When the coronavirus pandemic first hit and companies everywhere told their employees to pack up their desks and prepare to work remotely for the foreseeable future, some San Francisco-area residents took it as a sign to pack up their homes as well.
Rents in the Bay Area are notoriously expensive, and once proximity to office buildings was no longer a requirement, many tech employees jumped at the chance to retain their paychecks while slashing their living costs substantially.
But despite the initial Bay Area exodus that may have occurred, recent data points to the fact that tech workers are starting to return -- and that's something real estate investors may want to jump on.
Tech workers are coming home
In the area surrounding San Francisco Giants' Oracle Park, where almost 15% of the residents worked in tech, average monthly rent prices dropped from $3,956 in February 2020 to about $3,000 a year later. But in May, they rose to $3,312, reports Zillow.
Landlords can't typically get away with rent hikes unless the demand for housing is there. The fact that rents are creeping back upward is reason enough to believe that more workers are making their way back to San Francisco.
Of course, tech workers weren't the only ones who abandoned the Bay Area during the pandemic. A number of prominent companies went a similar route. Oracle and Hewlett-Packard, for example, moved their headquarters to Texas.
But while several tech firms have left the San Francisco area, others are staying put and expanding. Twitter is opening a 30,000-square-foot office in San Jose this fall and an Oakland facility next year. Meanwhile, Google is investing $1 billion in projects that include two office complexes in Mountain View, California. And the company plans to welcome employees back to the office on a partial basis come September.
Speaking of which, a big reason tech workers may be coming back to the Bay Area could boil down to necessity. Many tech firms are insisting that workers report to an office in some capacity. Others are allowing employees to work remotely on a long-term basis but are threatening salary cuts to account for the fact that the cost of living outside of San Francisco is much more affordable.
Is it a good time to invest in the Bay Area?
As more companies firm up their office reopening plans and local businesses and amenities open back up, we may see an influx of tech workers looking to return to their former zip codes. But that doesn't necessarily mean it's the best time to invest in the Bay Area.
The median price for a San Francisco home recently reached $1.9 million, according to the California Association of Realtors. That's higher than what prices looked like before the pandemic. The reality is that between inflated home prices and relatively low inventory, now's not an easy time to break into the San Francisco real estate market -- and investors who go this route risk grossly overpaying.
While tech workers may be finding their way back to the Bay Area, it could be more economical for real estate investors to look at emerging cities that are seeing an influx of job opportunities. Austin, Texas, and Nashville, Tennessee, are two strong contenders in this regard.
This isn't to say that buying San Francisco-area real estate right now is a bad idea. As long as the region remains a tech hub, the demand for housing will be there. But investors should also explore other cities where rental demand is really likely to boom in the near term.