SAN FRANCISCO, Ca., April 25, 2018 – A new report released by Cushman & Wakefield explores the rapid growth of cybercrime, the response of the cybersecurity industry and its impact on commercial real estate, especially in key technology and finance markets such as the San Francisco Bay Area, Washington, DC, New York and Austin, Texas.
The number and presence of cybersecurity firms in the Americas continues to increase from year-to-year and San Francisco Bay Area leads the pack, according to the report Cybersecurity: A Major Capital Opportunity.
The San Francisco Bay Area assumed no. 1 spot in the top 10 markets by new leases, including VC funding and job listings in 2017. In the Bay Area alone; 830, 469 commercial real estate square footage was leased, more than $1.65Bn in VC funding was administered and 13, 567 job openings were listed for this sector.
The total national spend on cybersecurity in all the aforementioned sectors has continued to rise from 2014 and is projected to reach more than $120Bn by 2021.
This increase bolsters real estate demand from cybersecurity firms and 2017 saw a major increase in leasing to cybersecurity companies across the U.S., with 1.4 million square feet signed, 1.2 million of which was new.
This was a big increase over 2016, which saw just under 800,000 square feet secured by the sector, and represents 2 per cent of the more than 49 million square feet of office space in total taken nationally in 2017.
“Of the 1.2 million square feet of new space taken nationally, more than 800,000 square feet of this was throughout the San Francisco Bay Area in neighborhoods such as the Financial District and SoMa in San Francisco, Santa Clara, Redwood City, and both the downtown and near-airport neighborhoods in San Jose,” Cushman & Wakefield research director, Kevin Imboden said.
In the Bay Area and other markets, cybersecurity companies are mainly signing deals on five- to seven-year terms.
Michael D’Ambra, owner of 2 W 5th in San Mateo, Ca. recently welcomed cybersecurity tenant Duo Security to the building. Cushman & Wakefield’s Executive Director, Marc Pope, and Director, Shannon Chircop, represented Mr. D’Ambra, the landlord, in the transaction.
Duo Security occupies space in more than one building downtown evidence of its business growth in the Bay Area.
“We have not had a cyber security company in the building before and one of the strengths of this particular building is that it was the largest block of space in downtown San Mateo where tenants can walk to Caltrain – the public transportation system that links San Francisco and San Jose,” Mr. D’Ambra said.
Robert Sammons, Cushman & Wakefield’s senior director in Northern Californian research, says many Bay Area companies are seeking close proximity to public transportation recognizing it is a big drawcard for the millennial workforce, who have shown a preference for driverless commutes.
“We find that almost all companies – no matter the industry – prefer locations within walking or biking distance to rail transit in particular. This trend has spread from San Francisco proper to Oakland as well as the suburban markets along the Peninsula and the East Bay with easy access to BART and Caltrain,” Mr. Sammons said.
“The latest to experience this trend is San Jose with its downtown exploding with development thanks to several rail options based around Diridon Station. In the urban or suburban environment, the desire to have mixed-use developments on or near rail – office, residential and retail – either more organic or created from scratch, is a huge draw for workers of all ages,” he said.
Silicon Valley is renowned for its cybersecurity firm presence. Additional commercial real estate transactions Cushman & Wakefield has been involved in the SF Bay Area include (but not limited to):
- AlienVault (San Mateo)
- Fortscale Security (San Mateo)
- Sophos (San Mateo & Santa Clara)
- Anomali (Redwood City)
- Symantec (Mountain View)
- VMWare (Palo Alto)
- Bugcrowd (San Francisco)
Every tech-centric market in the U.S. should benefit from cybersecurity’s growth, said John Redeker, Leader of Cushman & Wakefield’s Cybersecurity Advisory Group.
“Cybersecurity companies in these markets are prioritizing lease flexibility and scalability as they occupy more space to accommodate their growth,” Mr. Redeker said. “As a result, developing and employing an effective real estate strategy has become vital to the success of new leases across different markets.”
Much of this demand centers around two areas: network maintenance and administration and the design and development of cybersecurity systems. In 2017, more than $5.6 billion in venture capital and private global equity funding poured into nearly 200 cybersecurity firms. Denver, thanks to KKR’s buyout of Optiv, and the Bay Area led the way with more than $1 billion invested in both markets. Other key markets receiving over $100 million included New York, Boston and Washington, DC, maintaining the pattern of cybersecurity companies locating near their key clients in the software, financial and defense industries.
*See blogpost here.