By: Hadassa Kalatizadeh
Technology startups are taking a better look at New York as a viable alternative to San Francisco.
The Big Apple is now in a highly competitive position as one the top two markets for tech startups. In fact, a recent study by real estate services firm CBRE, revealed that it costs about $10 million less annually to run a 500-person tech company in the New York metro area than in San Francisco—which is the area traditionally known as the go-to for tech companies. The study compared the average yearly cost of wages and real estate, reporting that it cost only around $59 million to run a tech company in New York, while it’s around $69 million in San Francisco. The difference in cost is based on the $26,000 gap between the average tech salaries in the Bay Area versus New York.
As reported by Crain’s NY, this bit of info may also indicate that NY companies may lose out on attracting the best talent if they don’t start to increase salaries to meet West Coast wages. It was roughly ten years ago when former Mayor Michael Bloomberg had launched an initiative to turn NY into the world’s new tech hub, surpassing San Francisco, and the Silicon Valley. NY has climbed its way up to second place, but still has a way to become number one. While NY successfully landed about $11 billion in venture capital investments from April through June, the Bay Area and Silicon Valley startups got $24 billion from investors, as per CB Insights.
With office rentals weaker in NY, rent costs are down compared to San Francisco. In the San Francisco Bay area office rents are up some 20 percent since 2017, whereas in NY they are up just 13 percent since 2017, as per CBRE data. The significant factor, however, which is bringing NY costs down is wages. The average yearly cost in wages of both tech-skilled employees and non-tech workers, including sales and marketing, was $41 million in New York last year, or significantly lower than the $50 million in San Francisco. The difference in operating costs won’t be the only thing startups look at though. If they feel they cannot get skilled workers, it might be a deal breaker. In this year’s “Scoring Tech Talent” report, released last week by CBRE, the Bay Area region was again named the best market overall for employers seeking tech talent. Some 375,000 people have tech-related jobs in the Bay Area, compared to 340,000 in NY.