Cybersecurity: A Major Capital Opportunity

Cushman & Wakefield Research Explores Rapidly Growing Industry and its CRE Implications

CHICAGO – New research 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.

Cybersecurity: A Major Capital Opportunity notes that cybersecurity venture capital investment increased to more than $5.6 billion in 2017, a $1 billion increase over 2016, for an industry that has nearly 300,000 unfilled positions in key tech and finance markets and nearly doubled its office leasing volume year-over-year. 

Further, cybercrime damages are estimated to surpass $6 trillion by 2021, doubling 2015’s total, according to Cyber Security Ventures. In response, global cybersecurity investment increased 5% over the past four years and is expected to increase 12% to 15% annually through 2021, with a cumulative spend as high as $1 trillion, Cyber Security Ventures notes.

“And that estimate may escalate rapidly in response to the impending proliferation of connected devices,” said Elisa Konik, Chair of Cushman & Wakefield’s Emerging Technology Advisory Group. “That really underscores the continued and future importance of cybersecurity and its status as an attractive opportunity for both investors in the sector and those who lease space to the industry.”

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% 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 leased, more than 800,000 square feet of this was throughout the San Francisco Bay Area. The Washington, DC, area was a distant second at more than 132,000 square feet leased in 2017, followed by Detroit, Dallas and New York.

In the Bay Area and other markets, cybersecurity companies are mainly signing deals on five- to seven-year terms. 

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,” 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.

About Cushman & Wakefield
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