San Francisco. Silicon Valley. The hub of technological innovation and a hotspot for startups and established enterprises alike. It’s been the mecca of tech for decades now. And this is also why the city attracts some of the smartest talent in the country
There is another side to the story of San Francisco becoming the center of technology, not just in the US but across the world. This mass migration to The Golden City over the last many years has had a massive effect on the city’s landscape, demography, real estate, etc.
The city of San Francisco has the highest per capita income in the United States but also has the highest rental prices in the country. The claim that an annual household income of $400,000 was considered “middle class” in San Francisco raised quite a furor a couple of years ago. People in the city agreed, rest of the country gawked in astonishment. Mo money, mo problems.
So the talk of an exodus from San Francisco to other cities isn’t anything new. Analysts and industry gurus have been talking about it for ages. But what’s all it was, just talks, opinions, and predictions.
People chose to stay in San Francisco even with the super high cost of living and nightmare commutes for one reason and one reason only – that’s where some of the best jobs in the country were.
Outside of the high pay, it’s the work, the people, the access to resources that were the crowd pullers, and why millions of people who moved there now call it home. It’s not just the workforce, but also the employers who were attracted to what San Francisco had to offer.
The supply and demand drove each other up – with nobody wanting to miss out on the gold rush. The city became its own vibrant community that people couldn’t get enough of.
The Tipping Point
But now, the last 12 months, have been a whole together another story. The Covid 19 pandemic struck, and boy did it strike hard. San Francisco being the tech hub was able to make the switch from working from the office to working from home quite quickly. It seemed like a good temporary measure to battle the coronavirus.
Nobody anticipated what would happen after that though. Almost all Bay Area tech companies, from the biggest to the smallest, started announcing they were going remote for the foreseeable future. Some even permanently. Some said they might adopt a hybrid working system from now on – working partially from the office and partially from home.
But one thing was clear, almost no employer expected to return to having employees work full time from their office spaces even after the pandemic was over. Many companies have announced their new remote policies and how they will or might go fully or majority working remote.
With remote being touted as the new normal and the future of the tech workforce, it no longer made sense to many people who’d moved to San Francisco for a job to continue living there.
Thus began the foretold and often romantically prophesized exodus. All that was needed to get your work done was a laptop and an internet connection. The millennials took this seriously.
Enough people have already moved back to their hometowns, while some relocated to cities with much lower living expenses. Some people had their pay slashed, and for them, the need to relocate became even more urgent. There are enough tech workers who are willing to take a pay cut if it means they get to work fully remotely from a location of their choice.
For businesses, it no longer made sense to spend exorbitant amounts of money on renting or leasing office spaces. With the pandemic continuing without much respite, every dollar spent makes a difference to every company. The medium and smaller ones could not possibly sustain the cash flow bleed when the markets were brutal.
Several big tech companies like Google, Facebook, Salesforce, Yelp, Twitter, to name a few, have embraced remote work as their future even beyond the pandemic. Such companies being trendsetters in work policies and having pretty much making San Francisco the tech center it is today will drive other smaller tech firms to follow suit.
Companies have also clearly realized that employees can be productive when they work remotely. And also that they do not necessarily need to be monitored and micromanaged. Remote work has also expanded the talent pool for them – they can now hire a great candidate irrespective of their geographic location or proximity to a physical office space. The talent these days are looking beyond big fat paychecks, and want the flexibility of how and where they work.
Arguably, the technology is there. The trust has more or less been built. The barriers to remote work have been broken down. There is no reason not to embrace and run with it. It would be foolish not to.
This leaves the status of the Bay Area as the technology hub in serious doubt. Along with the loss of that perception, what will also leave with it is the urban economic growth and vitality.
What this could mean for San Francisco’s future?
The businesses and services which depend on these tech workers and their ability to spend will for sure take a hit. The services industry has been the hardest hit sector bearing the brunt of the pandemic and lockdown orders.
While people are now venturing back out, it is nowhere near the numbers of before, and not enough for long-term sustainability. The leaving of a sizeable chunk of tech workers will add to those woes.
This mass departure has also, for the first time in years, enabled the fall of rents and housing prices in San Francisco. With the demand going down, property owners and developers just cannot expect the same prices and margins as before. But if and how this will affect low-income housing, real estate growth, and housing demand in the future is to be seen.
Remote work is freedom for the employees and workers. They no longer have to leave their homes or move thousands of miles to a new city for their dream job. Remote work is also beneficial for companies – productivity goes up, talent pool widens by a huge margin, and costs come down.
But all is not grim. The pandemic is not yet over so some of these effects might not be long-term. Some of them will be. There have been announcements that some companies will adopt a hybrid workday policy. This is where they will have employees work in the office for a few days of the week and work remotely or at home the rest of the days.
Remote work is the future, there is little doubt about that. With it comes citywide changes and a new way of living and working. As we step out of the pandemic and contemplate on the lasting innate social and structural changes it has caused, what we need is the flexibility of thought and the scope to be adaptable to steer us through the new normal.
It will be interesting to watch how the ecosystem balance itself and comes out of this.
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