Let’s face it — Silicon Valley was once the only place techies and startups flocked to to be part of the world’s hippest tech firms. After all, it’s the region that gave birth to all-conquering unicorns like Google and Apple. But the times, they are a-changin’.
In a nod to the trend that more and more young tech workers prefer to be in an urban environment instead of an office park, a number of tech companies are packing up, hiking up mini asphalt versions of Mount Everest, paying $13 for eggs and calling the Golden Gate City home. Welcome to San Francisco!
Since 2010, the city has seen 2.5 million square feet of office space bought up by Silicon Valley area firms opening a new office or relocating to San Francisco, according to commercial real estate brokerage CBRE. And sweet baby Jesus, it’s not slowing down. The City by the Bay is on track to (hella) increase the amount of office space by 15 percent to keep up with demand.
Not surprisingly, the migration is costing the city’s residents;and even cash-flush tech employees are not immune to the most expensive rental market in the U.S. (only 35% of S.F. residents actually own houses).
“People are scared. It’s bad and it’s getting worse,” said one Spotify employee at a recent City Hall meeting, who told the committee that she was leaving the wildly popular streaming service for a better-paying job. Meanwhile, Twitter representatives noted how difficult it was to get globally-based talent to transfer to its San Francisco headquarters with the cost of living ( and we’re not talking about the outskirts of San Fran here, so don’t even go there).
So where are all the newly employed in San Francisco living? RadPad took a look (graphic above) at how employees from some of the hottest tech companies in the Bay were doing with income once they paid their sizable monthly rents in San Francisco.
With the help of our friends at Anthology, we were able to to see which companies’ employees (mid-to-senior level engineers) were paying the highest percentage of their monthly income to rent near their company’s headquarters (half-mile radius). Sure, Bay Area salaries are high, but the pay advantage of this area over other cities with tech scenes isn’t enough to offset the huge housing cost differences.
Here’s what we found
Airbnb: While Airbnb’s pay is on par with some of the other tech companies we looked at, it’s also smack dab in one of the city’s most desirable neighborhoods: South of Market (SoMa). Sure, it takes something special to justify a 45-minute wait for bread, but employees looking to live near its headquarters would have to shell out 53.84% of their monthly income — the biggest percentage of any company we tracked. Now that’s crazy.
The rent is too damn high, but how much rent is too much rent?
The rule of thumb is that you shouldn’t spend more than 30% of your monthly take home on rent, but Airbnb employees looking to live close to work might want to hop onto the platform and find a month-to-month that’s cheaper than the $3,495 median price they’d pay for a one bedroom pad in SoMa.
Also located in SoMa, Square and Stripe came in towards the top of the list, with employees having to pay 53.7% and 52.06% of their monthly incomes respectively in order to live near company HQ. This number reflects the percentage of take home monthly income spent on rent after federal withholding, social security, Medicare, and CA income tax for single filer at that income bracket for 2015. Also, given we’re using the after tax income to rent percentage number in the graphic, we also want to point out that California has some of the highest tax rates for high income earners.
Now compare that against another tech hub like Seattle, where workers pay no state income tax. That compounds rent issues for these workers — especially in Bay Area (highest rent + highest state income taxes).
If that doesn’t deter this payments posse, then there are plenty of trendy restaurants, swanky nightspots and other attractions for them to dole out their digital currency.
Guess where Twitter and Uber, the companies with the largest valuations out of any of the S.F. natives we looked at (Google’s HQ is in Mountain View), chose to set up shop? SoMa.
I think we are starting to see a trend here… Bay Area employees won’t get a break on rent prices with the median cost for a pad around their HQ’s at $3,295 and $3,265 respectively. However, Twitter and Uber also claim two of the highest median salaries for employees, resulting in Twitter’s employees paying 43.02%, and Uber’s paying 48.32% of their monthly income to live near base — markedly lower than some of the other firms.
With close access to cheaper Downtown/Tenderloin neighborhoods and salaries that stack up nicely with the rest of the herd, Slack’s employees looking to live near the company’s home office will have to spend the lowest percentage of their monthly income to do so: 42.09%.
The local S.F. tech scene and the economy are, of course, still thriving, so we can’t exactly call this a tech exodus from San Francisco. However, we can confidently say that the appeal of Silicon Beach is rising with the tides (and not just because RadPad is here).
With Tesla and SpaceX, the country’s most innovative private space company valued at a reported $12 billion, and the early success of startups like Snapchat and Tinder, Los Angeles is definitely a counter-option. So if you’re considering shuffling south, sacrificing discernible weather and decent public transportation for the endless sunshine and perpetual traffic of Los Angeles, we say, do it.
In LA, you don’t need to wear three layers of clothing and bring an emergency sweatshirt with you in case it happens to dip into the 40’s in the middle of August.
Despite senior-level engineers having a lower average salary, low rent prices in the area make Los Angeles the biggest winner for your net income. People can actually afford to live in Los Angeles proper, whereas S.F. prices are growing more ridiculous by the second. If these Alphabet employees forgo the trends to make Hawthorne their temporary home, they can take their savings and retire to a nice spread in… Mars?