posted on October 21, 2011 22:53
A few days ago, Jones Lang LaSalle Inc. released some interesting data analyzing rent growth nationwide based on high-tech job demand. JLL found that Austin, home to hundreds of technology companies, is still one of the most sought-after cities among tech companies looking for more office space. I wanted to hear a bit more about this, so I caught up with Elysia Ragusa, senior managing director at JLL’s Austin office, to ask her about the report. Here’s what she had to say.
ABJ: High-tech accounted for 50 percent of total venture capital funding over the past four quarters, with biotechnology and medical devices comprising 25 percent combined, according to the JLL report. Does that represent what’s happening in Austin?
Ragusa: In Austin, venture capital funding is largely funneled into software and semiconductor firms, representing 40 percent of total funding from 2006 to 2010. The presence of Samsung, Freescale, Intel, Cirrus Logic, ARM and AMD — whose businesses are rooted in the development of semiconductors — draw startups and growing businesses to the region, which in turn attracts venture capital investment.
Furthermore, Dell’s presence, along with several other established software firms, attracts startups and smaller firms involved in software development, also drawing venture capital investment. In total, about two-thirds of venture capital funding in Austin goes toward high-technology, compared with just 15 percent going toward biotechnology.
ABJ: High-tech cities are seeing a lot of demand for office space. Where, in Austin, do you see most of the activity?
Ragusa: The city of Austin’s overall office space demand and local market undeniably fluctuates as a result of high-tech job expansion and industry activity.
The city’s northwest submarket, in particular, is tightening due to its disproportionate share of leasing activity, specifically accounting for 34 percent of leasing activity while only representing 27 percent of the total market inventory. Some of the larger northwest tech leases include eBay/PayPal, Electronic Arts, Polycom, Pervasive, Apple, All Web Leads, Spiceworks and Samsung.
Austin’s Central Business District and southwest submarkets are currently witnessing a wave of tech leasing activity as well, but not as dramatic as what we see driving the northwest.
ABJ: Do high-tech companies like to be around each other? Why?
Ragusa: These companies want to lease the most appealing space — a combination of internal square-footage, aesthetics, accessibility and cost-efficiency — that is immediately available to them.
Industry competition drives a high-tech office location and why a company may strategically situate itself in a certain area. For example, if a company is expanding and looking to hire top-talent, the first place it will look is at the personnel in a competing company. It won’t want to displace the prospective employee, or be in a less-than-ideal office space, outside of his or her comfort zone. High-demand, newly-renovated yet affordable housing options sit within Austin’s northwest region, making this submarket attractive.
ABJ: What sort of floor plate requirements do high tech companies need?
Ragusa: High-tech companies and their employees are, by industry, innovative and creative. As they move to spaces that allow their employees to thrive, these companies seek large floor plates and an open design that accommodate both collaboration and efficiency.
ABJ: Economically, there is a lot of uncertainty outside of Austin. How does that trickle into the city?
Ragusa: I believe that Austin is, to some extent, insulated; but by no means immune. Innovative, high-tech companies drive our nation’s economy and are seen as both an asset and a vulnerability to the U.S.’s space in the global economy. With Austin’s job market relying heavily upon this industry, we’re not immune to the uncertainty before us. I remain optimistic that both the nation, and Austin, will thrive as a low-cost, business-friendly environment.
10/6/11, Cody Lyon, Austin Business Journal