The similarities between San Francisco and New York City during the pandemic are striking. Both cities have seen an exodus of residents, felt the economic devastation of COVID-19 on their downtowns, and witnessed the resiliency of their tech industries. As they look to recover in a world fundamentally changed by COVID-19 and remote work, San Francisco and New York City will have to draw upon their hard-won reputations for innovation to adapt to the future.
Learn more about the tech policy landscapes of San Francisco and New York City by watching sf.citi’s Mapping the Tech Exodus conversation with Tech:NYC Executive Director, Julie Samuels, below.
THE COVID-19 EFFECT ON SAN FRANCISCO AND NEW YORK CITY
The pandemic has not been kind to cities, especially dense, high-cost metros like San Francisco and New York City. In 2020, San Francisco and New York City saw net population losses of over 70,000 people with a high percentage of parting residents opting for more affordable surrounding counties.
Anthemos Georgiades, CEO of rental marketplace Zumper, described the pandemic migration pattern as the “concept of twin cities.” Rents in New York City, he explained, fell by nearly 20 percent while those in nearby Newark rose by 20 percent. The same phenomenon struck the San Francisco Bay Area. An analysis from the San Francisco Chronicle revealed that 34 percent of outbound San Franciscans relocated to places less than two hours away.
The rise of remote work—accelerated and normalized by the pandemic—is also taking a toll on San Francisco and New York City. Report after report shows that employees overwhelmingly want flexible and remote work to continue, which in turn has prompted companies to rethink their approach to the office. And the office markets on both coasts are bearing the impact of this seismic shift in the way we work. At the end of 2020, Manhattan had a 15.2 percent office vacancy rate—the highest it’s been in the past quarter-century. San Francisco’s office vacancy rate, meanwhile, has skyrocketed to nearly 19 percent.
The twin migrations of people and businesses away from San Francisco and New York City certainly present challenges for both cities. The Biden Administration’s $1.9 trillion federal stimulus bill spared San Francisco and New York City painful budget cuts in the coming fiscal year by plugging most, if not all, of their projected budget deficits. Nonetheless, San Francisco and New York City have seen key revenue streams from business taxes, hotel taxes, and sales taxes plummet during the pandemic. If recovery does not pick up immediately, both cities will have to find creative ways to boost their local economies in the years to come.
TECH’S RESPONSE TO REMOTE WORK IN SAN FRANCISCO AND NEW YORK CITY
One silver lining of the pandemic was that it has showcased the resiliency of the tech industry, which was able to quickly transition its workforce online and weather the worst of the economic recession. Tech’s continued growth also offers glimmers of hope for established tech powerhouses like San Francisco and New York City.
In a recent conversation sf.citi hosted about the migration of tech workers and companies, Justin Bedecarre, CEO of commercial real estate startup Raise, predicted our post-pandemic future will feature more tech offices in more U.S. cities. New York City, which has been steadily growing its tech ecosystem over the last decade, may well be a beneficiary of this new reality.
Julie Samuels of Tech:NYC has already observed an increase in tech companies expanding to New York City. In fact, tech appears to be bucking the trend of business leaving New York City during the pandemic. Amazon, Apple, Facebook, and Google are among the big-name tech companies that have increased their physical footprint in New York City in 2020.
The only companies that have publically doubled down on New York City since the start of the COVID-19 pandemic are tech companies.
—Julie Samuels, Executive Director, Tech:NYC
Samuels pointed out that tech’s growth is quickly permeating other longstanding New York industries such as finance, real estate, and media. “It’s not just the creation of new tech firms here, but it is the process of all these other industries becoming more technical,” she explained.
The story in San Francisco is slightly different. Like New York City, the San Francisco Bay Area experienced record levels of venture capital investment with over $60 billion flowing into the region in 2020. Unlike New York City, however, tech is one of the industries that appears to be downsizing in San Francisco. Since the start of the pandemic, a growing list of tech companies headquartered in San Francisco have subleased office space and announced permanent hybrid work policies.
Furthermore, while Californians have not left the state in droves, a report by the California Policy Lab confirms that “San Francisco is experiencing a unique and dramatic exodus.” The number of people coming into the City has also decreased, and the trend is exacerbated among tech workers. Drawing from LinkedIn data, Guy Berger, Principal Economist at LinkedIn, noted, “The flow from places that used to ship a lot of tech workers to the Bay Area, like Chicago and Philadelphia, has declined a lot.”
KEYS TO RETAINING TECH AND REBUILDING ON BOTH COASTS
The tech industry played a critical role in helping San Francisco recover from the Great Recession, and it could do so again after the pandemic. What’s critical for both San Francisco and New York City to acknowledge is that remote work is here to stay, tech is embracing it, and tech workers have greater flexibility to live outside of traditional tech clusters.
Perhaps the best thing San Francisco and New York City can do to attract tech talent and speed up their COVID-19 recovery is by reminding people of the many qualities that make their cities such fantastic places to live and work. After all, says Samuels, “There will alway be city people.” Of course, expanding the San Francisco and/or New York City dream to people of every background also means addressing issues that plagued both cities even before the pandemic—notably high housing costs, crime and safety, and transit infrastructure.
Increasingly, issues that we used to think of as secondary—issues around good schools, safety, and transit—are now primary. It’s about making New York City a place where people want to live and want to raise families and want to be. And if those things are all true, then the companies will come and stay.
—Julie Samuels, Executive Director, Tech:NYC
The shift to more flexible work styles also offers new opportunities for small businesses outside of downtown. With people working from home several days a week, Samuels said we could see “little locusts of economic activity in different parts of the city.”
Another sign of hope for both San Francisco and New York City is that industry leaders more or less agree that people will return to cities once the pandemic is over. On top of that, businesses reap tangible, economic benefits from being in cities like San Francisco and New York City. San Francisco’s Chief Economist, Ted Egan, explained that each tech employee in San Francisco has a productivity value-add of nearly $500 to their employer, which is far higher than the national average of about $300.
Finally, while more tech hubs are sure to emerge across the country, it could be years (possibly decades) before they reach San Francisco levels. New York City is the closest U.S. rival to San Francisco when it comes to boasting a mature tech ecosystem. Even so, New York’s 17 tech unicorns pale in comparison to San Francisco’s 68. sf.citi has little doubt that San Francisco’s network of innovative companies will continue to be a powerful draw for future tech founders and the next wave of people looking to shape the future.