Historically Denver has attracted the best and brightest, a city that continually ranks in the top 5 for residents educational attainment. Granted our weather is spectacular i.e. average 300 days of sunshine annually, an active city and state, which continually ranks the lowest rates of obesity and a population oriented towards a healthy lifestyle.
However as mentioned in my May 13th, 2019 blog post there are headwinds specifically the cost of living. Of the top ten most expensive urban locales when taking into account housing costs and average salary, Denver was #2, not a ranking to be proud of. Yes as a city and metro area we continue to attract businesses, most recently VF Corporation coupled with an entrepreneurial spirit. However are our attributes enough to compete?
It is no secret that Metro Denver may be experiencing net out-migration i.e. more people moving out versus moving in. While the outflow may have been stanched due to housing prices stabilizing coupled with increases in wages, there is still concern.
What made me consider the content for this blog post was the following headline:
- Nearly 25% of Wealthfront’s tech clients in the Bay Area plan to leave Silicon Valley for New York; Austin, Texas; and other more affordable cities, a survey of the firm’s investors found.
Ok to start, what is Wealthfront and why should we as Denver residents be concerned? First Wealthfront is an investment management firm that provides robo-advisor services. OK, before the next question, robo-advisor services is to millenials what Charles Schwab and Fidelity is to us Generation X members and what the former EF Hutton (when EF Hutton talks, people listen), Merrill Lynch and other investment advisory firms are to the Baby Boomers.
Wealthfront’s clients are skewed towards the millennial and tech savvy generation so their client base is not exactly representative of general trends yet does provide insights to a workforce who are generally highly educated, entrepreneurial, and working in white-collar professions with higher salaries.
During the first 5 months of 2019, Wealthfront surveyed 2,700 of its clients who work in the Bay Area at tech companies. The results are interesting (of note a small sample size yet still of interest):
- Fewer than a quarter of Wealthfront’s tech clients in the Bay Area plan to purchase a home in San Francisco proper. Those who choose to remain in California’s Silicon Valley think they’ll snap up a home in the neighboring cities of Sunnyvale, Mountain View and San Jose.
- But nearly a quarter of clients think they’ll part ways with the Bay Area altogether, opting for other comparatively cheaper cities.
Those other cities are as follows and of note Denver did NOT make the list:
New York/Newark/Jersey City: While at first blush somewhat surprising as Manhattan is not known for its affordability just across the Hudson River cities including Newark and Jersey City have become hip and desirable with millenials and others due to affordable housing options and an easy commute to New York City via PATH, NJ Transit, Ferry Service and or course car and bus. Many tech companies have outposts in NYC. The median list price for a home in the New York-Newark-Jersey City metro area is $525,000, according to Zillow. Within that region, Manhattan commands the highest median list price, which is $1.569 million.
Austin: While many would not consider Austin affordable and within Texas one of the most expensive urban areas Austin offers affordable housing — at least compared to San Francisco — and no state income taxes (Colorado is a flat 4.63% regardless of income). The median list price Austin is $400,000, according to Zillow. Austin also hosts plenty of tech companies, including Apple and vacation rental service HomeAway.
Seattle:While not affordable to most of the American population, this city that is home to Amazon and Microsoft and Boeing (manufacturing, HQ is in Chicago) and cheaper than Silicon Valley. The median home value there is $699,950 according to Zillow.
Los Angeles: While in the same state, Los Angeles and the Bay Area could literally be separate countries. From demographics and industry to weather, hard to imagine the two metro areas are within the same state. And while Los Angeles is not a city known as affordable the median home list price is $829,994, Companies located in the so-called Silicon Beach area include Ring, the home security company now owned by Amazon, and matchmaking service Tinder.
Chicago: Historically known as the 2ndCity, the reality is Chicago is affordable, centrally located and is developing a tech sector to complement its dominance in futures/commodities trading, transportation and multiple corporate headquarters. The median list price of a home is $349,900, according to Zillow. Of note Chicago is home to mutual fund research provider Morningstar, and it’s an outpost for Salesforce. The city has also set out to encourage additional tech jobs through a public-private partnership known as World Business Chicago.