SAN FRANCISCO—A report from Savills World Research ranked 12 global “tech cities” on a variety of factors including real estate costs, quality of life and talent pool, with one being most favorable and 10 being least favorable. San Francisco received an overall rank of number two, just behind Austin, TX, and just ahead of Tel Aviv.
In the last industry cycle, the dotcom boom was led by senior web developers. This time around, the tech boom is not about hardware, but the younger generation of 22-year-olds founding companies, sans spouse and kids. The Savills report finds they want to live and work in San Francisco, so the technical facilities in Silicon Valley are less important now. "Cities are better attractors of human capital than out-of-town business parks; purpose-built campuses whose purpose has changed," says the study.
Yolande Barnes BA (Hons), FRGS, AoU, director, head of department, Savills World Research, tells GlobeSt.com: “The digital age divides into two halves. The first, in the 20th century was about hardware and technical facilities; its place was Silicon Valley. The second digital age in the 21st century has been about human talent and its place is San Francisco.”
The tech industry now has applications in all walks of life, not just in computer science-related industries, so it is broadening to include artists, designers and inventors. This creative talent not only interacts in the workplace, but on the street, in coffee shops, bars, museums, theaters and a whole host of other places more readily found in cities, says Savills.
“City streets have a currency of their own in a tech marketplace where chance encounters and serendipitous meetings can spawn multi-million-dollar enterprises,” says Barnes.
This population concentration in San Francisco is one advantage in the competition for global talent. San Francisco is a high scorer on quality of life measures, established infrastructure, tech funding, venture capitalists, R&D, legal and tax frameworks, and connections to other global tech hubs, according to the Savills study.
The biggest threat to San Francisco's dominance of the tech scene may be the costs associated with the quality of life enjoyed within its confines. With real estate costs rising, this tech mecca is becoming more difficult to afford, particularly for young people, Savills warns.
Although the city is attracting workers (job growth in San Francisco was 4.5% for the 12 months leading up to January 2015), residential rents grew by 11.6% in the same year. This was the third highest rental growth in the country after Denver and Oakland, says Savills.
As a consequence, San Francisco has a much older population than its biggest rival, Austin, TX. The millennial-to-boomer ratio (the number of 15 to 34-year-olds compared to 50 to 69-year-olds) in Austin is much higher than San Francisco. Austin proves that cities with a great lifestyle offering but cheaper real estate are probably the biggest worry to the old giants, according to the report.
San Francisco should capitalize on its biggest assets of culture and lifestyle, and create new neighborhoods at affordable prices. For city leaders, this means that the arts and cultural offerings will be just as important as the business, finance and technical capabilities, says Savills.
“The third age of digital may be more challenging for the mega-tech cities like San Francisco. Its challenge will come from smaller cities that are globally known and connected but with cheaper real estate and living costs, combined with strong cultural identities and great lifestyle offerings. We fully expect that San Francisco will continue to compete hard on the latter counts but may find it increasingly difficult to deliver on the former,” says Barnes.
As previously reported, Savills Studley acquired Cresa South Bay.
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
