How Tech Hubs Uplift The US Real Estate Market?
Where the Tech Hubs expand, US Real Estate Growth Follows
Within a fast-growing, intertwined, and connected world, it’s inevitable that the booming of tech hubs boosts the US Reale Estate Market. The fourth industrial revolution transformed society and improved quality of life. Businesses relocation anywhere in the world, job opportunities, and people movements, in general, affect the real estate trends and market. With the mass influx of people, globalization of information, education, and science come an increase in property demand. With economic centers on all continents, the developed west, traditionally the USA, has lost gravitational power.
The latest global issue – the coronavirus pandemic changed the way the world functions. Employees of tech giants moved from their offices and company campuses to remote work. This served as a test that proved that quality work can be done from outside the office walls, changing the economy forever. More and more companies experiment with remote work, thus driving housing values.
On the other hand, in the last decades, the rest of the world started catching up with the US creating new financial centers and industries that became America’s competitors, posing a threat to the US over a century-long economic hegemony. China presents itself as the number one US counter superpower, moving the market gravity to the East. New tech hubs are rising from the ground of the major real estate European cities and promising new economies in the far East. Money makes the world go round, and with the money flow, people go where the business leads them, adjusting their lives to wherever the job requires. These migrations create and change the real estate market trends.
There is a new sheriff in town! Cities rapidly grow once the investors start injecting capital in the area, the corporate giants move their offices and personnel, creating the need for infrastructure. Real Estate Construction sites are seen anywhere you look in these new tech hubs, new campuses, office parks, homes, etc. Continue reading to find out how Tech Hubs Uplift the Real Estate Market in the US.
Let’s start our real estate tale and what’s its relationship with tech hubs from the beginning: America and the American dream.
The American Dream
For a long time, the United States was the world’s economic center and tech giant, from which all innovations and trends spread to the rest of the world. While the rest of the globe fought its wars, America developed at full speed. The world’s first technological center was created just outside San Francisco, California. The famous Silicon Valley was the pioneer tech hub, collecting brainpower from all around the world and producing the digital universe as we now know it. The rest of America’s big cities followed: New York, Boston, Chicago.
Lately, less traditional tech centers spurred, like Boulder, Raleigh. Many more are yet to come with the migration from big cities to more affordable and comfortable places with a higher quality of living. Small and traditionally unpopular cities are expanding with the ever-growing presence of tech companies opening their businesses.
On that note, we will go back in time and explain Silicon Valley’s skyrocketing success, then fast forward back to the future with the new hotspots in the States.
First off, back to basics:
1. San Francisco
Besides the Golden Gate bridge and the trams, San Francisco holds the title of the world’s first epicenter of technology. The economy of the US and the macroeconomic trends influence the fluctuation of the real estate market and the population dynamics of San Francisco and Silicon Valley.
At the borders of the city, a tech haven was founded. With its mild California climate, excellent educational system, and new job opportunities, the Bay Area started attracting residents in the late 1800s. Back then, the port of San Francisco was the center of radio and telegraph industries. In 1933, the US Navy established Moffett Field Naval Air Station, and in 1939, NASA established the Ames Research Center on the same site.
The innovation that sprang from the space race established the foundation for Silicon Valley’s ultimate rise. During the next few decades, with the influx of venture capital, around half a million workers in the tech industry lived in the Bay Area, creating the highest rent in the whole United States (five times the national average). Nevertheless, this flourishing period had to end eventually.
The end is near. Sit back and relax we’re just being a bit dramatic…
However, Silicon Valley is losing its former glory. We are witnessing the trend of leaving San Francisco. With remote work becoming the new norm, there is less population, therefore, less need for housing. Half a million employees started working from home during the pandemic, and the majority are considering keeping it that way. That is not only due to the coronavirus pandemic. Even before, tech companies started moving their recruitment efforts and offices to other parts of the country where it is more affordable, thus creating small hubs. Also, they allowed their employees to work remotely and telecommute. At this point, the occupancy rates are falling rapidly.
Experts predict that Silicon Valley will eventually shrink, causing the commercial and real estate prices to crash. Additionally, establishments like bars and restaurants will close as a result. At the moment, San Francisco has the lowest number of new housing construction compared to other metros in the States (competing tech hubs have eight to ten times more new construction). Therefore, we can conclude that all the recession in the Bay Area is closely tied to global and national economic crises. Despite all this, Silicon Valley remains the undisputed champion and the so-called gold standard tech hub.
2. New York City
A city so nice, they named it twice. Yellow cabs, skyscrapers, and Carrie Bradshaw: all chose to be ambassadors of the Big Apple! If you ever played Monopoly, you struggled with acquiring property in NY, and there is a reason for that! The city of dreams is one of the most expensive places to live. The main problem with living and working in NYC is affordability. The prices of housing and renting in the city are ridiculously high. More and more digital prodigies flee NY in search of a lower cost of living and higher quality of life.
Techpreneurs created Big tech in the Big Apple. New York is Silicon Valley’s most important competitor, housing circa 40 unicorns (unicorn – a company worth more than $1bn), being the biggest tech hub outside of the Bay Area.
The good thing about this tech hub is that many foreign workers come to NY, attracted by the big city life and what it offers (‘’If I can make it here, I can make it anywhere’’). Although Trump’s restrictions on highly educated foreign worker visas demonstrated how presidential administrations differing views on immigration policy may affect the tech industry, immigration has always been a significant part of New York’s prosperity.
In the third quarter of 2021, New York’s flourishing real estate market showed no signs of weakening. Queens is seeing a surge in demand from renters looking for a cheaper option to Brooklyn and Manhattan.
In August 2021, the state of New York outperformed the rest of the country in terms of job growth. At that time, the number of private-sector employment in New York State climbed by 28,000, or 0.4 percent, to 7,519,400.
The real estate market in New York City is now a buyer’s market, meaning there are approximately more active houses for sale than there’re buyers. In 2020, foreign purchasers accounted for 15% of all transactions in New York. In September 2021, the average rental price in Manhattan was $4,322, up 8.3 percent from September 2020 ($3990).
Trends of Migration
People emigrate from heavily crowded locations such as New York City to the suburbs or smaller settlements with lower infection rates and cheaper costs. There has been an influx of tenants from New York City in the Hamptons during the last several months. Hampton is around 100 miles from New York City and Brooklyn, the top two cities with the most net losses.
New York City has a reputation as one of the top long-term real estate investments in the United States. Year after year, the real estate market in New York has been rising. In the 2010s, the price of a house in New York City roughly doubled. In due course, prices continue to grow year after year as supply and demand continue to favor sellers.
The sunny state of Florida! Orange juice and alligators invite tech companies to try out life in the warm South of the U.S. Florida ranks 4th amongst the states as business-friendly. Also, Florida is the 4th biggest economy in the United States. The absence of income tax, combined with low insurance and corporate taxes, is probably the cause of the recent mass influx of people. In a period of nine years (from 2010 to 2019) Florida gained 2,3 million residents.
The population of the state increased 15% in the last ten years. The three hotspots of Florida are Miami, Tampa, and Orlando (not only because of Disney). However, Lower costs of living are one of the many benefits this state offers. Traditionally, people used to work and create capital in New York and spend their retirement in Florida. However, the times are changing. Orlando and Miami are becoming important tech hubs of the East Coast.
The Covid-19 world crisis hit hard on every economy on the globe without sparing the Everglades. Florida’s real GDP dropped by 2.9% since the beginning of the pandemic. Attention was drawn to Florida in 2018 when it raised $2.88 billion in venture capital ($3.1 billion in 2020). High-profile investors started moving their focus (and their money!) to the Sunshine State. Economic development activity on the rise is promising to make Florida the biggest tech hub in the country.
The Money Trail
Where the money goes, people follow! Orlando, one of the top three hotspots of Florida, located in the ‘’sunbelt’’ region is becoming a (home sweet) home to many Americans seeking job opportunities. Orlando’s housing market is seeing fast population, equity, and rent growth. This region has already generated some outstanding profits for real estate investors, and this trend is expected to continue. Property values have risen, along with appreciation rates, while the cost of living has remained below the national average. Its population has increased by over 22% since 2010 and is predicted to expand further, implying that housing demand would rise.
Orlando has been awarded the #1 Best Places to Buy a House by Forbes for the third year in a row. Around 4,000 jobs were delivered to Central Florida by Amazon Fulfillment, making Orlando the current leader in employment growth in the United States. Orlando’s employment growth expect to become the greatest in the country during the next ten years.
In conclusion, Florida seems like the place to be! That is if you like sunny weather, the beautiful outdoors, and, of course, Mickey Mouse.
4. Los Angeles
California dreamin’: Close enough to Silicon Valley, but new and improved! For decades, LA has been the global center of entertainment and one of the most popular cities to visit in the States. Since 2013, LA began to become a tech center of South California and the whole West Coast. The high quality of life has always drawn people to the city, the general ecosystem of possibilities, where young people with a healthy lifestyle try to fulfill their dreams. Once these dreams were Hollywood-related, but now ‘tech geeks’ find their haven in LA. All tech giants have decided to open shop in LA, inspiring new startups and drawing in job opportunities. Companies like Google, Amazon, Netflix, and Apple all opened up campuses, each larger than 1 million square feet.
A great advantage that LA offers is the exceptional high education; UCLA and Caltech are located in the city.
Silicon Beach (stretching from Santa Monica to Downtown LA, including neighborhoods like Playa Vista and Culver City) is a neighborhood on the Westside of Los Angeles (between Malibu and LAX airport), home to over 500 technology enterprises, including startups.
Now, let me welcome everybody to the wild, wild west :
Venice, Playa Vista, Silver Lake, and Echo Park are all trendy neighborhoods affected by the tech hub revolution. Expensive and modern, these parts of LA represent design and innovation. While these noteworthy tech advancements are taking place, real estate prices in greater Los Angeles have finally bottomed down following a seven-year run-up that began in 2012 and resulted in several years of double-digit price rise.
Aside from the impact on prices, tech influence changed the types of homes built-in Silicon Beach. Communities like Venice and Playa Vista look completely different than a decade ago, with more multi-million dollar modern homes in Venice and more multi-family residences, including condominium units and townhouses in Playa Vista. As individuals are priced out of Silicon Beach, the tech impact on pricing and design is growing farther east to communities such as Echo Park and Silver Lake. Young buyers who typically work in tech or tech-adjacent sectors are settling in and either working remotely or commuting.
The United States remains the epicenter of tech innovations and trends. However, the world is swiftly changing. Other regions with excellent education systems and technological industries create the tech hubs that draw the world to them. The fourth industrial revolution forever changed the world.
Need no worry, America; you are still number one! Though the gravity shifts towards the East, the U.S. remains the leader of the free world, meaning that many investors feel more secure investing venture capital in America’s market, rather than China, for example. Thus, workers from all over the world come to the country in search of better work and living conditions.
The real estate market trends are fluctuating. More interest is shown for the smaller cities inside the continent. Both Americans and foreigners are renting and buying real estate properties in cities that are new and promising tech hubs. However, big cities (tech meccas), like New York, still have a massive influx of people searching for a house.