Since its beginnings, the tech industry has been concentrated on the West Coast in Silicon Valley. That status has held through the '90s and up until the last few years of this century. Today, there are cities emerging into tech hubs in places outside of the Big 5: NYC, Boston, Seattle, San Jose, and San Francisco, which is part and parcel tied to how multifamily is faring in tech cities vs. non-tech cities.
Silicon Valley’s Tech Stranglehold – Strong but Weakening
Based on numbers tracking investment dollars in tech from 2016, a survey of 200+ cities across the U.S. revealed that traditional tech hubs still account for about 75% of all investor dollars going to tech. That money is still largely concentrated in just a few big cities.
San Francisco alone attracts over a third of all tech investments, followed by New York – a state ranking in over $7 billion in investments yet accounting for less than half of the $23 billion going to the Bay Area. San Jose brings in 10% of all tech investment dollars.
While those numbers remain impressive, non-tech cities like Detroit, Portland, Nashville, and Las Vegas have garnered an even bigger slice of investor attention over the last year. If you only look at the dollar amounts being invested, there is no question that traditional tech hubs still attract the most money, but when compared to the populations of rising non-traditional tech hubs, there is actually more money flowing to second tier non-tech cities now.
Second-Tier Tech Hubs on the Rise
Together, Seattle, Austin, Miami, Chicago, and D.C. accounted for nearly $1 billion in tech investments in 2016. At the same time, San Jose fell from the top spot for tech investments to number 5 while combined, nine traditionally non-tech cities made up 9% of venture capital investments in tech. Those cities include:
- Atlanta, GA
- Boulder, CO
- Dallas, TX
- Denver, CO
- Houston, TX
- Miami, FL
- Minneapolis-St. Paul, MN
- Philadelphia, PA
- Phoenix, AZ
- Pittsburgh, PA
Citylab’s 200 city survey broke the numbers down even further based on the per capita of each city versus investment amounts. What they found was that only San Francisco and Boston remained in the top 5. Dollar for dollar, it is actually Boulder, Provo, Santa Barbara, Durham-Chapel Hill, and Salt Lake City that round out the top 5 tech investment cities.
There are secondary cities that show up on that list that are way under the radar. Even among non-tech cities, Nashville, Pittsburgh, and Portland have been on the rise for a few years and hence are no longer a big secret in the tech sector. Places like Manchester, NH however, and Madison, WI are areas where venture capital is flowing under the radar while Chicago, D.C., and New York fell out of the top 20 based on population size.
Cushman & Wakefield conducted a study of new high tech cities and found the same thing. Baltimore ranks higher than NYC on their list of non-traditional tech cities. Their list identified dozens of new emerging tech hubs in places like:
- Raleigh/Durham, NC
- Indianapolis, IN
- Columbus, OH
- Kansas City, MO
Other cities are on the radar, but not on the list, including Phoenix, Houston, St. Louis, New Haven, Detroit, Cleveland, Louisville, and Orlando to name a few. The Silicon Valley based SVCIP (Silicon Valley Competitiveness and Innovation Project) showed that over 7,500 residents left the Bay Area last year. Why? Housing and multifamily pricing – a problem that is most acute in the Bay area.
New Tech Hubs’ Impact on Multifamily in 2018
Redfin conducted a study recently that showed nearly a quarter of the population in the Bay Area is actively searching for a new place to live or to establish or expand their business. This migration away from high rent, housing, and multifamily pricing coincides with the migration of tech jobs to non-tech cities. Portland, Seattle, and Nashville among many others appear to be the beneficiaries of the brain drain happening because of rising prices in multifamily in tech cities this year.