Report: San Jose Earns #1 Spot on List of Nation’s Top Tech Cities based on 6 Key Metrics

Colin Wiel
June 28, 2017

San Jose has been the heart of Silicon Valley’s tech scene for some time now. So it comes as no surprise that Cushman & Wakefield just named San Jose the #1 “tech city” in the country. But what’s interesting about their “TechCities 1.0” report, the first of what will become an annual publication, is the methodology used to make this determination. Here’s what landlords, San Jose property managers and prospective investors need to know about the report.

Cushman & Wakefield looked at six market drivers in an effort to distinguish tech cities across the U.S.

  1. Institutions of Higher Learning: leading universities that provide creative impetus, research, and that lead to the creation of new companies.
  2. Venture Capital: The capital needed to take those ideas and turn them into companies.
  3. Tech Workers: An ample supply of workers within a market’s tech industry, and leaders within the tech industry who understand the sector’s requirements.
  4. Knowledge Workers: An available workforce with the skills to work in a tech-focused company. These workers are in occupations that support tech, such as legal and accounting.
  5. Educated Workers: Educated workers are essential to supporting the growth of tech companies.
  6. Growth Entrepreneurship: There are many kinds of entrepreneurs and startups. Growth entrepreneurs stand out as companies that have the potential to become important contributors to local economies and to become mainstays of the local commercial real estate environment.
  7. These are the six ingredients that make up the “tech stew” needed to support, nurture and promote a strong tech ecosystem, according to Cushman & Wakefield.

Based on these metrics, San Jose performs incredibly well.

The San Jose metro area is home to six prominent institutions of higher learning, including Stanford and Santa Clara University.

  • In 2016, San Jose ranked third in the nation for venture capital funding, with $6.7bn in deals reported last year alone. Although this number is impressive, it is two-thirds of the venture capital that flowed to NYC ($9.1bn) during that same time, and less than one-fourth of the venture capital that companies in San Francisco received ($28.5bn).
  • San Jose has the highest concentration of tech workers in the nation. Tech workers account for 27.4% of San Jose’s total nonfarm employment. This is by far one of San Jose’s greatest strengths, and represents almost double the concentration of the next best-performing city (San Francisco at 15.9%) based upon this metric.
  • San Jose also ranks #1 for its share of knowledge workers. More than 35% of San Jose’s workforce is employed in knowledge-based industries, such as computers and math; architecture and engineering; life, physical and social science; management; education; and healthcare.
  • San Jose ranks 5th in the nation as it pertains to share of workforce with a bachelor’s’ degree or higher. This ranking looks worse than it is, but the ranking is somewhat deceiving. San Jose property managers, landlords and investors should know that the race to the top was a close one, with all top five cities coming in between 47% and 50%.
  • Among the top 25 tech cities in the nation, the average score on the Growth Entrepreneurship Index is 4.75. San Jose scores 8.0 on this index, third best in the nation behind only Washington D.C. and Austin, TX.

So, why does any of this matter to San Jose property managers, apartment owners or investors?

Simply put: these metrics provide valuable insight as to the strength of San Jose’s economy. Since 2009, real estate markets in the “Tech 25” have outperformed markets across the U.S., and San Jose is leading the way. Employment growth, absorption rates, and rent growth are all higher in San Jose than in other metro areas, including the other tech cities – great news for landlords, San Jose property managers and prospective investors.

Technology is present in all cities, “but certain cities stand out,” the report notes. “In these markets, tech plays a larger role in the city’s economic trajectory. It’s also a vibe. Certain cities have the tech feel in the air, on the signage, in the conversations at the bars, in its population’s habits and preoccupations. In certain cities, tech is more deeply woven into the fabric of the city itself, and it’s dramatically shaping those real estate markets.”

Indeed, San Jose’s tech sector is driving the local economy (as it has been for years). Companies like Google, Apple, Cisco Systems and Intel have deep roots here in the community. As a result, San Jose property managers and apartment owners are able to command premium rents—something we don’t expect to change for quite some time. The TechCities 1.0 study is just the latest evidence to that effect.

Landlords, San Jose property management companies, and prospective investors can find the entire Cushman & Wakefield “TechCities 1.0” report here.

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