Chapter 6
Which are the highest- and lowest-cost markets to operate in?
Scoring Tech Talent 2023
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Employee wages are the largest cost for tech companies.
Highly skilled and educated tech workers often command more than double the average non-tech salary. The San Francisco Bay Area ranked highest for average tech worker salary at $157,000 per year, about $34,000 more than the next highest markets (Seattle and New York Metro). The average tech worker salary in 31 of the 50 top tech talent markets was at or above their respective national average (23 in the U.S. and all eight Canadian markets).
Office rent is the second-highest cost for most companies. Even as remote and hybrid work become more common, companies understand the benefits of tech clustering and often place a higher value on specific submarkets and even specific streets convenient to tech talent. Manhattan has the highest average office rents, followed by the San Francisco Bay Area, Austin, Seattle and Los Angeles/Orange County.
Combining wage and real estate costs provides a benchmark of what a tech company might pay to operate in any of the top 50 tech talent markets. For this comparison, U.S. occupational averages were analyzed to determine the makeup of a typical 500-person tech company (Figure 29) using 60,000 sq. ft. of office space. Due to hybrid and remote work, the amount of office space needed for 500 employees was reduced from 75,000 sq. ft. last year.
Figure 29: Average U.S. Tech Company Occupation Pools
*Tech talent includes the following occupation categories: software developers and programmers; computer support, database and systems; technology and engineering related; and computer information system managers
Source: U.S. Bureau of Labor Statistics (National), April 2023.
What are the highest- and lowest-cost markets to operate in?
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Local market wages were applied to the various occupations to determine total annual wage costs by market, while local market rents were used to estimate the annual cost of renting a 60,000-sq.-ft. office to house 500 employees.5 The San Francisco Bay Area topped the list with the highest estimated annual cost in 2022 at almost $79 million, followed distantly by New York Metro, Seattle and Washington, D.C. The lowest cost markets were all in Canada (Figure 30). Since tech industry wages are 16% higher than the U.S. average, tech companies can expect higher annual costs. The 50-market average annual cost exceeded last year’s by $3.5 million, primarily due to wage increases.
5 The COVID-19 outbreak may have lasting effects on office use and density with the rise of hybrid and remote working arrangements.
Figure 30: Estimated One-Year Company Costs by Market (500 Employees; 60,000 Sq. Ft. of Office Space)
Source: U.S. Bureau of Labor Statistics, April 2023, Canada Statistics April 2023, CBRE Research (Metro), Q4 2022.
Note: Occupational amounts sourced from Figure 29 which uses U.S. occupational averages to analyze the makeup of a 500-person tech company using 60,000 sq. ft. of office space.
** New York office cost represents Manhattan only, all others are metro area.
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