Tech Boom! Where and Why it’s Happening may Surprise You

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Mike Cagna

Senior Research Analyst

“Due to its available talent, location and hospitality, Indianapolis is gaining recognition as the
Silicon Valley of the Midwest.” – Mike Cagna

Indianapolis’ Tech Opportunity
Indianapolis is home to several well-regarded institutes of higher learning such as Butler, Indiana University, Purdue and Rose Hulman to name a few. These schools churn out top-level engineering talent on a yearly basis. With a favorable business climate and several incubators and shared-office space companies available for startups, Indianapolis offers everything needed for tech companies to grow and flourish.

Indianapolis’ Tech Challenge
Metro Indianapolis is currently lacking in the type of unique office space that tech companiesteck1 gravitate toward. This is especially true within the urban core. Housing options within the CBD have been restrictive in the past as well, but several options have recently hit the market with more to follow over the next year.

View Indianapolis’ full Tech Story

National preview
For the technology industry the story remains location, location, location.tech2

The technology industry may be strongest in the San Francisco Bay Area, but its pervasive nature continues to impact local economies across the country. Now a required function within nearly all industries, from banking (fin-tech) to marketing (digital) and retail (e-commerce), technology is the elusive linchpin that separates the growing companies from those that are shrinking.

Unsurprisingly, technology companies (over the past four quarters) have been responsible for the largest share of leases 20,000 square feet and larger across the United States, comprising 20.5 percent of all leasing activity and only closely trailed by financial services leasing, which captured 16.3 percent of large block activity. Additionally, 73.0 percent of those technology leases represented occupancy growth — a growth rate 1.6 times higher than that of financial services. This trend is expected to continue over the next several quarters.

While the obvious markets remain at the top of the ranks for technology leasing activity, smaller markets are emerging to capture demand. Today more and more startup founders consider the viability of their hometown as a business location instead of relocating to San Francisco or Silicon Valley. With relatively low real estate and employee costs in markets like Atlanta, Dallas and Raleigh-Durham (where average rents are in the low $20s versus the mid-$50 average you’ll find in the Bay Area and New York City.)

The timeline to capitalize on opportunistic markets is not infinite, however. As economic and
employment conditions continue to improve across the country, rebounding financial, professional and business services companies are beginning to compete for the same talent. Additionally, workplace trends increasingly shifting demand toward creative space is intensifying not only among technology companies but throughout the office-using workforce. As a result, competition for a generally smaller supply of creative office space will begin to push rents at a faster rate over the next 12 to 18 months and reduce tenants’ negotiating leverage in even the smallest of markets.

Demand toward creative space is intensifying not only among technology companies but throughout the office-using workforce and will begin to push rents at a faster rate.

View U.S full Technology Office Outlook

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