The city’s burgeoning tech market, tech companies’ demand for prime real estate and other signs indicate that Northwest Austin tech hub will become more prominent.
“We believe there remains a high concentration of that tech talent in the northwest area that will continue to be attractive to tech companies,” said Carl Condon, principal at commercial real estate firm Avison Young.
Austin’s penchant for tech, coupled with its business-friendly reputation, earned the city the No. 8 spot on real estate firm CBRE’s Tech Talent Scorecard, released July 20, to show cities that have the best talent and how that affects the commercial office market. In June, Austin was named the seventh best tech city in the U.S. by commercial real estate services firm Cushman and Wakefield.
Both reports acknowledge Austin’s entrepreneurial growth and high numbers of tech workers. Accessing that tech talent, however, is an issue for some tech companies.
“The biggest challenge is the competitive nature for talent in Austin,” said Sam Baber, head of people operations for Northwest Austin-based Cognitive Scale. “Companies, when they find that talent, they pay attention and move quickly. It’s a buyer’s market.”
Cognitive Scale, an augmented intelligence firm that helps companies expand human intelligence and solve problems, is planning to grow its employee base from 140 to 200 in the next two years, Baber said. The company’s partnership with The University of Texas’ computer science programs helps with finding Ph.D.-level talent, he said.
From 2011-16, the city added 15,170 tech employees, excluding high-tech manufacturing and research and development, according to CBRE.
Even with that growth, the vast number of tech firms in the city has created another problem, said Travis Baker, recruiting manager at Northwest Austin-based software firm Bazaarvoice.
“One of the issues we see is it tends to be a robbing Peter to pay Paul situation where we go and attract talent from another Austin company, which then creates an opening,” he said.
What could alleviate that issue is creating a system in which companies have a concerted effort to attract talent from other tech markets, he said.
“We need to recognize there is tech talent outside of Austin and the Bay Area,” Baker said. “There are a lot of smaller tech communities—Denver, Orlando—where they have a burgeoning tech ecosystem being created.”
Austin Community College is also doing its part to create more tech talent. The college district has an advisory committee—comprising executives from companies such as Dell and information technology firm Cisco Systems Inc.—that provides input on new classes and programs, said Linda Smarzik, ACC’s dean of computer studies and advanced technology.
ACC recently added a software testing certificate and a cloud computing class. Before adding any classes or new programming, Smarzik said ACC ensures anyone completing those new options will be able to get a job after graduation.
“We have to keep in tune with the community because our students wouldn’t get jobs otherwise,” she said. “IT is one of our top three career fields behind nursing and other nonrelated degrees.”
On Aug. 25, ACC and Apple announced a new partnership. This fall, ACC will offer Apple's new app development program, which instructs students in application coding and design.
Prime real estate
The high-tech industry’s growth is also having an impact on the city’s commercial real estate. In the second quarter of 2017, data from CBRE shows 48 percent of leases were signed by tech companies, an increase from 24 percent in the first quarter of 2017 and 34 percent in the fourth quarter of 2016.
Most of the growth in the Northwest Austin area has come from The Domain. However, downtown Austin remains a significant draw for companies, including Google Inc., which consolidated offices in North and Central Austin to move to a new downtown office tower.
“We have seen a concentration of interest and demand of companies wanting to be either downtown or in The Domain,” Condon said. “A lot of that has to do with the type of employee they’re trying to attract or retain. They’re focused on young millennials, the demographic of 30 years or younger, and [attracting] the top talent in that demographic. Downtown is really where a lot of these companies want to be to attract that talent.”
For companies that do not have to be downtown, The Domain offers similar amenities—nearby restaurants, retail stores, bars and fitness facilities—at a lower cost. Outside of downtown and The Domain, traditional commercial landlords are bringing in food trucks for tenants, or companies are building their own amenities, such as Apple and Polycom Inc., both located on Parmer Lane.
“They’re bringing The Domain environment to their campus,” he said.
Proximity to employees’ homes in Northwest Austin was important for Q2 Software Inc., located on US 183 at Lake Creek Parkway. In the past two years the company grew from 86,000 square feet to 200,000 square feet in three buildings on two campuses, according to Q2.
The company focuses on its culture and guiding principles to attract talent, said Kim Rutledge, senior vice president of human resources. The interview process includes meeting with several employees to ensure a cultural fit.
“It’s a competitive market for every role,” she said. “There are a lot of great tech companies in Austin. For us it has generally worked out, but that’s because we’ve put a lot of effort and resources into [hiring].”
Last year Austin ranked No. 5 on the Tech Talent Scorecard, and reasons for its slippage include a rising cost of living for residents and businesses and less organic growth of talent.
Rutledge said keeping the tech talent pool full is already a challenge, and the area needs more high schools, technical schools and junior colleges to step in and train future employees.
“We are all going to have to start getting creative on how we make those types of investments and how we develop that talent,” she said.
Adding to the city’s affordability challenges are rising housing and living costs as well as a lack of available commercial real estate that is driving up business costs, Condon said.
Little new development in the pipeline is also contributing to the city’s tight commercial real estate supply, said Erin Morales, CBRE’s senior vice president of technology and media practice.
“We as professionals are needing to think outside the box in order to help [high-tech companies] find [real estate],” she said. “Or we need to work together to plan well in advance to make sure we can map out a solution for them perhaps over a period of time to get them to where they need to go.”
Companies are now being charged additional fees for parking at The Domain, Morales said. The cost of $20 per space per month is still lower than an average $175 per space per month in downtown Austin.
“Downtown is great for 100 employees, but once you get above that it can be very difficult and costly to house your people downtown,” she said. “That’s why you see these large-block [users needing over 20,000 square feet] open offices in the northwest market to house maybe their customer service operations or back-of-house operations.”
In the short term, experts say co-working spaces, such as the new WeWork spot in The Domain, could tide over the market and bring in new recruits.
“They’re attracting companies, not just startups and freelancers, but larger companies that could [grow] 30-50 people within that space,” Condon said. “Companies in a growth mode can plug into that WeWork environment and grow in that same footprint.”