Chapter 5
Which are the highest- and lowest-cost markets to operate in?
Scoring Tech Talent 2024
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Employee wages are the biggest 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 $178,000 per year, about $30,000 more than Seattle, the next highest market. The average tech worker salary in 15 of the 50 top tech talent markets was at or above their respective national average (10 U.S. and five Canada markets).
Office rent is the second-biggest 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, South Florida and Seattle.
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 32) 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. in 2022.
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. The San Francisco Bay Area topped the list with the highest estimated annual cost in 2023 at $81 million, followed distantly by New York Metro, Seattle and Boston.
The lowest cost markets were all in Canada (Figure 33). Since tech industry wages are 17% higher than the U.S. average, tech companies can expect higher annual costs. The 50-market average annual cost exceeded last year’s by $3.6 million, almost entirely due to wage increases.
Figure 32: Average U.S. Tech Company Occupation Pools
Source: U.S. Bureau of Labor Statistics (National), April 2024.
Figure 33: Estimated One-Year Company Costs by Market (500 Employees; 60,000 Sq. Ft. of Office Space)
Source: U.S. Bureau of Labor Statistics, April 2024, Statistics Canada, April 2024, CBRE Research (Metro), Q4 2023.
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