SEATTLE, Jan. 9, 2020 /PRNewswire/ -- Silicon Valley and Seattle might seem like the obvious places for tech start-ups to set up shop and large companies to site new offices. But a confluence of factors such as rampant home-price growth and a seeming saturation of companies competing for the same limited pool of tech talent have led some companies to look toward other options.
A new Zillow® analysis shows that markets in the Midwest and South are most ripe for tech growth, with Oklahoma City, Kansas City and Jacksonville leading the way.
- Housing affordability
- Market 'hotness' — does the market have the ability attract people?
- Demographics and labor market dynamics indicating a robust economy
- A ready or potential pool of talented and available tech workers
- The appeal of living in the market based on factors like commute times
What we found are – while not necessarily places that would be top of mind when thinking of tech markets – cities with untapped potential for tech companies to grow.
The top-10 markets for future tech growth are:
- Oklahoma City
- Kansas City
- San Antonio
The Oklahoma City and Kansas City metros both score well for affordability — where typical-income earners are spending a relatively smaller share of their income on housing – livability, and the availability of a tech-skilled workforce.
A number of southern markets such as Jacksonville, Fla., San Antonio and Austin join Cincinnati in the top 10 in terms of market hotness. Robust rents and/or home value growth, as well as more people searching into the area than searching out, suggest these places are poised for growth and an influx of people.
The analysis also shows that traditional tech hotspots often fell toward the bottom of the list because of eroding affordability and quality of life. Lack of affordability is a major concern for tech hubs: Los Angeles and the Bay Area have the worst affordability rankings of all markets examined in this study. Chicago — not typically thought of as a tech hub — also was near the bottom of the 42-market ranking.
Here are the highest- and lowest-ranking markets in each category of analysis:
Highest scores: Pittsburgh, St. Louis, Oklahoma City
Lowest scores: Los Angeles, Bay Area, San Diego
Highest scores: Las Vegas, Jacksonville, Tampa
Lowest scores: Bay Area, Washington, D.C., New York
Markets with a robust economy
Highest scores: Austin, Orlando, Bay Area
Lowest scores: Detroit, Cleveland, Pittsburgh
Markets with available skilled tech workers
Highest scores: Kansas City, Milwaukee, Memphis
Lowest scores: New York, Los Angeles, Bay Area
Highest scores: Kansas City, Raleigh, Salt Lake City
Lowest scores: Chicago, Los Angeles, Detroit
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To determine the markets that provide the best environments for tech expansion or start-ups, we examined:
Demographics and the labor market
- Non-farm job growth (Bureau of Labor Statistics, Current Employment Survey)
- Unemployment rate (Bureau of Labor Statistics, Local Area Unemployment Survey)
- Share of population aged 20 to 35 (U.S. Census, American Community Survey)
- Share of population with a bachelor's degree, over the age of 25 (U.S. Census, American Community Survey)
- Shortage/surplus headcount of those with Software Development skills (LinkedIn)
- Shortage/surplus headcount of those with Data Science skills (LinkedIn)
- Shortage/surplus headcount of those with Artificial Intelligence skills (LinkedIn)
- Year-over-year growth in home values (Zillow)
- Year-over-year growth in rent estimates (Zillow)
- Inbound-outbound home search ratio (Zillow)
- Share of median income needed to pay median rent (Zillow)
- Share of median income needed to pay median mortgage payment (Zillow)
- Broadband speed, mbps upload (Ookla)
- Broadband speed, mbps download (Ookla)
- Mean commute time for workers who do not work from home (U.S. Census, American Community Survey)
Markets are identified by their larger metropolitan areas. The San Francisco Bay Area includes both San Francisco and San Jose metros and the underlying factors for this region are based on a population weighted average between the two metros.