WASHINGTON, DC - Venture capital investment is having a direct impact on job growth, which in turn is spurring strong demand for commercial properties, according to a new whitepaper, entitled Insights: Commercial Grows Where the Venture Capital Flows, just published by Cassidy Turley, a leading commercial real estate services provider. During the past 12 months, many of the nation's top performing office markets – including New York, Boston, San Jose and San Francisco – were also among the most active in terms of venture capital investment. These markets are expected to continue to see the strongest levels of growth in office demand in 2011 and 2012.
"Venture capital flows are a clear bright spot in a still-tenuous economic recovery," said Kevin Thorpe, Chief Economist at Cassidy Turley. "In nearly every single major market where there are significant venture capital flows, current office space requirements are up. For the most part, tech users are driving office market demand as they expand their real estate holdings in anticipation of expanding their payrolls."
Following are key highlights from the whitepaper:
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Over the last 15 months, three US office markets saw the greatest performance in terms of occupancy growth: New York City led the way with over eight million square feet of office space absorbed since the beginning of 2010; Washington, DC followed with over 4.2 million square feet of positive net absorption; and San Jose and Silicon Valley placed third with over 3.5 million square feet of growth.
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In every single major market with significant venture capital flows, current office space user requirements are up. For example, San Francisco is currently tracking over 5.2 million square feet of active office requirements with over 1.3 million square feet of that total coming from tech companies looking to expand their office space. Cassidy Turley is currently tracking as much as 10.6 million square feet in potential office and R&D space requirements in Silicon Valley and in the neighboring San Mateo County marketplace
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During the next 12 months, we expect markets with a strong technology base to show strong growth. Conversely, we expect markets without a strong technology business presence will continue to show signs of improvement, but at a much slower pace.
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New York led the country in net demand for office space in the second quarter of 2011. Moreover, there is currently 10-15 million square feet of potential user requirements that could land over the next 18-24 months
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The Boston office market recorded nearly 1.3 million square feet of positive absorption since mid-year 2010. Despite occupancy losses of nearly one million square feet during the first half of 2010, Cassidy Turley forecasts strong occupancy growth for Boston given that its 6.5% unemployment rate.
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Washington, DC has been one of the strongest performing office markets throughout the recession thanks to Government spending, a 5.4% unemployment rate and venture capital activity. The Washington, DC market absorbed 4.2 million square feet of office space since 2010.
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Recovery in the US office sector is beginning to spread across major markets as well as secondary markets that, until recently, had reported negative occupancy growth – notably Northern New Jersey, Orange County (CA), Philadelphia, Las Vegas, New Orleans, Fort Lauderdale and Tulsa.
"Tracking venture capital investments and related regional job growth sheds light on how one industry can become a major player in job creation and shaping the economic landscape," said Garrick Brown, Northern California Regional Research Director at Cassidy Turley. "Whether we are talking about hardware, software, green energy or biotech, the venture capital industry and the tech sector specifically are proving to be trustworthy economic indicators that should be watched."
A copy of Cassidy Turley's full whitepaper report, Insights: Commercial Grows Where the Venture Capital Flows, is available online at: www.cassidyturley.com/research/white-papers
Cassidy Turley is a leading commercial real estate services provider with 3,200 professionals in 60 offices nationwide. The company represents a wide range of clients -- from small businesses to Fortune 500 companies, from local non-profits to major institutions. The firm completed transactions valued at $17 billion in 2010, manages 430 million square feet on behalf of private, institutional and corporate clients and supports over 25,000 domestic corporate services locations. Cassidy Turley serves owners, investors and occupiers with a full spectrum of integrated commercial real estate services—including capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. In 2010, the firm enhanced its global service delivery outside of North America through its partnership with GVA.