According to a new analysis by UCLA’s Benjamin Freud, the opening of tech offices is associated with a “strong and long-lasting” effect on local housing prices.
According to his research, in the two years since the office opened, housing prices within 1 kilometer have increased by 11 percent. The difference remains, at around 8% after five years. And the impact is “much bigger” than when supermarkets or coffee shops open in a neighborhood.
“The agglomeration explanation seems to be the most compelling method,” he says. “The new office will attract similar organizations in the area, which will significantly increase the number of highly skilled and affluent residents.”
After examining data on several major tech offices, including their exact address and year of opening, to power his analysis, Fried statistically evaluated the impact on housing prices using transaction-level data. His analysis spans 14 years and over 25,000 property transactions.
Those house prices are a “key ingredient” in the gentrification process, Freud says, with “strong and long-lasting” effects. In order to protect local renters and maintain access to housing, he makes a policy recommendation that “the opening of large technology offices should increase in proportion to the housing supply.”
A A crop of new technology centers Leading markets such as Ventura, Buffalo, Greensboro, Miami, Greenville, Knoxville, New Orleans, Norfolk, San Bernardino, Nashville, Lexington emerged during the outbreak. and Wichita.
“Big tech companies may be rethinking their roots as skilled labor moves beyond the confines of established tech hubs and flees the high rents and wages within,” Moody’s analysts said in a report earlier this summer. “Silicon Valley, Seattle or Boston remain high-tech centers, but there’s a shift in the scale of the tech sector spreading across the country.”
Tech leases accounted for 22 percent of all office leases last quarter, but demand has slowed as more companies continue to restructure their WFH policies. BMO Capital Markets analyst John Kim said the decline in demand for technology “takes the leg out of the stall for growth.” CNBC‘Squawk on the Street’.
