The influx of tech jobs are growing the Phoenix commercial real estate market. The usual players, health care employment, population growth, and tourism are often the first thing experts point to in assessing market health, but Phoenix’s tech story is an emerging and important player. The Greater Phoenix Economic Council’s reports that a pro-business environment, abundant talent supply and quality of life are luring more and more tech employers to the Valley.
Low cost of living, top talent, big growth
According to a GPEC report, The Phoenix Tech Story, Greater Phoenix is drawing in companies from New York to California because of its ability to attract top talent from other cities with much higher costs of living. In fact, a new U.S. Bureau of Economic Analysis report says Arizona has the third fastest growing economy in the country, right behind Washington and Utah, respectively.
11,000 recent high-tech jobs
GPEC points to 35 companies who have recently announced the creation of nearly 11,000 tech jobs in Greater Phoenix. Intel and USAA alone added more than 4000. That amounts to nearly 1.4 million square feet of occupied office space in the Valley. These figures make Greater Phoenix one of the fastest-growing high-tech job markets in the country. Employment has surged more than 33 percent over a five-year period. With more than 83-thousand high-tech employees, Phoenix has pushed past other competitive markets such as Denver and Austin.
Talent supply now and later
The Valley’s steady population growth provides employers with a steady supply of talent, but the presence of Arizona State University and other major universities and college systems also promises a future supply of educated employees and at relatively lower labor costs. Case in point, ASU has one of the largest engineering schools in the country with 20,000 students enrolled and most of those who graduate stay here. Since 2010, nearly 70 percent of ASU’s engineering graduates remained in the Phoenix region.
Tech talent density
Another promising number is the growth of the Valley’s tech talent density. That’s a measure of the number of computer and mathematical workers in a market relative to the market’s population. The GPEC reports that the number of tech workers in the Phoenix metro area as a percentage of its population has risen at an average of more 28 percent over the last five years.
Hottest tech submarkets
The hottest tech submarkets include downtown Tempe, Chandler, downtown Phoenix, and South Scottsdale.
Tempe ranked as the top tech submarket in the country for rent growth and net absorption growth from 2015 to 2017. High tech companies occupy four million square feet of office space at an average of $41.53/sf. Class A development along Temp Town lake has attracted tech companies in want of high-quality space at lower costs. The proximity to ASU’s main campus also offers a pipeline to a large, qualified workforce. Zip Recruiter, LifeLock, and Limelight all call Tempe Town Lake development their home.
Price Corridor: Chandler
Price Corridor in Chandler also proves attractive to employers. GPEC says it is a high demand submarket for fintech and high-tech manufacturing companies, including Intel, PayPal, and General Motors. Plentiful low-cost land fueled a flurry of office construction. High tech employers lease 3 million square feet of office space at an average cost of $29.05/sf . The bargain-priced office spaces are also surrounded by quality, affordable housing.
Downtown Phoenix is also a draw. An increasing number of tech companies such as Uber, DoubleDutch, and Gainsite are leaving coastal markets to relocate in an area that is revitalized with restaurants, retail and walkable streets. The light rail and ASU’s downtown Phoenix campus make downtown an attractive spot for employers to move. High-tech employers now occupy 6.4 million square feet of office space at $31.13/sf in the downtown area.
That brings us to South Scottsdale, an area attractive to high tech companies in part because of its concentration of educated millennials. Yelp, Weebly and ZocDoc have expanded their operations in this submarket over the last several years. GPEC says south Scottdale’s shopping and restaurant scene and vibrant nightlife are also a big draw. Currently, high-tech office space measures 2.3 million/sf at $34.67/sf.
The steady flow of high-tech employers into Valley office space is helping push vacancy rates in office buildings down to their lowest levels since before the crash. Experts expect vacancy rates to keep dropping as the economy keeps chugging and office rents to increase.
Affordable and no natural disasters
But even with market-driven increases in both the cost of office space and housing, Phoenix is still comparing favorably to other cities in terms of affordability. And it’s a major selling point with employers. Compared to other large cities, Phoenix consistently ranks as one of the most affordable. Its income to rent ratio is one of the lowest, while the amount of affordable housing is one of the highest. Combine that with a lack of natural disasters and well you might have a high-tech match made in heaven.
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