A major reason tech companies are branching out of Silicon Valley and San Francisco are costs, and not just the cost of real estate—the cost of talent as well, according to Ryan Severino, senior economist and director of research at Reis. There are educated workforces in other markets that are equally competent and not as expensive as the San Francisco and Silicon Valley salaried tech office workers.
Business incubators in many of these cities are giving start-ups a place to grow their business, but technology firms are also benefitting from a significant reduction in office rents compared to America’s tech capital. Larger companies, meanwhile, are choosing to move parts of their overall team, such as the sales staff, to less expensive markets, in part to reduce their Bay area office footprints.
“Larger organizations like having an international and national network and the diversity of talent that comes with it,” Severino says. It also gives these companies the ability to offer perks such as flexibility to work between locations.
Another reason to open locations in new markets is the freedom to expand when necessary. With painfully low supply of office space in the Bay area, emerging tech markets offer greater redevelopment opportunities.