New York City logged impressive high-tech services job growth over the past two years; but in Midtown South, the industry failed to achieve the colossal rent growth seen among its west coast counterparts.
The city’s high-tech jobs — defined as those that involve mobile, search, social, cloud computing software and service technologies — grew 22 percent between Q2 2010 and Q2 2012, second only to San Francisco, where jobs grew 41 percent, a new report from CBRE shows.
“I was somewhat surprised at the strength of job growth and volume in New York — something that’s really taken hold over the past year,” said Colin Yasukochi, director of research and analysis at CBRE.
But particularly within its premier Midtown South submarket, high-tech services rent growth paled when compared to California’s top high-tech submarkets.
While Midtown South experienced a formidable rent growth of 24 percent from Q2 2010 to Q2 2012, Silicon Valley’s Mountain View submarket experienced 83 percent growth, followed by San Francisco’s SOMA submarket, with 59 percent growth.
Citywide, growth levels out. Rents grew 17 percent citywide, compared with 26 percent in Silicon Valley, and 44 percent in San Francisco.
The primary driver that accounts for large discrepancies in rent growth is the heavier concentration of high-tech users in the Mountain View and SOMA submarkets, which also take much larger space than companies in Midtown South, Yasukochi said.
“They’re all competing in the same core area,” he said. “But in Midtown South, high-tech firms don’t make up enough of the employment total to really move the market as a whole.”
He also noted that Silicon Valley still produces more total jobs than either New York or San Francisco, having added 13,700 jobs during the two-year period measured.
But by that measure, the 11,000 jobs created in New York City surpassed San Francisco’s 9,100 jobs added.
The city’s media and entertainment industries give New York a promising edge because they offer high-tech firms complementary talent, and most premier California tech firms have now established themselves on both coasts, Yasukochi added.
The U.S. high-tech economy has grown nearly six times faster than the national average, the report shows; high-tech services jobs grew 9.9 percent, while total non-farm jobs grew 1.7% between 2009 and mid-2012. The number of high-tech services jobs grew in 18 markets nationwide.
*this article appeared in the August 29, 2012 print issue of Real Estate Weekly