San Francisco, along with the Bay Area, has the highest concentration of tech companies, making it the nation’s hotspot of innovation. By the latest approximations, there were at least 1,000 start-ups located in the Bay Area, and 18 of Fortune 500 companies have headquarters here. Although other cities in the U.S., such as Austin, Boston, and Chicago, are picking up speed and attracting tech investors, the Bay Area remains the incontestable leader in this sector. Thanks to this tech economy, the state of California is expected to outshine national economic growth in 2020 and even in the unlikely event of a recession, California’s outlook is still more optimistic compared to the rest of the country.
But the reach of the tech economy isn’t limited to these numbers. Being the nation’s tech powerhouse influences life in San Francisco in more ways than one and residents aren’t always as happy with the area’s growth as much as investors.
Tech employment is at an all-time high
Do you want to work in tech? Come to San Francisco. In May 2019, there were 835,600 available tech jobs in the Bay Area – a 16% increase compared to the dot-com bubble in 2000. This trend shows no sign of stopping. The tech industry has continued to expand and not even major events such as 9/11, the housing bubble, and the 2008 recession could halt it. Year after year, more companies have joined San Francisco’s growing tech scene and, experts argue, the jobs they have created are much more stable compared to the ones in the dot-com era. That’s because, unlike the companies that headlines twenty years ago, the ones of today report actual profit and produce products and services that are in high demand.
Opening headquarters in San Francisco is a top priority for tech firms, which don’t seem to be bothered by the soaring costs of office space – as much as $81 per square foot.
Investors are tapping into the potential of the Bay Area
Tech has always been a divisive topic among investors. On the one hand, there are those who say that innovative technologies such as Blockchain, Big Data, and AI, are still in their prime and we don’t know the long-term profitability of such investments. However, the Bay Area continues to attract record VC funding, along with New York and Boston. On the other hand, others say that this form of alternative investment is too promising to refuse and that in the following decade not even risk-averse investors will be able to deny its potential. San Francisco has some of the most forward-thinking tech companies in the world, which attracts venture capitalists and angel investors with an eye for innovation. Much like Forex brokers that offer high trading leverage, San Francisco’s tech companies offer investors the chance to make high profits in a relatively short time (the tech sector offers the highest average returns out of all ranked market sectors). However, no investment is without risk and investors need to carefully consider all their options and do their research before backing a startup.
51% of home buyers work in the software industry
San Francisco’s booming tech sector hasn’t only impacted employment, but also the housing market which, according to statistics, is mostly dominated by tech employees. 51% of San Francisco’s home buyers work in software, followed by 8.9% in finance and 4.5% in biotechnology. Mission Bay, South Beach, and South of Market are the top 3 most popular neighborhoods thanks to their highways and good commuter lines to Silicon Valley, while the poor commute conditions of Lower Pac Heights and Inner Sunset brought these neighborhoods at the bottom of the list. Who employs these buyers? According to data from Fidelity National Title, Google, Apple, Salesforce, Facebook, and LinkedIn are responsible for most tech buyers in the region.
Over the years, the increasing number of tech jobs has changed the local communities. Working-class neighborhoods on the north side that were racially and ethnically mixed a few decades ago have now become affluent, industrialized, and occupied mostly by highly educated white communities. San Francisco is still a multicultural city, since it attracts people from all over the world, but their socio-economic background is almost the same. Younger, richer, more educated residents also triggered a massive gentrification trend in San Francisco, but these moves on the real estate market also have a darker side.
Rent and property prices have spiked due to high demand, making life in San Francisco more difficult for average income families. Many residents were evicted or displaced which has led to an increase in homelessness on the one hand and an increase in unoccupied homes on the other hand. There are now about 38,000 empty homes in San Francisco, which means there are five empty homes per homeless person. Once proud to be part of the community, more and more residents worry about the unchecked homeless, the rising incidence of drug abuse and violence in wealthy neighborhoods.
Is the tech industry hurting local businesses?
San Francisco and the Bay Area definitely have booming economies, but tech companies are the main drivers behind it. Local businesses, however, seem to be struggling. Commercial spaces that aren’t occupied by tech companies are left to small businesses that can’t keep up with the high costs of rent. A new fancy restaurant or coffee shop pops up every week, but owners can’t stay in business for very long. Family stores have it even harder. Instead of going out to buy groceries from the store down the street, tech workers order them through Amazon Prime. In the past five years, this has led to a desolate landscape: one in eight storefronts is empty, long term leases are considerably harder to find, and small businesses that aren’t tech are facing a great deal of financial insecurity.