Job-hungry and space-guzzling tech companies have driven up real estate values to staggering levels in California’s San Francisco Bay Area and Silicon Valley.
Now they’re rattling other markets — from Seattle to Boston and south to Austin, Texas — as companies stretch beyond tech’s traditional enclaves.
Where tech expands, real estate values rise, according to residential and commercial real estate experts who have done studies on the sector’s real estate impact.
Seattle is among the U.S. markets that have seen an influx of new technology jobs — and steeper home prices. View Enlarged Image
One prime tech spillover market is Seattle, where Bay Area carpetbaggers Facebook (NASDAQ:FB), Google (NASDAQ:GOOGL), Salesforce.com (NYSE:CRM), Oracle (NYSE:ORCL) and Dropbox, among others, are extending their reach.
Costs for downtown Seattle office space soared 22% in the 12 months ending March 31, according to global commercial real estate firm CBRE Group (NYSE:CBG).
That was the second fastest pace in office markets worldwide, behind Dublin.
“A lot of the tech companies in San Francisco have opened engineering and sales offices in Seattle,” said Owen Rice, a senior VP at CBRE who is based in Seattle. “Some have grown tremendously, such as Facebook and Salesforce.com. I’m talking about big tech tenants making a meaningful impact.”
In addition, he added, “Apple (NASDAQ:AAPL) is looking for space right now.”
On the housing front, demand for homes in Seattle is growing faster than supply, causing prices to rise around 10% from the previous year.
“This year almost every single home that goes on the market is getting multiple offers, sometimes 10 to 20 offers,” said Chad Pluid, managing broker with real estate brokerage and research firm Redfin, which is headquartered in Seattle. “As you get closer to core areas like downtown Seattle or Bellevue, it gets more competitive.”
Demand is being fueled largely by “the huge increase in tech workers,” many of them recent arrivals from elsewhere, he says.
According to a Redfin analysis of LinkedIn (NYSE:LNKD) data, the number of tech workers in Seattle climbed 21% in May from a year earlier.
Despite rising home prices, Seattle homes are still much more affordable than in the Bay area.
The median home price in San Francisco is more than $1 million, vs. $481,300 in Seattle, according to Zillow Group (NASDAQ:Z), the online real estate company. And while San Francisco’s median rent is $3,995, it’s $1,765 in Seattle.
“Seattle is becoming a digital technology city,” Pluid said, but it’s still “an affordable West Coast city.”
Still, the kind of wealth created from technology in the Bay area and Silicon Valley is extending to cities across the country — especially Seattle, Portland, Austin, Boston and Denver, Redfin CEO Glenn Kelman said in a recent blog.