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The Cheapest Cities to Base Your Tech Startup

The Cheapest Cities to Base Your Tech Startup

(Bloomberg)—It's no secret that the San Francisco Bay area has gotten too expensive for tech workers, but costs have also been skyrocketing for their companies, making other U.S. locales more appealing for industry offices and headquarters.

Combining wages and rents, it costs the typical 50-person technology firm in and around Silicon Valley more than $56 million per year to run its operations, according to new data from the commercial real estate firm CBRE. That's 40 percent more expensive than the price of running the exact same business in Charlotte, N.C.

Ranking 20 cities, the CBRE report had San Francisco, unsurprisingly, at the top, followed by New York, which is almost $6.5 million cheaper than the West Coast technology hub. Looking at what the report calls “secondary markets,” the cost of doing business drops significantly in such places as Charlotte, Minneapolis, and Philadelphia.

While tech talent is still concentrated in San Francisco, workers are already starting to flee in search of lower rents and higher quality of life.

“Even though there are higher wages [in San Francisco], the cost of living for employees is even higher,” said Kristin Sexton, CBRE’s managing director of labor analytics. “It’s a hit to both the employer and the employee. They’re paying higher wages and not getting that quality of life.” A place such as Charlotte might not have enough tech talent to sustain an entire business, but Raleigh-Durham has a “large tech talent” pool and saw a 9.4 percent increase in millennial population from 2009 to 2014.

Tech firms have already started opening satellite offices in lower-cost cities such as Seattle, Los Angeles, and Portland, Ore.  "As companies are looking for location, they are looking not just at the wages, they're looking at cost of living and home values to understand how far that wage will stretch and ensure that the market costs and the costs to them as an employer are aligned," added Sexton. So how does North Carolina sound?

To contact the author of this story: Rebecca Greenfield in New York at [email protected] To contact the editor responsible for this story: David Rovella at [email protected]


© 2016 Bloomberg L.P

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