Senior Fellow - Brookings Metro
Senior Research Assistant - Brookings Metro
The tech industry’s big, coastal “superstar” cities aren’t going anywhere. That’s the first takeaway from Brookings Metro’s new look at the geography of the tech sector as it has powered through the COVID-19 pandemic.
With reports of remote-working techies heading for the hills, many pundits have prognosticated that the Bay Area and other tech superstars would become ghost towns. And indeed, California tech behemoths such as Google, Apple, Palantir, and Intel are moving work into new places such as Denver, Raleigh, N.C., and Columbus, Ohio.
But even so, the initial story we see is one of continued superstar dominance. Overall, tech’s eight superstar cities (San Francisco; San Jose, Calif.; Austin, Texas; Boston; Seattle; Los Angeles; New York; and Washington, D.C.) accounted for half of the nation’s technology sector job creation during the pandemic’s first year. What’s more, these superstars slightly increased their share of the tech sector’s total nationwide employment in 2020, even as hopes rose for greater dispersion of tech work.
Overall, tech fundamentally remains a “winner-take-most” employment sector even amid widespread disruption, including the national remote-work explosion.
And yet, for all that, our new analysis of job creation in six key high-tech industries during the pandemic surfaces genuine signs that tech work might be beginning to spread out.
For one thing, tech sector employment growth among the eight superstars slowed in 2020 in all but one (New York), while in many smaller places, it increased. Often far from the coasts and less established as tech hegemons, these new markets displayed—at least for now—a wider array of growth in tech, including:
- A group of nine increasingly sizable “rising stars” grew as fast as the superstars in 2020. Mostly in the interior or Sun Belt, rising stars Atlanta, Dallas, Denver, Miami, Orlando, Fla., San Diego, Kansas City, Mo., St. Louis, and Salt Lake City all gained ground through the first year of the pandemic. As a whole, these cities added a combined 14,000 tech jobs to their base ecosystems and slightly increased their aggregate share of the nation’s tech sector. Dallas, Atlanta, Denver, and St. Louis all added tech jobs at annual growth rates in excess of 3%. And St. Louis saw its tech growth rate increase from 3.9% over the 2015-19 period to 4.8% in 2020. Some of these metro areas are asserting a vibrancy that places them on the brink of “superstar” status.
- Multiple regional business hubs across the country (including the heartland) saw tech sector growth rates increase in 2020 compared to 2015-19. These hubs included northern business cities such as Philadelphia, Minneapolis, and Cincinnati as well as sizable warm weather cities such as Charlotte, N.C., San Antonio, Nashville, Tenn., Birmingham, Ala., Albuquerque, N.M., New Orleans, Greensboro, N.C., El Paso, Texas, and Jackson, Miss. Cities like these likely participated in the rapid “digitalization” of the economy during the first year of the pandemic, as numerous industries transferred more of their operations onto the internet. Overall, nearly half of the nation’s secondary large metro areas added tech jobs at a faster rate than they did in 2015-2019, while only one superstar did.
- Numerous smaller quality-of-life meccas and college towns qualified as “Zoom towns” during the first year of the pandemic. Among the former group, high-amenity coastal towns such as Santa Barbara, Calif., Gulfport-Biloxi, Miss., and Salisbury, Md. all saw their tech employment surge by 6% or more, while Barnstable, Mass. and Pensacola, Fla. saw their tech communities grow by more 3%. These locations offered proximity to larger technology centers in addition to an attractive quality of life for remote firms and workers. Likewise, attractive and convenient college towns such as Boulder, Colo., Madison, Wisc., Lincoln, Neb., Charlottesville, Va., Tallahassee, Fla., and Ithaca, N.Y. all grew their tech jobs by more than 3% during the first year of the pandemic. Smaller-town job surges like these likely reflected the at least temporary employment of local or footloose techies whose work relied on digital tools.
In sum, even as tech’s superstar metro areas persist in their dominance, scattered signals suggest that tech work spread out a bit during the first year of the pandemic. Confirming the impression are more recent data points from city-by-city job postings information and new firm starts. Far from definitive, the new information provides real world, at least temporary evidence for what AOL co-founder and investor Steve Case calls “the rise of the rest”—the spread of tech activity into the heartland.
As to whether these mixed signals add up to more than a short-term disruption, that will depend on larger dynamics in tech. For example, if remote work fades or is subsumed by “hybrid” work with significant tethering to offices, the spread of tech work into smaller towns will flag.
Meanwhile, the urgency of Big Tech’s incessant search for talent—especially diverse talent—could play an even bigger role on the sector’s future geography. Tech companies have pledged before to narrow their persistent talent and diversity gaps, including by going beyond their extreme concentrations on the coasts. If the next few years find these firms targeting new talent in new places by boosting their presence in metro areas far from the usual superstars, that could by itself alter the current narrow geography of tech. Hiring associated with new, already announced Google and Apple satellite offices in the Southeast could alone make a difference.
In any event, whether the pandemic turns out to be a one-time disruption or a true inflection point leading to decentralization remains hard to parse. Tech’s future diffusion into more places is possible, but the superstars remain entrenched.