DC's Tech Industry and COVID: Where Do Mid-Sized Businesses Stand?
Information and communications technology (ICT) businesses, along with other types of tech companies routinely come to D.C. to put down roots and pursue the many opportunities that await. Historically, the U.S. government has attracted a significant number of these businesses to supply the needs of federal agencies, and this need continues to grow, especially in the cybersecurity niche.
Many mid-sized tech companies that land in D.C. are B2B, and the U.S. government becomes their primary customer. Let's take a look at how these businesses have performed before, during, and what they will likely look like after the pandemic.
Before COVID-19
Before the COVID-19 pandemic, D.C. was considered to be a tech-friendly city and a vibrant area for startups. Many mid-sized companies position themselves locally to compete for federal government contracts. As they need to demonstrate an ability to support any contracts they bid on, they actively pursue local top talent.
Prior to the pandemic, CBRE listed D.C. as #4 in its annual tech talent list behind San Francisco, Seattle, and Toronto. Fast-forward to 2020, and DC inched up to the #2 position. Despite the number of qualified professionals in recent years, there has still been a large tech talent shortage in D.C. Jobs are plentiful in this sector and mid-size businesses are hiring.
During the pandemic
For many D.C.-based tech companies, it was business as usual. The pandemic, while causing disruption to some extent, did not shut them down. Here are industry highlights from 2020.
Tech office leases
Leased tech office space across the U.S. saw a steep decline during 2020. D.C. was an exception. Statistics show D.C. led the nation for new tech leasing activity. In the summer of 2020, 1.456 million square feet in office space was leased by D.C.-area tech firms; up 55 percent from the prior year.
Raising capital
Mid-sized tech companies in the region were able to raise millions in venture capital during the shutdown. For instance, Gaithersburg-based Xometry (273 employees) raised $75 million, while Herndon-based Expel (220 employees) landed $50 million.
Tech jobs added
Between August 2019 and July 2020, roughly 260,000 IT jobs were added to the D.C. market when everything in the capital region was shut down. Moving into 2021, D.C. remains one of the top metro areas to record high month-over-month gains in IT postings.
Finding new opportunities
Some mid-sized companies pivoted to pursue new opportunities. Kastle Systems International develops technology to make office and residential businesses smarter. During the pandemic, the firm, which employs 600+ employees, shifted to accommodate pandemic conditions. In 2020 it introduced KastleSafeSpaces, a tech solution to offer contactless entry, health screening, and occupancy monitoring, essentially filling a new niche created by the COVID-19 pandemic that enabled other employers to reopen safely.
Looking towards the future
The future is hard to predict, but it's a fair assumption D.C.'s tech industry will prosper. Digital transformation enables middle-market businesses to thrive, and local IT companies are already primed. Tech needs may shift and companies reinvent themselves to accommodate evolving demands, but they will have an easier time adapting to potential market changes.
Early signs indicate mid-size companies will continue to compete for qualified candidates and their highly coveted skill sets to fill in-demand positions in the cybersecurity, cloud, artificial intelligence, management analyst, network and computer administrators, and software engineer niches.
Whether mid-sized companies will continue to allow remote work is in flux. Decisions may be driven by reliance on government contracts. Employees working in government contractual positions may be required to be in-person, but maybe not 100 percent. Projections suggest workers able to do their jobs remotely will do so in a hybrid fashion.
According to commercial real estate services company JLL, big tech is diversifying into sub-sectors and many are landing in the D.C. region. Moving forward, mid-sized companies are likely to continue to expand in the area to tap into local talent and compete for government contracts.
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