Technology companies are driving a new boom in commercial real estate leasing, as these businesses look to expand with new office spaces. The tech industry has been the main driving force of the commercial real estate market since the beginning of the COVID-19 pandemic, according to the JLL Technology Research Group. Tech companies who are looking to make their own commercial real estate deals should be aware of the complexities of the leasing process.
The tech industry impact on office leasing
The pandemic made working from home the norm in tech and many other industries. However, many tech companies have banked on at least a partial return to the offices. Since March of 2020, the five largest United States tech companies have expanded their office space by a total of 10.1 million square feet. According to the Mortgage Bankers Association, tech tenants accounted for 22% of all office leasing nationwide in Q4 2021, with 5.4 million square feet of office space.
The tech industry has prompted a rapid rise in commercial leasing rates, with the largest impact in secondary-growth markets (cities with populations of between one and five million). Office leasing rates remain below pre-pandemic numbers, but this demand is expected to gradually rise. These rates are already on an upward trend: in the fourth quarter of 2021, more office space was leased than left vacant for the first time since 2020.
What should tech companies prioritise when looking for an office?
Leasing an office space is a critical decision for startups and other businesses. Whether it is the first office space for a brand-new business or an upgrade for an established company looking to expand, it is vital to do extensive research and find space that meets the needs of the business. While these needs will vary, there are certain priorities that most high-tech companies should have when searching for an office to lease.
Location
Location is the cliched top priority in both commercial and residential real estate for a reason. A strong location can provide many benefits to high-tech office leasing tenants. Workplaces located in well-connected and thriving parts of the city will attract a larger pool of younger applicants, giving the company better access to the top talent that can help the business grow.
Scalability
Just about every high-tech company has goals to expand eventually. Successful tech companies often grow at a rapid pace, and those who are in the market for an office lease should prioritise finding a scalable space. Properties with sufficient space to accommodate new employees can ensure that the company remains in the space for the long term.
Bandwidth and internet quality
Strong internet connectivity is a necessity for many industries in the modern world, but none more than in the tech industry. Ideally, tenants should seek out office spaces that offer either fibre or gigabit internet connections. These higher speeds will make it easier for the company to meet its current bandwidth needs. Additionally, tech companies will have higher bandwidth needs as they expand.
Considerations for commercial real estate landlords
The tech industry has taken a much larger piece of the commercial real estate market over the past two years, and commercial real estate owners should be mindful of this change. Those who own office spaces should carefully consider what they can do to attract high-tech office leasing tenants. Tailoring office spaces to the needs of these potential tenants allows office owners to find high-quality tenants in the industry with the largest representation in the commercial real estate market.
Invest in the latest internet technology
Tech companies universally require fibre-optic cables, as a consistent connection and high speeds are paramount in this industry. Property owners who are looking to attract tech industry tenants will need to install these cables if they want to be competitive in this growing high-tech office leasing market.
Offer amenities
The modern tech industry values onsite workplace amenities. Features like gyms and exercise classes are a draw for employees who prioritise their health and can help them work at their most productive levels. Developers should consider building office spaces in central areas that are within walking distance of restaurants, cafes, and other local businesses.
Design tech-friendly floor plans
Office owners should consider the preferences of tech companies when designing their office plans. Open office spaces with a handful of private offices and a conference room are a common preference in this industry. The open space fosters collaboration between co-workers, while the offices are necessary for holding important private meetings.
An experienced business and real estate lawyer can help with high tech office leasing
Both prospective tenants and commercial office owners should consider seeking legal guidance throughout the negotiation and transaction process. Office leasing agreements are complex documents that often involve a variety of complicated terms and conditions.While either side is free to go through the process on their own, a lawyer can be helpful in several ways:
- Protect their client’s financial interests by working towards a fair deal
- Handle the entire legal process on their client’s behalf, allowing the client to focus on their business
- Research to ensure the property has no major issues, such as liens
- Help the client understand how local zoning laws may be relevant
- Draft legal documents, such as lease agreements
- Provide legal guidance during commercial lease disputes
Keep these items in mind when planning to build or lease an office space in the future.
