Los Angeles’ emergence as a national tech hot spot is driving up office rents while fueling employment, which is also helping to push up home prices, especially in Silicon Beach.
L.A. office rents rose by 15.8 percent from the second quarter of 2016 to the same time this year, a growth rate second only to Atlanta among the top tech markets in the country, according to a new report by CBRE.
In the two years prior, L.A. ranked 12th in the country in rent growth.
Tech companies have flocked to the city to take advantage of rents that are lower relative to other major tech hubs in the U.S., namely the San Francisco Bay Area. Companies in the top four “tech headquarter markets” — San Francisco, Seattle, Boston, and New York — have leased 1.3 million square feet of space in L.A. over the last five years.
Tech companies have also been attracted to L.A.’s growing tech labor pool. Tech industry employment grew by 14.7 percent from January 2016 to December 2017. Over those two years, 10,200 new high-tech jobs were added, or 86.3 percent of total new office jobs added during that period.
Much of that growth has been in the Silicon Beach communities located on L.A.’s Westside, including Santa Monica, Venice, and Playa Vista. Tech behemoths like Facebook and YouTube have opened offices there in recent years, with local startups like Snap Inc. grabbing a sizable amount of square footage as well. Google was the latest major player to land in the area when it opened its long-awaited office in the Spruce Goose hangar in Playa Vista in October, tripling its L.A. footprint overnight.
The tech boom has helped drive up home prices in the area as well, as young tech industry buyers liquidate stock options and cryptocurrency portfolios to make cash purchases.
Orange County is also growing, posting similar rent growth and tech job growth numbers as Los Angeles over the same period, according to CBRE.
While tech companies are finding value in the L.A. area, it still lags behind other California cities in terms of concentration of tech talent and local university tech programs.