How The Tech Industry Is Redefining Real Estate

The banner statement of the tech revolution is adorned with the words “innovation” and “disruption”. More than creating products, the tech industry is about creating ideas that change the way we think about everyday commodities and activities. It seems only logical that the shifting vision of this industry, as well as its needs, practices, and personnel, would begin to change the shape of real estate markets where tech is centered. Emerging Trends in Real Estate 2015 predicts that the love/hate relationship real estate investors have with tech will intensify. Intentional or not, the wants and needs of the tech industry is changing the face of residential housing, urban trends, and the notion of the office itself, making it one of the more interesting trends to follow this year.

How The Tech Industry Is Redefining Real Estate

One of the heaviest tread stories in real estate for the past several years centers on incredible property price jumps in tech-centric areas like San Francisco. Outpacing most other major metropolitan areas in the nation, San Francisco home prices and rents skyrocketed as it became a sort of urban bedroom community for Silicon Valley workers.

Median rents in San Francisco hit $3,200 the first quarter of this year, a monumental high that has pushed many former residents out into other Bay Area cities like Oakland and Berkeley (each of which is seeing climbing prices as a result). Similar home price and rent pushes are underway in other cities, such as Seattle where giants like Amazon are driving prices, as well as upstart 18 hour cities like Denver. Prices are driven largely by the high salaries of tech workers, salaries that outpace the average growth of American middle class jobs in other industries. Even worker bees at Google, Twitter, or even many startups can expect to make upwards of six figures yearly.

What gets less press is how the tech industry is revolutionizing changes in office and retail real estate. While a lot is said about how tech is changing the shape of workspaces, offering a variety of amenities to appeal to workers, these larger campuses are more revolutionary for their placement near urban centers rather than in office parks. What could really shake up the real estate industry though is the downsizing of office and retail spaces “as technology enhances workability, shopping and overall living,” as Emerging Trends notes.

Technology is allowing more people to work from anywhere–homes, cafes, shared hourly workspaces, and the like. Tech also allows workers to work from smaller spaces, with less need for storage such as file cabinets, etc. As Co-Star notes, “Ten years ago, 250 square feet per office employee was the gold standard in office real estate. Today, that average has dropped to approximately 195 square feet.” Tech is also more reliant on freelance workers, who often work offsite, bring their own equipment, and therefore require less space.

Tech and creative industries are leading the way towards urban cores, both with a younger and hipper worker demographic and affinity for public transit options. A recent study from George Washington U School of Business notes that “walkable urban office space in the 30 largest metros commands 74% of rent-per-square-foot premium over rents in drivable suburban areas.” This makes urban workspace a highly desirable option for investors, driving capital away from office parks and towards core cities. While this may not spell doom for drab suburban office parks, it may drive the need for repurposing these spaces towards new economic means as older business models compete with upstarts tech-oriented companies.

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