Technology firms drive large leasing deals

Global Market Perspective, August 2019

Technology firms have continued to demonstrate their demand for space in the first half of 2019 and remain a key driver of leasing volumes globally. This is particularly evident in the U.S. in markets such as Silicon Valley and Austin where technology companies are behind significant net absorption. Firms such as Salesforce, Google, and Facebook continue to sign leases around the globe which exceed all expectations in terms of headcount growth and space required.

Rental growth and economic uncertainty leading to portfolio optimisation

A sustained period of rising rents and heightened economic uncertainty are contributing to a growing focus on space efficiency and portfolio optimisation. Many large, global occupiers are currently engaged in efforts to determine where they need to be located in order to attract and retain top talent, while culling from their portfolio certain locations that are underperforming in terms of cost efficiency.

With limited vacancy in many markets, occupiers are also looking at how they can improve and invest in their current workplace to meet some of their objectives. With a greater emphasis on driving flexibility and agility within the portfolio, the use of flex space is becoming a more prominent feature of this internal workplace transformation.

Automation on the agenda in portfolio planning

As the feasibility of automation in many professional tasks increases, many corporate occupiers are beginning to consider the implications for their real estate portfolios. JLL is currently advising companies which are selecting both their city location and their lease terms based on an expectation of automation replacing a subset of their employee base. Examples include companies looking to move to larger markets for access to a more diversely trained employee base, in the event that they end up automating a portion of their back-office tasks. Other firms have begun to look at lease terms which enable them to flex in and out of space depending on whether or not they replace certain jobs with automation. This may be the beginning of a trend in certain industries as technology automates some portion of existing jobs.