Technology plays an important role in the personal and work lives of all Americans, and there’s no doubt that in order for the U.S. to continue to be competitive on the global stage, companies will need to continue innovating.
This decade is already gearing up to be dominated by autonomous and electric vehicles, artificial intelligence and automation, advances in medical sciences and cybersecurity, the expansion of the cloud and the internet of things, and property tech and wearables.
The label attributed to the industries that research and develop these incredible technologies is STEM, which stands for science, technology, engineering and mathematics. Of course, the people whose occupations focus on creating these technologies are already of growing importance, and the cities that are able to attract companies with STEM jobs are likely to flourish for the foreseeable future with population, wage and job growth, making them potentially sound locations for real estate investments as well.
STEM jobs are certainty on the rise. Roughly one out of every 10 new jobs created in the U.S. between 2018 to 2028 is expected to be in STEM fields, according to the U.S. Bureau of Labor Statistics (BLS). BLS also projects that STEM occupations will increase by 8.8%, or more than 858,500 jobs nationwide, to 10.6 million during that same period. This would vastly outpace the 5% growth rate of non-STEM jobs over the same period.
STEM employees run the gamut of industries from finance, food processing, and manufacturing, to healthcare, defense, and pharmaceuticals. Specifically, they can be mathematicians, biomedical researchers, electrical engineers, scientists, data analysts, information technology specialists, and much more. Since these employees are in high demand and require technical skills, they typically earn much higher wages than jobs in other fields. The median annual wage of STEM employees in 2018 was $84,880, which was more than double the median income of non-STEM jobs of $37,020, according to BLS data.
The demand for STEM jobs is likely to intensify as there is currently a shortage of qualified workers in the STEM fields, which was estimated to be 2.4 million jobs in 2018, according to the Smithsonian Science Education Center. This leaves room for millions of additional potential jobs to be added to the field.
In response, the education community has begun to help provide funds and programs to help train the next generation of workers in STEM fields. The U.S. Department of Education invested $819 million in 2018 and 2019 combined to support STEM education programs. And M.B.A. programs of prestigious universities are adding STEM studies to their concentrations, according to The Wall Street Journal.
With these and more efforts around the country to teach future workers STEM skills, companies will be hiring and expanding their offices to continue to expand production.
Where are the STEM centers?
San Francisco, New York City, San Jose, Boston and Washington, D.C. take a lion’s share of the STEM job openings, according to Forbes.
However, smaller cities with strong economies are also seeing huge surges in STEM jobs. A good example of this is the Huntsville, Ala. metropolitan area, which is ranked in the top three cities with the highest concentration of STEM jobs, according to financial news website 24/7 Wall Street based on the analysis of BLS data.
Since the time Huntsville begun attracting many technology and science companies to establish roots in their city, its population has increased dramatically. From 2010 to 2018, Huntsville’s population jumped over 10.8 percent, roughly double the pace of the national population growth, according to the U.S. Census Bureau. Unsurprisingly, this boom has been a large contributor to rent growth as well, with average rents in Huntsville increasing by 7.9 percent in 2019, the second largest increase in U.S. cities in 2019, according to real estate data firm RealPage, Inc.
There are many reasons why STEM jobs have been attracted to Huntsville. The city is known locally as Rocket City for its history housing the NASA Marshall Space Flight Center, which employs 6,000 people and makes rockets propulsion systems. The NASA center is housed in the Redstone Arsenal, a U.S. Army garrison with approximately 36,000 employees, including many focusing on weapons technology, who work for divisions such as the U.S. Army Aviation and Missile Command, U.S. Army Space & Missile Defense Command, and the Missile Defense Agency of the U.S. Department of Defense.
Huntsville is also home to the Cummings Research Park, the second largest such facility in the country and fourth largest in the world, with 300 companies, more than 26,000 workers, and 13,258 students focused mostly in STEM fields.
Over the past two years, more than a dozen major economic projects worth a total of $4.5 billion with a planned 7,500 new jobs have been announced for Huntsville, most of which are in the technology fields. Facebook and Google are building data centers worth a combined $1.35 billion that are expected to create 200 new jobs, and Blue Origin, a private space travel company founded by Jeff Bezos, recently opened a new $200 million facility to manufacture engines, which is expected to create up to 400 jobs.
What does the STEM job boom mean for real estate?
Real estate sponsors do not have a magic ball they can consult with in order to find the right markets to invest in. Instead, they must rely on their experience to seek out cities with sound fundamentals and their ability to interpret market trends.
The growth of STEM jobs, which are high paying, abundant and would appear to have lasting power, create a compelling case for the real estate markets in which they are located. However, the major cities which employ many of these jobs, including San Francisco and New York City, are very highly priced and it can be very challenging to find opportunities with acceptable projected risk-adjusted returns. On the contrary, smaller population centers such as Huntsville and Boulder, Colo. are markets in which good opportunities can still be found.
STEM jobs will play a massive role in our economy for the foreseeable future. Investors should consider the impact that these STEM jobs may have on real estate markets across the country when evaluating potential investments. As with any investment opportunity, investors must still do their due diligence and make sure that any deal they are contemplating exhibits sound market fundamentals and has a strong sponsor who can execute on the business plan. The STEM fields are exciting in their own right. For those in the real estate industry, however, even more exciting is the potential for STEM jobs to propel growth in markets that embrace this burgeoning industry to new heights.