Battle of the Bay: Silicon Valley vs. San Francisco

SAN FRANCISCO—During the past decade, technology juggernauts have expanded further throughout the Bay Area by leasing large blocks of space or acquiring buildings to occupy. Tech giants such as Google, Apple and Facebook make up the roster of more than 200 companies that call the metro home.

While Silicon Valley has traditionally been the chosen location for tech firms, San Francisco has recently emerged as a viable alternative for tech employers to accommodate increasing traffic concerns and tap more of the region’s top talent.

Transwestern recently interviewed employees at Bay Area technology unicorns and startups. Derek Cuschieri, Transwestern associate in Silicon Valley, and Jack Seymour, Transwestern associate in San Francisco, weighed in on the highlights of each market.

GlobeSt.com: What is driving tech companies to expand more in San Francisco during the past few years/?

Cuschieri: Since Millennials make up a large part of the workforce, companies have expanded to San Francisco with the goal of attracting those who prefer living within the city limits where they have a finger on the pulse of the latest technology. With a high concentration of premier universities that produce qualified candidates, the city by the Bay is still the most talent-rich destination in the greater Bay Area.

Seymour: The most obvious drivers are talent, innovation, lifestyle and money. A less tangible factor is the energy of the city. San Francisco’s startup energy, unlike any other, lives through a sense of connectedness of individuals, teams and companies to a common purpose. A critical mass of industry acts like a gravitational pull, continuing the cycle of attraction and feeding into that energy.

GlobeSt.com: What factor did both Silicon Valley and San Francisco employees have in common? What were the major differences?

Cuschieri: Big trends that we observed were that companies located in both Bay Area markets were focused on being close to venture capital accelerators, mass transit lines and top talent from local universities. A major difference was that San Francisco employees are relying more on public transportation to get to work rather than in the Valley, where employees are more likely to use their own vehicles and ride sharing.

GlobeSt.com: How is each market responding to these expansions?

Cuschieri: Silicon Valley is seeing a large development boom in North San Jose, downtown San Jose and Santa Clara. And these are large corporate campuses, not single buildings. The Valley continues to experience record-setting economic expansion, and with Google set to move into the Diridon area, that growth will continue.

Seymour: The San Francisco market continues its performance as one of the healthiest economic markets in the country with little signs of slowing down. San Francisco office vacancy currently sits at 7%. With 4 million square feet under construction, the majority of which is in Mission Bay and south Financial District, large blocks of space have become a hot commodity in an ever-tightening market. More than a dozen 100,000-plus-square-foot tenants are currently in the market for office space in San Francisco. At approximately 1.5 million square feet total, the likelihood of them all finding a home is impossible in the near term. Oakland has emerged as the most logical location with four large block developments coming on line in the next 12 months.

GlobeSt.com: Are there any building amenities that are unique to each location?

Cuschieri: No amenities were unique per se, but it’s the unicorns in both markets that provide a wealth of amenities for their employees. Some examples of these amenities are free food, napping pods, on-site physicians, unlimited time off, massage therapy, concierge services and ministry services. Since the employees and founders that we interviewed were from both startups and unicorns, the trend is that the smaller the company, the less likely amenities were offered.

Seymour: Many of the amenities unicorns offer are more service-oriented and less tied to building class or management offerings, such as the more traditional amenities like parking or fitness centers. An interesting trend to watch in San Francisco is the potential legislation outlawing in-house campus cafeterias in an attempt to bring employees back out into the local retail community.

GlobeSt.com: Do you think there is any danger of Silicon Valley losing company headquarters to San Francisco?

Cuschieri: It’s more likely that Silicon Valley will lose headquarters to other cities outside of the Bay Area due to the high cost of living, housing shortage and major traffic congestion. The recent boom in office developments shows continued growth through the third quarter of 2018. San Francisco lacks available space for companies to move into. The demand is there, but Silicon Valley has an abundance of available space for companies to grow into.

Seymour: I tend to agree. As we have famously seen with Amazon’s HQ2 search, large tech tenants are looking to cities that check several boxes. While San Francisco can certainly tick the talent box, a lack of inventory and the steep cost of doing business present a high barrier to entry, a barrier that has been heightened by the introduction of two new tax measures, Proposition C that passed in July and the homelessness gross receipts tax recently placed on the November ballot. Rather than enticing companies to relocate their headquarters, San Francisco will continue to be an incubator for fresh startup innovation.