Demand From Tech Sector Helps to Reboot Office Market

Rendering Courtesy of NBBJ

Amazon's "Rufus" headquarters project commands three city blocks in downtown Seattle and features three interconnected glass-and-steel domes.

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After five years of slow or no growth across many construction sectors, the technology industry's demand for new building stands out. While most markets are only gradually digging their way toward recovery, office starts in many regions are taking off, thanks in part to tech firms seeking more space for operations such as administration and data storage.

Much of the office activity is occurring in well-known tech hot spots, such as Seattle, where Amazon is building a 3.3-million-sq-ft new headquarters campus that consumes three downtown city blocks. In 2013, the city's office starts soared to $709 million, up 205% year-over-year, according to the latest revised data from McGraw Hill Construction Dodge (see table).

Analysts attribute most of the increase to Amazon's massive, three-phased project, dubbed Rufus 2.0, which includes three interconnected spherical glass-and-steel domes that can accommodate mature trees and plants from around the world. But Microsoft, Google and other tech firms also are building, expanding or renovating in the region.

"Office-building construction in Seattle is far ahead of [most] everyone else, largely because of Amazon and the high-tech sector," says Cliff Brewis, senior editorial operations director at Dodge, which shares the same ownership as this publication.

Office construction is up by about 100% or more in 19 of the 75 metro regions Dodge tracks. Some are dubbed "tech pockets," which include the San Francisco region (up 386%), where Apple is about to start building its new, $2.5- billion headquarters in Cupertino; Facebook's $435-million West Campus expansion of its Menlo Park, Calif., headquarters is under way; and Samsung America is erecting a $200-million headquarters in San Jose, Calif.

Not all the office sector's growth can be attributed to the tech industry. However, Apple, Facebook and Microsoft as well as smaller dot-coms are expanding their operations and kick-starting markets in select regions.

"Typically, white-collar employment results in absorption of office space, which leads to construction demand," Brewis says. The tech firms typically build offices near major universities in cities with good transit, housing and other amenities. "There's no doubt about the fact that techand all the new creative work being done, the new firms being created the wealth they are seeingis just incredible," Brewis says. "It results in hiring and offices going up in those marketplaces where tech plays a significant role."

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Demand From Tech Sector Helps to Reboot Office Market