top tech cities: exploring demand, leasing growth, vc funding and more

Technology

Office

Outlook

United States

2015

JLL TECHNOLOGY OFFICE OUTLOOK

techs

firmly planted roots

as well as opportunities

for branching out. In examining

markets across

the country for their

attractiveness to the

technology industry,

we hope to showcase

< 2 0 1 5 >

WHAT WE LEARNED < 2 0 1 5 >

Proximity to a hub is not

necessarily enough: Local

markets with an existing tech

cluster that are also more

affordable than the Bay Area

will likely experience

accelerated industry growth

as firms explore new markets

for expansion.

1. Secondary markets are

quickly catching up:

In 2015, roughly 60% of

unicorn companies were

located in San Francisco

and Silicon Valley, down

from almost 76% in 2014.

2. Startup momentum will

cost you:

Markets with the greatest

startup momentum,

characterized by access to

capital, innovation and top

talent (such as New York,

San Francisco and Silicon

Valley), are also the most

expensive.

3.

EXAMINING 4 QUESTIONS < 2 0 1 5 >

1. Where are companies leasing space and expanding?

3. Where are venture capitalists placing their bets?

4. What markets will become the next hotspots?

2. Where is the real estate cost highest and where can you find both value and talent to

grow your company?

JLL TECHNOLOGY OFFICE OUTLOOK < 2 0 1 5 >

TECH is the elusive linchpin that

separates the growing

companies from those that

are shrinking

JLL TECHNOLOGY OFFICE OUTLOOK < 2 0 1 5 >

73% of technology

leases

represented

occupancy

growth

JLL TECHNOLOGY OFFICE OUTLOOK < 2 0 1 5 >

Secondary and

tertiary markets are

looking much more

attractive to both young and mature companies as

industry saturation in the most

mature tech hubs has created

both competitive and costly

leasing environments.

TOTAL TECH LEASING (S .F. ) (Q414 -Q315) < 2 0 1 5 >

*Data reflects leasing activity from Q4 2014-Q3 2015 for leases 20,000 square feet and larger

Source: JLL Research

- - 11,141 45,621 75,100 98,946 101,539 115,251 117,115 124,734 146,616 169,132 192,921 199,409

249,906 251,437

303,047 322,664 343,224

426,409 451,879 462,960 465,095 493,469

546,965 899,413 923,339 938,378

1,063,110 1,654,912

1,807,057 2,175,629

2,400,759 5,386,142

0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000

MiamiSalt Lake City

RichmondCharlotteOrlandoHouston

IndianapolisMinneapolis

Suburban MarylandNorthern Virginia

DetroitOrange County

BaltimorePhoenix

New JerseyDallas

San DiegoLos Angeles

DenverRaleigh-Durham

PhiladelphiaPortland

PittsburghSan Francisco Peninsula

AtlantaChicago

Washington, DCOakland-East Bay

BostonSeattle-Bellevue

AustinNew York

San FranciscoSilicon Valley

JLL TECHNOLOGY OFFICE OUTLOOK < 2 0 1 5 >

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.

TECH AS % OF LOCAL LEASING < 2 0 1 5 >

*Data reflects share of local market leasing activity from Q4 2014-Q3 2015 for leases 20,000 square feet and larger

Source: JLL Research

0.0% 0.0%

1.6% 2.9% 3.0% 3.3% 3.8%

4.7% 5.8%

8.4% 8.5% 8.8% 9.3% 9.8%

10.6% 11.5% 11.6% 11.7%

12.5% 13.3%

14.6% 15.1%

16.1% 17.5%

18.4% 23.5%

32.3% 34.0%

38.6% 40.2%

48.2% 66.2%

70.7% 81.3%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

MiamiSalt Lake City

RichmondNorthern Virginia

HoustonCharlotte

New JerseyMinneapolis

DallasOrange County

DenverPhiladelphiaLos AngelesIndianapolis

PhoenixDetroit

Suburban MarylandOrlandoChicago

Washington, DCAtlanta

BaltimoreNew York

PittsburghPortland

BostonSan Diego

San Francisco PeninsulaRaleigh-Durham

Oakland-East BaySeattle-Bellevue

AustinSan FranciscoSilicon Valley

JLL TECHNOLOGY OFFICE OUTLOOK < 2 0 1 5 >

Within the primary tech hubs the technology industrys

saturation and fast

growth has created

highly competitive

leasing conditions.

JLL TECHNOLOGY OFFICE OUTLOOK < 2 0 1 5 >

With an average vacancy rate of 7.6% in the 15 most expensive tech submarkets,

tech companies in need

of those locations must be

willing to pay.

MOST EXPENSIVE IN -DEMAND SUBMARKETS < 2 0 1 5 >

Market Submarket Average asking rent

(Q3 2015) 1. Silicon Valley Downtown Palo Alto $98.68 2. Silicon Valley Downtown Mountain View $87.53 3. San Francisco Mission Bay/China Basin $81.50

4. New York Hudson Square $81.50

5. New York SoHo $79.80 6. New York Gramercy Park $76.58 7. San Francisco Peninsula Menlo Park* $73.44 8. San Francisco South Financial District $68.61 9. San Francisco North Financial District $68.53

10. Boston East Cambridge $67.21 11. San Francisco South of Market $66.07 12. Silicon Valley Cupertino $65.52 13. San Francisco Peninsula Redwood City $63.06 14. New York Greenwich Village $61.49 15. Los Angeles Santa Monica $59.75

TOP 15

*Excludes Sand Hill Road

JLL TECHNOLOGY OFFICE OUTLOOK < 2 0 1 5 >

Does concentration of brand-name headquarter location present potential risk to

the market or does it

simply affirm its place

as the epicenter of the

technology industry?

NASDAQ COMPOSITE BY MARKET CAP < 2 0 1 5 >

Mega $200b + Large $10-$200b Mid $2-$10bSmall $300m-$2b Micro $50-$300m Nano

JLL TECHNOLOGY OFFICE OUTLOOK < 2 0 1 5 >

83% of the NASDAQ composite

lies with just

73 tech

companies

# OF MEGA AND LARGE CAP TECH HQs < 2 0 1 5 >

# of mega and large cap technology HQs Total market cap

Silicon Valley 25 $2,151,240,300,303.46

San Francisco Mid-Peninsula 4 $397,150,931,958.84

Chicago 4 $79,506,967,555.90

Boston 3 $89,782,814,898.36

Northern New Jersey 3 $81,165,126,709.76

San Francisco 3 $68,789,917,234.46

New York 3 $42,055,691,881.64

Stamford 2 $208,420,969,436.20

San Diego 2 $144,263,755,709.21

East Bay 2 $26,495,513,492.10

Seattle 1 $366,762,291,334.80

Dallas 1 $51,657,748,144.84

Orange County 1 $23,412,831,364.80

Kansas City 1 $19,105,214,519.04

Milwaukee 1 $15,646,535,660.62

Raleigh-Durham 1 $10,661,251,367.30

International 16 $641,044,818,435.93

All others 643 $895,466,673,458.15

Grand Total 716 $5,312,629,353,465.43 Source: NASDAQ

JLL TECHNOLOGY OFFICE OUTLOOK < 2 0 1 5 >

34 technology

companies

opened new

locations across

19 markets,

expanding into a

combined total of

more than

2.1 m.s.f. in markets like

Atlanta, Detroit,

Orlando and

Phoenix.

JLL TECHNOLOGY OFFICE OUTLOOK < 2 0 1 5 >

The number of

unicorns in the industry has

nearly tripled.

JLL TECHNOLOGY OFFICE OUTLOOK < 2 0 1 5 >

The trend of tech growth

in secondary

markets is beginning to dispel the traditional mentality

that startups need to locate to the

Bay Area in order to have access

to private capital.

VENTURE CAPITAL FUNDING ($ IN MILL IONS) < 2 0 1 5 >

$5.00 $20.95 $24.65 $26.00

$34.85 $69.01 $101.57 $108.78 $128.29 $140.85 $147.79 $158.97 $173.87 $201.29 $203.29 $209.35

$279.19 $348.32 $377.34 $379.32 $412.17 $434.60 $459.40

$500.97 $686.03

$872.77 $946.20

$2,084.54 $2,159.88 $2,561.03

$5,313.10 $5,438.80

$12,621.65

OrlandoIndianapolis

Las VegasPhoenix

MiamiBaltimore

DallasMinneapolis

Suburban MDRaleigh-Durham

PortlandPittsburgh, PA

New JerseyBoulder

PhiladelphiaWashington, DC

San DiegoDenver

Suburban VAEast BayChicagoAtlantaAustin

Orange CountyFlorida (entire state)

UtahSeattle

San Francisco PeninsulaBoston

Los AngelesNew York (region)

Silicon ValleySan Francisco

$3.90

$17.80

$19.50

$38.50

$39.10

$51.90

$59.20

$77.50

$92.10

$104.10

$109.80

$117.90

$121.20

$141.70

$176.30

$264.40

$321.00

$340.80

$359.10

$372.50

$429.90

$437.50

$457.10

$592.60

$738.10

$862.10

$1,258.30

$1,411.60

$2,699.30