Want to learn more about what makes millennials tick? Check out our webinar, co-hosted by TriNet.
Tech markets are thriving all over the country, everywhere from Silicon Valley to lesser known havens like Charlotte, NC, Houston, TX, and Madison, WI. Millennials are the driving force behind much of this growth, and their preferences in both the workplace and the communities they live in is shaping commercial real estate nationwide.
Understanding this force begins with examining how millennials are impacting tech-talent, and it ends with a glimpse of how millennial preferences will play a heavy hand in shaping the future of real estate.
Tech markets are still in growth mode
While some people fear Silicon Valley and the tech boom are slowing down, CBRE’s 2016 Scoring Tech Talent report reveals tech jobs have grown by over 27% in the US over the last five years. When looking at the largest markets, the San Francisco Bay Area enjoyed the highest growth at 61.5% and Baltimore was only a fraction behind. But the underdogs grew even faster—among the top small tech markets, Charlotte, NC, saw job explosion at over 74% while Nashville came in second place with just less than 68%.
This growth is huge, but not surprising—technology is truly the lifeblood of business and the backbone of commerce. The internet provides the space for companies to compete, meet their consumers and provide services, and while tech workers account for only 3.5% of the US workforce, the sector has grown by more than three times the national average. That growth has not been even across age groups—a huge part of it is coming from millennials.
Tech markets impact commercial real estate more than most
Tech markets are characterized by large concentrations of highly educated workers and huge, growing millennial populations. They also stand to impact local markets more than other industries because their employees receive upwards of double the average non-tech salary. Five of the largest tech markets have seen their millennial populations jump by over 10% since 2009, and Washington, D.C. experienced a near 26% spike. In Madison, WI, Pittsburgh and Boston (all growing tech markets) millennials make up almost 25% of the entire urban population.
Millennials have different preferences than older generations when it comes to working and living, and as they continue to enter the workforce, amass wealth and impact their local markets those preferences are going to leave a mark on real estate—by 2020 millennials are expected to make up a staggering 40-50% of the workforce.
One huge shift from the past is the millennial desire to live in cities. Millennials have shown a strong preference for city-life over suburbia and this has helped revitalize, or gentrify, depending on who you ask, downtown neighborhoods all over the country. Now-trendy neighborhoods in Manhattan like Chelsea and the East Village are no longer places to run from, but places most people can’t even afford. The same is true of Silicon Valley, where tech-talent has boosted the median monthly rent to $4,547, according to data from Zillow. That’s the highest median rent among the nation’s 50 largest cities. Another millennial trademark is the open office, which has spread far beyond just millennials—currently 70% of American employees spend their working lives in open floor plan offices, according to International Facility Management.
One size does not fit all
Real estate is changing, and office space is changing along with it. Millennials in tech markets are a major force driving that change thanks to the financial power of the tech industry and the sheer mass of millennials in, and continuing to enter, the workforce. As millennials keep bending real estate to fit their specific needs and preferences, one thing is clear—one size does not fit all.
The move towards increased diversity in the office, whether that mean open offices, private offices, coworking or more, is only in its early stages. And it’s no coincidence the tech industry has been behind many office space and real estate breakthroughs, from bikes all over Facebook’s campus to gourmet meals and massages at Google. Investors, employees and CEOs alike would do well to take note of the shifting real estate landscape and recognize the vital role millennial tech-talent is playing. While it would be a daunting task to try and predict exactly where this road is leading, one thing is clear—millennial trends and preferences are an intimate part of tech-talent, and understanding those trends is a look into the future of commercial real estate and the modern office.
For more on how millennials are shaping the workforce? Check out our webinar, co-hosted by TriNet.
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