When we think of the different areas of the country where tech companies tend to cluster, Silicon Valley easily comes to mind. New York City is also a fairly strong contender. But now, there's a new tech hub that's slowly but surely emerging, and it could set the stage for real estate investors to make a killing.
Tech companies are flocking to Austin
Over the past year, Austin, Texas, has seen the highest level of tech company migration, according to data from Microsoft Corp.’s LinkedIn profiles. In fact, between May 2020 and April 2021, Austin saw a net inflow of 217 tech firm workers per 10,000 existing ones. That's the highest net migration rate among 35 metro areas with strong levels of tech-specific migration.
One such company is Oracle, which may have spearheaded that trend to some degree by announcing late last year that it would be moving its headquarters from California to Austin. And the reason may have largely boiled down to cost.
Not only is office space less expensive to come by in Austin, but it's also a much cheaper city to call home -- a fact that could entice workers to pack up and move there. In fact, a person would need to earn only $52,100 in Austin in order to maintain a lifestyle similar to that of a $100,000 salary in San Francisco, according to CNN's cost of living calculator. That means that companies can save money not just on square footage but on salaries too.
Great news for Austin investors
Austin added an impressive 11,600 jobs in 2020 despite the pandemic, making it one of the faster metro areas to recover from its impact. And rental vacancies in Austin recently reached a five-year low, coming in less than half the national average.
If more tech companies continue to relocate to Austin, it will fuel the need for more housing and drive property values upward. That would, in turn, be a very good thing for real estate investors who already own income properties in Austin. It also spells opportunity for multifamily investors who are looking to add properties to their portfolios.
An influx of tech companies could also help Austin's economy better thrive on a whole, leading to more businesses opening and fewer closing their doors. And that, too, could lead to an uptick in property values.
While it's too soon to write off Silicon Valley as the country's tech hotspot, Austin is poised to become a solid competitor in that regard. Of course, one thing the city has going for it right now is its affordability, and the more tech companies that migrate there, the more expensive it's apt to become.
But right now, Austin real estate may be hovering around that sweet spot -- one where it's gaining value but still attainable. Investors who have been eyeing that market may want to get in sooner rather than later, before the cost of living and doing business in Austin inches closer to the crazy numbers coming out of Silicon Valley.