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Friday November 20, 2020 |Q&A

Has Silicon Valley peaked as a physical place of importance in tech?

The pandemic has brought swift and sudden changes to both commercial and residential real estate. Overall, cities have lost considerable prestige and value, with general consumer preferences shifting towards the larger spaces offered by suburban and rural landscapes. Expensive, crowded cities have been hit hard, with San Francisco the worst hit by many accounts.

In the Bay Area, the detrimental effects have primarily been in the city. There are reports of up to 10% of the population leaving, based upon change of address forms. It hasn't been all that long, or convenient, to move and still plenty have felt incentivized enough to make the move. The suburbs around the city have benefitted, in terms of real estate values, with limited inventory causing those fleeing the city to push prices higher. It doesn't seem sustainable for the negative effects to be limited to the city of San Francisco.

At some point next year, most offices will reopen. It's not yet known to what degree businesses will do the same. Many workers were already looking for reasons to leave San Francisco due to a conundrum of problems related to limited housing, homelessness, and poor governance. Plenty of businesses have canceled leases and are happy to put the money into other areas.

San Francisco is not Silicon Valley, and for many years was not considered part of the physical area. As tech grew over the years, Silicon Valley grew to include San Francisco. For thousands moving to the area to pursue tech, there was no long desire to live in Mountain View, San Mateo, or another sleepy suburb town. San Francisco became the pinnacle of tech, and a city for the tech workers to make into a playground.

It's hard to imagine a sudden reversal where tech companies reallocate budgets away from tech and back into physical space, especially at exorbitant prices. It's far more attractive to spend on great tech tools, create vast offices in other cities, and provide opportunities for teams to travel to be on-site occasionally.

This may be the end of an era for Silicon Valley and tech in general. There were already cracks, the luster is off tech, San Francisco's problems are no longer worth enduring for many, and the value of in-person has dropped dramatically. There's already been an exodus of talented people and there will be lagging effects for years to come. While big tech companies are still here, it's no longer the hotbed of new tech development that it once was.

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