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Local office rent costs are trailing Manhattan and the Bay Area. Is it paying off for tech companies?

(Pexels)

As Austin grapples with sky-high rents, even tech companies are seeing hefty costs for their dwellings.


A new report by commercial real estate and investment firm CBRE shows Austin is among only a handful of markets with more than 20% office rent growth from the first quarter of 2020 to the fourth quarter of 2021.

The average office rent per square foot is $45.11, which follows just behind the tech hubs of Manhattan and the San Francisco Bay Area. Except those places made the report’s top five rank for tech talent while Austin just missed the cutoff at No. 6.

With the costs of setting up camp or expanding in Austin, will tech companies still see the capital city as worthy of an investment especially as a possible recession looms?

“Tech talent and the broader technology industry have time and again proven resilient amid economic cycles,” said Colin Yasukochi, Executive Director of CBRE’s Tech Insights Center.

Still, employee wages are the largest cost for tech companies, behind office rent, and Austin workers don’t come cheap. On average, the annual salary of tech workers here is $150,026.

But the report notes that Austin’s talent is highly desirable and it’s growing at a rapid pace. We have one of the highest concentrations of top-quality software engineering talent and the tech labor force saw a 21% growth rate.

And selling that talent on Austin might be an easier path than having them work and live on the coasts. Especially for recent grads and entry-level workers, the cost of living can play a major role in the path they take. In Austin, the rent-to-tech wage ratio is 19% compared to 32% in the New York metro and nearly 24% in the Bay Area.

So while Austin’s talent pool may not be ranked on the same level as others just yet, the promise workers show now and in the coming years could be what’s driving giants like Meta and Google to set up shop downtown. On top of that, North Austin is also seeing a breadth of office space. Late last year, Amazon announced an expansion at the Domain and plans to add 2,000 more corporate and tech jobs. And earlier this week, news broke that PayPal would be a tenant at a new Domain tower.

As Austin’s tech scene continues to elevate its reputation, don’t be surprised by techies making the Domain and downtown their home rather than sprawling across the city.

“Many (companies) understand the benefits of tech clustering and often place a higher value on specific submarkets and even specific streets convenient to tech talent,” the report says.

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