With the Silicon Slopes experiencing significant tech growth, they may just be the answer to Silicon Valley’s affordability problem.
As Silicon Valley continues to become expensive to the point of unaffordability, it’s become a common guessing game as to which metro area is poised to become the next “it” market for startups to flourish, find investors and win over consumers.
Naturally, major locales like Seattle, New York, San Diego and Los Angeles are considered major tech hubs as well. Austin, Texas, has emerged in recent years as the go-to area for major tech companies looking for a more affordable alternative for employees, bringing startups and investors along with it.
But is Salt Lake City gearing up to take that title?
Called “Silicon Slopes” by many in the industry, Utah has seen steady growth in the analytic data industry in particular since the 1990s, and in more recent years the state has made significant progress in attracting startups and venture capitalists.
“The real explosion in venture capital in Utah has really been in the last 10 years,” says Mark Gorenberg, managing director of Zetta Venture Partners, who has invested in numerous Utah-based companies throughout his career, including data analytics company Omniture, before it was purchased by Adobe.
In commercial real estate company CBRE’s annual report of key markets for tech momentum released in July, Salt Lake City showed more than 22 percent growth in tech talent in the last two years and is one of the most concentrated millennial markets in the U.S., with 21.8 percent of the urban population made up of millennials.
For workplace productivity firm Teem, a company that lists Gorenberg’s Zetta Venture Partners and Google Ventures as investors, Salt Lake City has always been the ideal location to grow and attract the right talent. Plus, it’s just a short plane ride to Silicon Valley, where many companies are benefiting from Teem’s designs for a more productive, happier workplace.
“There were several specific moments in time where we said, ‘Hey, should we move to San Francisco? Should we move to the Bay Area?’” says Shaun Ritchie, CEO of Teem. But in the end, the pros for Salt Lake City outweighed the cons of being outside California. “We felt like we could build a world-class technology company not having to be down there [in Silicon Valley] all the time,” Ritchie adds.
As will happen, the effects of business growth are having a direct effect on Salt Lake City’s real estate industry. The average home price in Salt Lake City is currently $285,000, according to real estate information company Zillow, which is a 9.9 percent increase over the past year. Paul Benson, a real estate agent and CEO of Engel & Volkers Park City in Park City, Utah, says he has watched the luxury home market transform as more investments, startups and expansions occur throughout Salt Lake City and the surrounding areas.
“It used to be in Utah we were looking for just a random [relocation] or we were looking for a ski-home buyer – somebody that was coming here primarily to ski,” Benson says. “That has now switched to marketing a lot more in Northern California and places like Austin, Texas, for our buyers in the real estate world.”
In March, technology executive network TechNet released an analysis of the parts of the country experiencing the most growth in startup job opportunities and tech business. The report ranks what it identifies as the 10 existing tech hubs, based on each area’s startup economy. It’s no surprise that the list begins with San Francisco; San Jose, California; Seattle; New York City; Boston and Austin, Texas.
The report then goes on to list the next 25 metro areas for their startup economies, considering them as emerging in the tech industry. Salt Lake City comes in at No. 14 overall, fourth among the emerging tech hubs.
Salt Lake City’s Secret Weapon to the South
While Salt Lake City takes a prime spot on the emerging markets list, that doesn’t necessarily indicate it as the runaway for new tech growth. However, Provo, Utah, a smaller neighbor to southwest of Salt Lake City, is already noted by the report as an existing tech hub – No. 7 on the list.
“It moved to creating a larger ecosystem around the area, so it was not just Provo,” Gorenberg says. “Now companies were starting to move north. Sort of, again, in the same way I think you saw in Silicon Valley, where companies moved toward Palo Alto and then further north in the 1990s.”
Beyond Austin
Silicon Slopes’ proximity to Silicon Valley, extended role in the tech industry with Provo, a climate that appeals to ski lovers and those who prefer sunshine alike, an adventurous location and a welcoming culture draws more parallels not to Austin, but instead to the Mecca of tech itself.
“I think Utah could be the next Silicon Valley,” Gorenberg says.
In fact, Gorenberg points out, the growth of the analytic data industry in Utah in many ways mimics the growth of software in Silicon Valley in the 1980s – beginning further south and expanding northward to encompass more of the San Francisco Bay Area.
Room to Grow
Beyond business and job opportunities themselves, Salt Lake City serves as a draw for many entrepreneurs and recent grads looking to get into the startup game. Not only is it significantly less expensive than the likes of San Jose and San Francisco, but Salt Lake City is also situated with access to an international airport, ski resorts and major highways so that ground travel is rarely more than a half-hour heading anywhere.
While Utah is widely recognized for its mountainous landscape and relatively small population at just over 3 million people, Salt Lake City is still a large city, and residents get all the benefits of living in a major metropolitan area.
Because many relocating from out of state find that urban setting appealing, Ritchie says he expects to see more companies placing their headquarters within city limits. “They’re going to realize it’s difficult to recruit from out of state when you live 20, 30 miles south in bedroom communities,” Ritchie says.
Housing Outlook
As far as the real estate market is concerned, there’s certainly room to grow. Benson notes that Salt Lake City, like many other markets in the country, is seeing record low numbers of homes on the market and record high sale prices – but relative to San Francisco, San Jose and even Austin, the area is still more than affordable. Salt Lake city residents spend just 25.78 percent of their household income on housing expenses, based on information from the U.S. Census Bureau to calculate blended annual household income and the cost of living.
“Our prices started out so low that we haven’t really priced ourselves out of anybody’s market yet,” Benson says.
He adds that the development of public transportation has made it so neighborhoods and suburbs are able to grow without being negatively impacted, and it’s possible to live in Salt Lake City without a car and get around easily.
Combined with the nearly ideal infrastructure to take on population growth, the fact that Utah’s tech focus has largely been in information technology helps set the entire state up for success.
“They’re well-positioned for where the puck is going with information technology. … If anything, you’re going to see more explosive growth there,” Gorenberg says.
By Devon Thorsby, Editor, Real Estate | Sept. 13, 2017, at 2:18 p.m.
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