D.C.’s Tech Sector Is Experiencing Explosive Growth. What Does This Mean For The Office Market?
While the unemployment rate may be slowly rising — up to 4.0% in June from 3.7% this time last year — the outlook for tech jobs remains bright.
The U.S. Bureau of Labor Statistics reports that overall employment in computer and information technology occupations is projected to grow much faster than the average for all occupations from 2022 to 2032. While this projection is for the country overall, one place where this growth is very evident is in Washington, D.C.
According to a new report from JLL Research, the projected growth in tech jobs in D.C. from 2023 to 2028 is 7.9%. One possible driver behind this increase is a major boost in tech lobbying. Tech companies spent more than $342M on lobbying in 2023, a 41.5% increase over their 2020 lobbying spend.
“The dollar volume is just immense,” Director of Research for JLL Tammy Shoham said. “The federal government allocated $14.2B in 2023 for contract work in D.C. related to its IT infrastructure. Tech companies spent $342M on lobbying in 2023. Venture capitalists allocated $2.2B to tech companies in D.C. in 2023. And the industry is still growing.”
Growth is particularly fast in the artificial intelligence space, she said. The number of entities lobbying on AI issues grew by more than twice its size between 2022 and 2023. During the first three quarters of 2023, companies, nonprofits, universities, trade groups and other organizations reported spending $569M on lobbying the federal government on issues related to AI, Shoham said.
To Shoham, these figures show that tech companies come to D.C. to lobby and stay to grow. Technology regulations are evolving rapidly, and educating and influencing decision-makers is vital to tech companies.
“Most tech firms have a government affairs team in D.C., and many house other operational functions in their D.C. office space, too,” she said. “42% of tech companies in D.C. have office space larger than 10K SF, which indicates that multiple functions are housed in the office since government affairs offices are typically pretty small.”
While that 42% figure still suggests that the majority of D.C.-based tech companies have offices smaller than 10K SF, the JLL report stated that if these companies follow past trends, they will likely expand their footprint in the D.C. market in coming years.
This growth presents an exciting opportunity for D.C. office brokers who can step in and help ensure these firms have the space they need for both their current operations and future plans. JLL Executive Managing Director Doug Mueller said the area is seeing near-term stabilization in the tech office sector with existing tech tenants and pockets of growth in the AI space that could be “seismic.”
“With the second-highest number of AI-related job postings in the U.S., we’re clearly seeing a signal from big tech and government contractors that our talent is appreciated and desired greatly,” he said. “Brokers should expect local tech to feed competition for talent from big tech and expect increased lobbying spends in the space.”
Mueller said tech companies have the same space needs as many other industries today. Specifically, they are looking for spaces that will be attractive to their employees and encourage them to make the commute to the office.
“This means amenities that work both as third spaces and places to congregate for meetings and celebrations,” he said. “I think the fascinating shift now is where we are choosing to locate amenities. Basements and back-of-building spaces simply don’t sing anymore. Tenants want spaces that are light, bright and located at the tops of buildings.”
Shoham said that D.C. has one of the most highly educated labor pools in the country, which helps tech companies in D.C. grow faster. This could mean big things for the local office market.
“Job posting data shows that big tech companies in D.C. are currently hiring for software engineer, data science, AI research, product manager and marketing roles,” she said. “And the industry is still growing.”
Click here to read the full JLL report and learn more about tech growth in the D.C. area.
This article was produced in collaboration between JLL and Studio B. Bisnow news staff was not involved in the production of this content.
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