Top 6 tech trends impacting real estate decisions

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techOver the course of this economic cycle there’s been a lot of speculation about the tech industry’s sustainability. Is it a bubble or isn’t it?

Many people were burned during the dot-com bust, and the scars from that experience run deep. Since 2009, the technology industry, the venture capital industry and many of us in the commercial real estate industry have been assuring the economy that this is not a bubble.

We all say that it’s different this time, and it is.

For starters, most of us have become dependent on the technologies that we worry are contributing to bubble conditions. And we aren’t using these technologies (and others) any less. In fact, we’re using them more. As a result, the tech industry continues to be the largest consumer of office space across the country. They’re gobbling up talent and large blocks where they can get them and driving economic growth from San Francisco to New York and everywhere in between. Here are 6 trends that will impact real estate decisions.

Talent is the target for tech

With more than seven years of economic expansion (the longest-running since post-WWII) under our belts, competition for the best and brightest people is at an all-time high. And with the economy trending toward at least another 18– 24 months of additional growth, this competitive environment isn’t expected to change. To prove our point, take a look at job openings. On the one hand, the numbers are very uplifting. Job openings hit a new record in October at 6.2 million, with no signs of a slowdown. On the other hand, low unemployment (4.2 percent) paired with low labor force participation (63.1 percent) remain hurdles for the economy at large, and employers are getting increasingly more creative. Because of this, we expect more secondary and tertiary markets to be the beneficiary of corporate expansions. This should continue to spur tech clustering and allow smaller startups to stay local in the future.

Cost is irrelevant

Well, that’s not exactly true, and good financial decision-making is key to smart growth. But the future of work is changing, and making good investments in the workplace is becoming more and more critical to a company’s success. The adage “it’s all about location” is truer now more than ever, but equally critical to the real estate discussion is the human experience. Companies that embrace this philosophy by investing in the experience that they offer to employees can focus on three tenets of our Human Experience model: engagement, empowerment and fulfillment. When all three pillars are activated within a company, the effects on employee productivity, innovation and retention can be significantly improved. So while a nicer office, location and amenities may cost more, what a company will get in return is worth every penny.

Reversal of density

Over the course of both this economic cycle as well as this real estate cycle, trends toward efficiency have reigned supreme. The drive toward a “less is more” ownership mentality on a personal and corporate basis has completely transformed the way things work. As a result, the concept of the personal office has been largely eliminated from a technology company’s space design and personal workspace has been reduced from what was once an industry standard of 350 square feet per person during the dot-com days to as low as 50 square feet per person today. We all know the adage of “too much of a good thing” and early anecdotal evidence indicates that companies have become too efficient. While we knew that the all-open workplace was inhibiting productivity, the all-shared workspace also has its downside. Companies will be taking a closer look at the optimal space utilization ratios moving forward.

Flexible space evolution

Companies are now setting up shop in coworking centers, placing teams small and large into these spaces for a variety of reasons. The “third space” will be considered the third pillar of sound real estate strategy, especially as companies consider these other trends mentioned. How do you attract and retain the best workforce, for the best cost, in the best market? And how can you consider the generational shift and prepare for that as well? Flex office options offer additional options on short notice, without sacrificing culture. Expect to see a blurring of lines between not only traditional coworking centers and the traditional office, but also hotel lobbies, coffee shops, retail banking centers and office common areas to serve as the third space informally as well.

Generations matter

The baby boomers caused fundamental changes in our society that no one could deny. Millennials outnumber the boomer generation and the youngest of those are just now graduating high school. As millennials come of age, they will be buying homes. They will be settling down. They will be raising children. It may not look the same as their elders’ generation, but they will need housing. They will want to ease their work-life balance. What should companies be thinking about when considering long-term moves? The suburbs are not dead, and even though we’ve seen a lot of shift toward downtowns across the country, don’t count the suburbs out just yet.

Cost of living: A top concern

Housing is expensive, especially in markets that have benefited from booming economic conditions thanks to an expanding tech industry. It seems that young talent can’t catch a break. New graduates are bunking up with multiple roommates, converting living rooms into bedrooms or renting micro apartments. Sure we all had to stretch when we got our first job, but in some cities it’s just too much. Markets with the greatest tech job growth this cycle have also seen the greatest increase in the cost of living. How should you be thinking about this issue? Many talented tech professionals will remain in top markets. But there are many more that want all of the quality of living without the cost. It will be important to understand where that talent wants to live.

Download our latest report on this year’s tech trends in real estate to learn more.

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