Huntsville, Alabama, tops a list of lesser-known and underdeveloped U.S. and Canadian markets that the world's largest real estate brokerage is betting has the strongest growth potential for technology companies.
The 25 smaller tech markets have talent pools for employers that might be looking to expand their geographical reach, according to CBRE's annual "Scoring Tech Talent" report.
The report ranks the ability of the 50 largest U.S. and Canadian markets to attract tech employees based on a variety of factors, such as graduation rates, tech job concentration, tech labor pool and real estate and labor costs. The 25 smaller markets — referred to as "North America's Next 25" — were ranked separately from the larger markets using a narrower set of criteria.
The "Next 25" markets in the U.S. are primarily concentrated in the Midwest and South. Huntsville ranked as No. 1, followed by Colorado Springs, Colorado; Dayton, Ohio; Halifax, Nova Scotia; and Omaha, Nebraska.
"There is some sort of nucleus in each of these markets that makes them a driver of tech talent with specialized skills," Colin Yasukochi, executive director of CBRE's Tech Insights Center in San Francisco, told CoStar News. "Many large employers will look at these markets for those specialized skills."
Huntsville, Alabama's biggest city that is situated between the Tennessee River and the Appalachian Mountains, was the birthplace of the rocket propulsion technology that powered America's first satellite and eventually took the first people to the moon in the 1960s. That tradition of innovation and technology continues in Huntsville, where tech jobs have increased 14% to nearly 24,000 positions over the past five years, according to CBRE.
Like Huntsville, each "Next 25" market has tech roots, with Colorado Springs being home to the U.S. Air Force Academy, and tech companies such as IBM setting up outposts in places such as Halifax with academic institutions focused on incubating talent.
Besides Halifax, other Canadian markets named to the "Next 25" list of smaller areas with strong growth potential include London, Ontario, at No. 8 and Winnipeg at No. 18.
Lower Costs
Huntsville's average annual tech salary is up 13% to $96,740 over the past five years. But that still might be considered a bargain compared to the San Francisco Bay Area, which took the No. 1 spot out of the top 50 largest tech markets in the U.S. and Canada by overall score. The average tech salary in San Francisco is $157,457 per year, according to CBRE.
Today, the Huntsville area is known mostly for its Redstone Arsenal military base where military missiles are developed, and the NASA Marshall Space Flight Center, which develops rockets for spaceflight. Supportive industries and contractors have set up shop around these government activities while NASA’s push to rely more on partnerships with private companies has also attracted more tech jobs. Billionaire Jeff Bezos' space startup, Blue Origin, opened a Huntsville plant in 2020 to build rocket engines.
The city's growth is also bolstered by a new $2.3 billion manufacturing plant for Toyota and Mazda that opened in 2021, adding about 4,000 jobs to the area. However, Huntsville suffered a recent setback when President Biden announced plans to keep the U.S. Space Command's headquarters in Colorado Springs instead of relocating it to Redstone Arsenal.
Less Office Space
In a first in CBRE's "Scoring Tech Talent" report's 11-year history, the Dallas-based brokerage reduced its estimates of how much office space a tech company with 500 employees might need, reflecting a broader change in how offices are being used with the rise of remote and hybrid work.
But the macroeconomic headwinds hitting the tech industry, causing some firms to pull back on real estate plans and lay off workers, aren't expected to unseat the anticipated continued growth of the tech industry's labor market, Yasukochi said.
The number of U.S. tech talent workers increased by 11.4%, or 610,000 workers, between 2020 and 2022, higher than the nation's total employment growth during that time of 6.3%. And in Canada, the tech talent workforce grew by 15.7%, or more than 150,000 jobs, between 2020 and 2022, according to CBRE.
"The tech industry is not immune from macroeconomic trends and business conditions, but technology companies and tech workers are going to do very well," Yasukochi said. "There's still a high demand for technologists and software engineers. It really is the future of our economy with the highest growth potential, and they generally are using office space."