San Francisco Office Rents Seen Topping Manhattan in 2015
bloomberg.com
bloomberg.com
It has never been easier to build a tech company, especially a SaaS-type business with no physical inventory. You could home your company in a cheaper, more business friendly city like Austin (disclaimer: I live in Austin). The tax savings alone would cover the costs of going to SF once a week. Quality of life is just as high (or higher, depending on your interests) in many other cities.
Edit: Seems people are missing the fact that you could literally fly to SF once a week for networking / meetings / events and it would still be cheaper to live somewhere else. You don't have to miss out on being a part of the network.
Folks here have bigger ambitions and want to change the world. Some do, most don't. Lot's are just delusionary.
Changing the world is nearly impossible, but that possibility is sharply increased when living in close proximity to money and talent. You only live once, why not try?
> Changing the world is nearly impossible, but that possibility is sharply increased when living in close proximity to money and talent. You only live once, why not try?
Talent is available everywhere and for far less than the bay area. Why not live somewhere else and raise funding from CA?
There are far better options for just as little money that offer culture, more fun, safer living, you name it.
The standard arguments for starting a company in California is: 1) You'll be closer to venture capital. 2) You'll be closer to talent. 3) You'll be closer to customers.
1) If you want or need venture capital, then it helps to play by their rules. One rule is: "Locate your company's headquarters within an hour's drive of my office." In my opinion, this is stupid and short-sighted, but from their perspective, it kinda makes sense. Giving you capital means (most likely) also sitting on your board of directors. And if those board meetings only require a short drive (instead of flying), then their life is easier. Also, if they're giving you a ton of money (many millions, perhaps), they'll sleep better at night knowing you're close by and can meet in person at any time.
2) Access to talent is closely related to access to capital. VCs will want to give you money only if you want to get big and make billions of dollars. (AKA: Are you the next Google, Facebook, or Apple?) The implication is that if you're going to scale big, you're going to need a ton of employees. If you're based in the middle of nowhere, your growth potential is limited to the size of your local talent pool. Again, I think this argument is silly and short-sited. But I've heard VCs make this argument directly to me in the past.
3) It generally makes sense to be close to your customers, especially early on when you don't have any. If you're a software company selling to other software companies, it might make sense to be based in San Francisco, regardless of how expensive it is to operate there. (You're going to make billions, anyway, right?) If your early customer is the U.S. Government, it might make sense to be primarily based near D.C. If your customer is the media, it might make sense to be based in New York or Los Angeles. If you can argue that there isn't a central cluster city of potential customers for your business (or you can argue that it doesn't matter), then it's less likely you'll need to move to be closer to them.
This is how I plan to do my next startup given the above three arguments: 1) Don't plan on needing VC. Bootstrap and get to profitability as quickly as possible. Then I won't have to play by VC rules and move closer to them. 2) Don't plan on needing to grow big. Plan on hiring people wherever they are, and create a remote-friendly working environment. 3) Live near an airport. As long as I'm close to an airport with lots of direct flights, I can visit potential customers whenever/wherever I want. (This is why I'd rather be in Chicago near O'Hare Airport, than live in the middle of Kansas, for example.)
However, I still might move back to the Bay Area someday. But I'd only do so for personal reasons - e.g. being closer to family and access to awesome hiking trails.
[edit: spelling and grammar]
"Can I throw one into the list? The median cost of a one-bedroom apartment in San Francisco gets you approximately two bedrooms in Tokyo... in a semi-luxury apartment, in the most desirable neighborhoods. . . .
"Still though, given that I have had lifelong impressions of Tokyo as being the most expensive place to live anywhere, I was pretty gobsmacked when I started doing the math."
A traffic system that programmatically prioritizes for public transportation, along with traffic citations issued by camera and automation (sorry) is what we need.
The seismic activity of California certainly exposes more challenges, but there's no good reason why underground transport is impossible in SF.
Bus Rapid Transit is a cheap way to look like you're doing something about transit in a growing city when in reality you're just kicking the problem down the line.
Which is the same as NYC - subways in the central bits, elevated/at-grade rail as you get further out and land less scarce.
The problem with buses is bus routes are too easy to change or eliminate.
To get me to give up my car, a public transportation system needs to have good coverage of where I need to go, when I need to go, and there has to be good reason for me to believe that it will stay this way.
Buses can provide the good coverage, but it is almost impossible to provide the assurance that this will continue. If some route I depended on when I picked where to live has a ridership decline, some bean counter can cut that route, or move it a few blocks over to try to get more riders. I can't easily move my house a few blocks over to match the new route.
For buses to really work, there has to a strong commitment to stability of routes and schedules, so that people can base long term plans on them. I don't think most US cities have the political and financial stability to make that commitment.
New York has a legitimate demand problem, seeing as it's the capital of the world.
California has an artificial demand problem due to NIMBYs who corrupt zoning boards, oppose reasonable development at every turn, and live in the past while paying lip service to "building the future".
(It also has a problem with corrupt/dirty foreign money swelling into the housing market, but that's an issue in New York as well.)
New York has solid public transportation. You don't need a car if you live there. People bitch about the MTA, but it's remarkably cheap compared to having a car anywhere in the US, and remarkably convenient considering how much access it provides.
San Francisco is a city where you need a car, but can't afford it. Parking costs are so bad that many garages post their 15 minute rates (often around $3.00).
New York is hard-core urban and owns the positives and negatives that comes from it, and New York runs itself. San Francisco companies are run from the suburbs-- specifically, from an office park called "Sand Hill Road" in a stretch of land that really ought to be reclaimed by the cows and orange trees, because the people living there are contributing nothing but additional work for the sewer system.
Manhattan is what it is, take it or leave it. (And there's nothing wrong with leaving it.) California is fundamentally dishonest and hypocritical, because it's full of people who pretend to be liberal but are, in many ways, worse than the Manhattan old board when it comes to elitism.
New York isn't perfect. There's a lot that's badly designed or unpleasant about it, but if you compare it to the cataclysmic mismanagement of California at all levels, it's a breath of fresh air.
I have always loathed California. It all seems so fake and far reaching, while NYC, as you say, is brutally honest in what it presents: lead, follow, or get out of the way.
In the suburbs (and the mentality that is now dominant in San Francisco is suburban, because the locals have been priced out by fratty douchebags and basic bitches) people have enough distance from what's going on that they don't have to acknowledge the facts of social injustice. They can persist in the delusional belief that "the rich" are more successful versions of themselves, and not preselected winners who've had social connections and resources delivered to them since before birth.
I don't loathe "California", insofar as many people I like live there and it's a big state with some beautiful national parks. I'm just disgusted by what it has become, and especially by the utter defeat of the technology/engineer culture in Silicon Valley at the hands of MBA C-students and people flushed out of McKinsey.
I like the raw energy of NYC, something no place in CA has, not even LA, and I lived out there for almost 4 years. NYC trumps any large US city for pure energy and things to do. I can be in Europe in a few hours, Canada in no time, the food is second to none, the weather is decent, as you tend to get four seasons instead of warm and cooler.
I've lived in Europe, Asia, and 7 US states. NYC is by far my favourite place in the US to visit, and perhaps one day, live. NYC is walkable, something few US cities can boast. Not even Chicago comes close to NYC in amenities -- and Chicago cannot seem to get a grip on their gun violence problem, something NYC has all but stamped out.
Let's not even mention the plethora of museums, restaurants, theatre choices, educational institutions, and more that NYC has going for it. No other US city can compare.
(NYC is overrated, but so is SV)
Maybe for some people, or for some definition of "need." I've been in SF over three years with no car, although I rent a car for a day maybe once every couple of months.
Who exactly is the arbiter of this right? San Francisco (and for that matter Paris, Tokyo, Beijing, London, hell even Turlock) are free to compare themselves to whatever other city they like.
Also, you don't need a car in SF if you're not lazy or just coming back from buying a couch, I prefer the weather in SF, and different cities have different good and bad things about them.
As far as capital of the world? Eh... I guess, but London seems the more natural choice for that in many regards.
Come on, now. Paris? Milan?
Exactly. That's the whole problem with the sweeping statements here. It's good we have different cities with different styles and sensibilities. And it's usually silly to say one is "best."
This is a demand problem in the same way that a bakery might make some really popular cookies, and the customers would buy all those cookies. Then more customers would come in and be told, "sorry, we're out". This is not a "demand problem", this is a stupidity problem. "Demand problem" in a free-market capitalist economy? Please.
Bake some more cookies, look how popular they are.
And there's also the lack of new housing development in San Francisco that is a function of public policy. There is tons of new housing going up in the affluent parts of Brooklyn and the prices are rising in spite of that.
In short the bay area structurally is not fit to be as unified as New York is for citizens & commuters and San Francisco has policy changes it could make to accomodate the rising population that it has not taken.
Ditto on office space. If SOMA built up like Midtown - or screw Midtown, just SoHo - we wouldn't be looking at these insane office rents.
But of course, Manhattanization is a dirty word in SF, largely because rent control lets you pass the buck on macro problems in the housing market. You got yours, sucks to be the guys who need an apartment now.
The density of the Tenderloin is 71k/sq mi.
That's extremely far off the mark. Rent is so high in SF precisely because it's not like Manhattan.
Even Brooklyn is denser than SF. That's ludicrous, when you consider the supply & demand of housing.
In New York, housing almost follows the free market. Yes, rent is expensive, but that's too be expected considering the consistently high demand and that apartments can't be instantaneously constructed.
SF is just as expensive, despite have an order of magnitude less demand. It's a completely supply-driven problem, and until that supply problem is fixed you're going to see rents well in excess of Manhattan (for a far shittier city, with way fewer amenities).
People who would rather live in Manhattan know where to go -- but, you know, there are people who consider higher density a negative feature that weighs against other amenities, rather than a positive or neutral feature. Not everyone has the same preferences matrix, and plenty of people see San Francisco as preferable to New York.
> In New York, housing almost follows the free market.
That New York is free or rent control, zoning laws, etc., etc., etc. is, well, news. The regulation in New York may be driven by different preferences -- and perhaps by preferences more in line with yours -- but it is no less present.
"Demand" must be the new "eyeballs."
There's no question that there is strong demand from consumers for high-tech products and services. The question is how many startups are capable of offering those products and services profitably.
Right now, much of the rent money in the Bay Area is coming from investors, not cash flow.
Do you know what the ratio is? Was in 2000? Is in NYC or elsewhere?
How to calculate? Investment divided by revenue of startups, or divided by city or metro gross product? Investment in current period, or cumulative with some decay factor?
Is there an index that gets at this that I don't know about?
0: http://sf.curbed.com/archives/2014/04/04/mapping_big_changes...
1: http://sf.curbed.com/archives/2014/07/23/norman_foster_vies_...
http://techcrunch.com/2014/07/22/the-pressures-driving-adapt...
Of course, NYC's overall infrastructure for tech companies is horrible compared to SF.
What makes it horrible out of curiosity?
Also, http://en.m.wikipedia.org/wiki/Multihoming FIOS and cable Internet or even just DSL is a good option if you need a little more stability or bandwidth.
The main problem are buildings and landlords. Many landlords and supers receive kickbacks from TWC to prevent Verizon from accessing the building and delivering the last-100-feet service.
The best way to improve the state of internet in NYC is for the city to start busting landlord heads.
In your case, bonding with wireless or DSL in case of outages is probably worth it. The difference between slow internet and no internet is huge. Other options include wireless internet cards for PC's / laptops, it can get vary expensive but for a small staff that occasionally does off site demo's it's also vary useful for that.
DSL isn't an option as, like most (possibly all) of NYC, I only have a Verizon or someone that resells it. I tried it once years ago and was out of service for 7 days of my 1 month trial because a Verizon tech randomly unplugged something at the local box.
My only real choice is to move to another neighborhood. But I've begun looking into moving to San Francisco anyway, since it's a much better environment for tech companies (unless you're in finance technology, which I used to do).
I have TWC at home but need to have a (very expensive per GB) Verizon hotspot as a backup. TWC goes down a few minutes every day (which will disrupt any long term stuff you need) and goes down for about a full day every month or two. Each time it goes down TWC will claim its something with your internal equipment. Even though the truck is down the street fixing the connection. Multiple TWC level 3 techs have confirmed that our neighborhood, like most, is oversold and they have fairly regular outages.
On particularly bad days, TWC will go down and then Verizon's 4G network will go down right after, leaving me stuck at 3G speeds or without a connection and losing a few hours of work.
It's been this bad for the 18 years I've lived here and is unlikely to change. Even large office buildings often have exclusive agreements with poor providers. Heck, when I worked in the WTC 15 years ago, you had to use Verizon exclusively and the network was overloaded and severely overpriced compared to any other building.
Welcome to the network infrastructure of NYC.
I have, over the years, toyed with -- and still do -- the notion of moving to Brooklyn or perhaps further out into Long Island. Love the place. Home of the best pizza outside of Naples to be sure.
Personally, I hate NIMBYs but I also hate SF.
Chuckle.