From the CBJ: Look out San Francisco: Charlotte’s among 8 cities vying for your tech workers
September 9, 2015
We read this interesting article by Roland Li in the online edition of the CBJ:
“The tech industry has long been the lifeblood of economic growth in the San Francisco Bay Area. But other cities around the country are fighting to gain a bigger share of the pie, with their lower costs and academic centers, according to a new report from real estate brokerage CBRE Group Inc.
The tech industry added 48,000 jobs in the U.S. between January and May and is on pace to add 150,000 jobs this year, the highest annual total recorded. Tech is outpacing all other industries, with 34.4% job growth in the last six years. That accounted for 19% of the largest leases signed throughout the country, statistics show.
Check out the accompanying photo gallery to see eight U.S. cities that are vying to compete with San Francisco’s tech industry.
San Francisco still tops the country with the highest growth in tech jobs, weighing in at 42.7% from 2012 to 2014. Not surprisingly, California’s Silicon Valley clocked in at No. 2, with 27% growth. The Valley also added the greatest number of jobs out of any region with 25,448, thanks to the presence of tech titans like Apple Inc. (NASDAQ:AAPL), Google Inc. (NASDAQ:GOOG), and Facebook Inc. (NASDAQ:FB).
But there is change on the horizon. Other cities are stepping up to attract more technology companies, including Charlotte, Phoenix, Austin, Nashville, Indianapolis. That’s creating more competition for San Francisco and other prominent tech hubs like Seattle, home of Amazon.com Inc. (NASDAQ:AMZN) and Microsoft Corp. (NASDAQ:MSFT), and New York City, when it comes to attracting tech talent.
So what makes these areas so hot — and why are they attracting such notice now?
First, cost. All of those markets are significantly cheaper than the Bay Area when it comes to office rents, with an average cost of around $20 per square foot, far below San Francisco’s average rents of around $68 per square foot. States such as Texas have also pitched tax incentives in a bid to poach California companies. Last year, Toyota announced that it would move its U.S headquarters and 3,000 jobs from Southern California to Plano, Texas, by 2017.
“Wages and housing expenses are substantially lower,” said Colin Yasukochi, research director at CBRE (NYSE: CBG).
But the decision to expand elsewhere isn’t just based on economics. Having access to educational resources can also be a major draw.
For example, Pittsburgh is home to Carnegie Mellon and Austin has the University of Texas at Austin, which provide thousands of potential new, educated workers each year. “Many of these tech companies realize that good caliber talent exists across the country,” said Yasukochi. “They are attempting to tap into key nodes where this technology is being developed.”
In some cases, major technology companies may have the bulk of their “back office” functions such as marketing and finance in cheaper markets. Meanwhile, more highly paid employees like engineers may still work in the Bay Area or other urban centers in order to better attract talent, said Yasukochi.
The Bay Area still has substantial advantages, despite its issues with housing costs and congested transit. The vast majority of large U.S. venture capital firms are located in Silicon Valley, and entrepreneurs benefit from have the physical proximity to pitch investors. The thousands of engineers already working throughout the region are also potential job candidates, along with graduates from the University California, Berkeley and Stanford University.
“As it gets more and more expensive to operate here, they are just more focused to have the highest value jobs and functions here,” he said. Expensive real estate is also a lesser expense compared to the wages, which make up the majority of most companies’ operating costs. So moving to a cheaper market may not make sense if a company would struggle to find talent there.
But the region is struggling to accommodate the growth. Tight office supply is further restricted by Prop M, which limits the amount of office space that can be approved each year. Office rent is the second-highest in the country, behind New York, which may restrict the growth of future companies, potentially smaller startups.
All of those factors combined could mean tech companies slow their growth here and look elsewhere for larger operations.”
und viele Grüße aus Charlotte
Reinhard von Hennigs