Austin Shows Strong Showing at #7
Austin’s stature as a top technology hub is reinforced in a new national research report from Cushman & Wakefield. Austin came in at No. 7 among the top 25 U.S. tech cities, with San Jose (Silicon Valley) and San Francisco capturing the first and second spots respectively, according to Cushman & Wakefield’s inaugural “Tech Cities 1.0” national report.
“Austin sets itself apart as a tech hub due to its highly educated labor pool, a lower cost of living compared to other high-tech cities, and an excellent quality of life,” said Brian Butterfield, Managing Director in Cushman & Wakefield’s Austin office, who specializes in the representation of technology and VC-backed startups.
The top 25 tech cities were determined by analyzing the concentration of factors such as talent, capital, and growth opportunity – key ingredients that comprise a tech stew. The heartiest of these tech epicenters are: 1. San Jose, Calif. (Silicon Valley); 2. San Francisco, Calif.; 3. Washington, DC; 4. Boston/Cambridge, Mass.; and 5. Raleigh/Durham/Chapel Hill, N.C.
Cushman & Wakefield created the “Tech Cities 1.0” report to provide greater insight for its clients and industry stakeholders into existing and emerging tech centers that are driving much of today’s U.S. economy.
Ken McCarthy, Cushman & Wakefield’s New York-based Principal Economist and Applied Research Lead for the U.S., states that “tech is in everything,” and that people would be left behind if they did not adopt technology and change with that technology.
“Basically every company today is a tech company in one way or another. We’re all using it, we’re using various aspects of tech companies to do various things,” Mr. McCarthy elaborated. “Whether it’s Salesforce as customer relationship management, or Workday for HR, and various other database programs, the old way of doing business just doesn’t work anymore.”
“Austin is known for its availability of risk-oriented private capital to invest in businesses, and the intellectual capital to grow them,” stated Butterfield. The city is home to a highly educated workforce, with 180,000 students at The University of Texas and other top area schools. It is also recognized for its livability, and in early 2017 was named the best place to live in the country by U.S. News & World Report.
“People want to be here, so companies want to be here,” Mr. Butterfield added. “That attracts even more people and creates a self-perpetuating cycle of growth that has Austin set to double in size by 2040.”
For decades, Austin was known as an education and government hub. It wasn’t until the last 40 years or so that the city began to reinvent itself as a top technology market. Things changed when IBM came to town in the 1970s and, even more so, when home-grown Dell Computer began to take off. Today, the company employs 13,000 people and has created dozens of so-called “Dellionaires.”
California tech giants like Google, Apple, and Facebook have migrated to Austin. Oracle also has a huge presence in the city. On top of that, the strength of the region’s education, government, and tech triumvirate has created fertile ground for a wildly successful startup scene.
Of the six metrics used to compile the tech cities rankings, Austin performed especially well in the Growth Entrepreneurship category, coming in at No. 2 behind Washington, D.C. and followed by San Jose (Silicon Valley), Nashville, and Boston/Cambridge. The Growth Entrepreneurship index is made up of three components: rate of startup growth, share of scale-ups, and high-growth company density.
Robert Sammons, Tech Cities report co-author and Regional Director, Northwest U.S. Research at Cushman & Wakefield, in San Francisco, said that although it was not surprising to see San Jose (Silicon Valley) and San Francisco continue to dominate, mass-transit issues and escalating housing costs in those areas have fanned a tech spillover into secondary markets such as Austin (no. 7), Denver (no. 8), San Diego (no. 9), and Salt Lake City (no. 24).
Sammons cited Seattle’s cost-of-living as a lingering issue, somewhat mitigated by a recent uptick in residential development that’s outpacing San Francisco’s, as well as mass transit challenges.
“Seattle has played catch-up over the past few years, but with housing creation now outpacing that of the Bay Area and with a huge $54 billion transportation initiative that recently passed at the ballot box, it will likely allow it to compete much more aggressively with those markets at the very top of the list.”
“In the case of New York, when we started to see a growth in tech employment here about four or five years ago, one of the big issues for the companies coming to New York, particularly from San Francisco or Silicon Valley, was a lack of the skilled labor force they needed, particularly engineers,” Mr. McCarthy said.
In terms of Los Angeles, both Mr. McCarthy and Mr. Sammons noted its exceptionally diverse economy.
“Media is important, and you can’t lose sight of the fact that historically it’s also been an important manufacturing and industrial center,” McCarthy said, “There are myriad industries centered in LA, which has a good talent pool, and I would expect that also will come into play as we start to see these things evolve.”