Even though most people think of Silicon Valley and the Bay Area of California as the cradle of the startup culture, a new report from a commercial real estate firm shows that startups may be taking a second look at other parts of the country.
Jones Lang Lasalle (JLL) recently released a report about this trend. In the 2015 United States Technology Office Outlook Report, San Francisco, Silicon Valley and LA lead the pack in venture capital funding in Q3 2014 to Q2 2015 by a huge margin. But, other areas are making headway in acquiring vital venture capital.
Even though JLL is a commercial property concern, what it has to say about growth in the office sector casts a big shadow over the real estate market. What they see, across the country, is office occupancy growth. New buildings that will come online over the next few years also show the expected demand to continue, as many of those spaces are pre-leased.
Firms choose to locate their businesses in a particular place for a variety of reasons. Some of these relate to the price of office space; California rents are sky-high, with several hot spots commanding more than $120 per square foot. Those numbers make secondary and tertiary markets look good.
JLL’s researchers have good things to say about Chicago, putting it in fifth place for cities it’s watching in the tech sector. They say that the tech sector in Chicago continues to mature, which is pushing commercial landlords to invest in building upgrades to attract more tech firms to their locations.
However, the report continues, despite relatively low costs and high start-up favorability, Chicago’s biggest challenge is stiff competition from both the East and West Coasts of the United States for funding and acquisition opportunities.
In addition, firms look for other things that make their leadership and their employees want to live there– amenities like housing, transportation, good schools and close proximity to more like-minded individuals.
Chicago is becoming a market of note for the tech savvy. Google made a big investment in Chicagoland recently by claiming and updating six floors in a nearly century-old building in the meatpacking district.
In the study’s time period, Chicago firms hauled in $412.17 million in VC capital. That’s a drop in the bucket compared to what The Golden State’s metros haul in, but is still a respectable showing on a list of heavy hitters, putting Chicagoland just after Austin and Atlanta. Also, Chicago is ninth on the list of square footage dedicated to new office space leasing.
The strongest sector in the report for renting space is the tech sector, which accounts for 20.5 percent of space. Next, was the banking, finance and insurance sectors, which scooped up 15.3 percent of the square footage.
