By: Dave MacDonald, Executive Vice President, JLL
When you think of high-tech, which regions come to mind? Silicon Valley? Perhaps Seattle or even San Francisco? Statistically speaking, you’d be absoultely correct. But what if I told you that cities within our Midwest region, like Detroit and Pittsburgh, are among the tech industry’s next generation of hot cities?
Detroit, as recently reported by GlobeSt.com, “is turning into [a] high-tech hub.” Notorious tech leaders, including Google, Amazon, and Twitter all have a presence in the area. And, thanks to the evolution and demand of navigational amenities, and other computer-driven features in modern cars, the local tech sector is taking off.
Another up-and-coming city for tech: Pittsburgh. In fact, Pittsburgh was recently recognized on JLL’s list of the nation’s next tech hubs. Why? Well, for starters, real estate is much more affordable than other big cities, such as Silicon Valley, Washington D.C. and Los Angeles. Couple that with the city’s established presence with venture capital funding, and its proximity to universities, and you have a potential high-tech hot spot.
JLL researchers recently took a closer look at big trends driving innnovation and growth in local tech. Below, I’ve outlined the top four industry influencers in tech real estate for an up-close look at what’s making waves in national news, and what’s trickling down to our local cites.
4 Trends Impacting Tech Real Estate
1. Patent Activity
JLL identified the top cities with the most patent activity. Using this information, researchers can forecast where the next high-tech clusters will be, as well as where new talent will relocate. From JLL:
“Where innovative ideas cluster, so will talent and new real estate opportunities.”
Michigan made the list in 2012, coming in at number six, with 4,598 patents generated in one year. Also in 2012, Detroit opened its own U.S. Patent and Trademark Office, which became “the first-ever patent office outside Washington D.C,” according to MLive.com.
2. Mergers and Acquisitions
180 tech companies have gone public since 2009, according to JLL. Plus, more than 50 percent of the largest U.S. Internet IPOs took place between 2009 and 2014, or “the current technology boom.”
While IPOs remain a key goal for many high-tech companies, mergers and acquisitions are a growing trend among those seeking to grow, or strategically exit with a cash reward.
3. Funding from Venture Capital Firms.
In terms of funding, venture capital firms continue to favor companies in tech. In 2013, high-tech companies secured more than 65 percent of U.S. venture capital funding ($19 billion), according to JLL. This is just another reason why location is key for tech companies. They often have greater access to funding in certain areas (i.e. Silicon Valley).
4. Tech Labor Shortage and Talent Gap
According to a recent study from Georgetown University,the U.S. economy “will face a shortage of 5 million workers.”
Despite these statistics, the high-tech industry remains strong, and employers are implementing space amenities, such as flexible workspaces and collaborative work environments, to attract a pool of talented professionals. However, in recent years, tech companies are limited by H-1B visa regulations when it comes to hiring. JLL’s infographic zooms in on the tech labor shortage and dwindling access to foreign talent.
Between booming innovation, prime real estate opportunities and abundant venture capital funding, we think the region will continue to grow its presence on the tech scene.
For more information on the key trends impacting tech in 2014, check out JLL’s recently released infographic series spotlighting tech.
About the Author
Dave MacDonald is Executive Vice President in the Detroit office of JLL. With 20 years of commercial real estate experience, Dave specializes in acquisitions and dispositions of office and industrial properties. View Dave MacDonald’s bio or connect with him on LinkedIn.