Economy Watch: Emerging Tech Hot Spots to Enjoy Office Rental Growth

A new wave of cities are attracting top tech talent and therefore seeing rising office rents, a new NGKF report reveals.
Austin is emerging as one of the top cities attracting tech talent.

Austin is emerging as one of the top cities attracting tech talent.

Rental growth for office space isn’t over yet, according to a new report by NGKF (NGKF and Knight Frank’s 2017 Global Cities Report). In some places, that is. Investors will need to focus on emerging tech hot spots around the world to find such growth, with the highest rental growth over the next three years in places where tech companies look to grow by taking advantage of high concentrations of creative talent.

U.S. cities are among the top places for emerging tech talent, and thus for rental growth between now and 2019, but Sydney actually leads the pack. Office rents in Australia’s largest city are forecast to increase by 27.5 percent over the three-year period, followed by Berlin and Austin, both of which will experience rental growth of more than 20 percent (25 percent and 24.9 percent, respectively). Rental growth will be less pronounced in mature tech markets such as London (7.1 percent) and San Francisco (5.1 percent).

As recently as three years ago, San Francisco, New York and London were leading tech expansion, but now NGKF and Knight Frank report that a new wave of cities are taking their places as emerging tech markets, including such places as Berlin and Austin (and Madrid). These cities are able to attract and retain “the iPhone generation,” as the report puts it.

U.S. cities that will enjoy double-digit office rent growth by 2019, noted the report, are Seattle (up 17 percent), L.A. (15.9 percent) and Boston (11.1 percent). Other cities around the world forecast to see double-digit rental growth over the next three years are Melbourne, Shanghai, Dublin, Mumbai, Tokyo and Paris.