Austin was ‘the largest winner’ of COVID tech migration. What occurs to Silicon Valley?

AUSTIN, Texas — Texas’s capital has long been a tech pioneer, starting in the 1960s with IBM and Texas Instruments. In 1984, a University of Texas at Austin student named Michael Dell launched his PC company, which would become one of the largest computer manufacturers. But the rise of social media and mobile phones was concentrated in Silicon Valley, cementing the West Coast as the world’s biggest tech hub.

Now, Austin is striving to win the next era of tech.

A year after the pandemic canceled its signature tech and arts conference, SXSW, the city has gone from a harbinger of the crisis to one of its biggest winners, according to local businesses and economic data.

Austin has regained 97% of its lost jobs from spring 2020, according to the Austin Chamber of Commerce. Unemployment was a seasonally adjusted 4.6% in May, down from a pandemic peak of around 12% in April 2020. Company relocations added 12,421 new jobs last year, a record high. The housing market is one of the hottest in the country, with demand soaring from out-of-state arrivals. Studies show there wasn’t a California exodus to Texas, but Austin has benefited from company expansions and tech migration.

As Austin gained, the Bay Area lost. LinkedIn user data shows Austin had the highest net inflow of tech workers of any major U.S. city between May 2020 and April 2021, gaining 217 people for every 10,000 users. The Bay Area saw the biggest drop, losing 80 tech workers for every 10,000 users.

“I didn’t think it could have grown any faster. And then somehow it did,” said Joshua Baer, CEO of Austin tech incubator Capitol Factory. “COVID-19 broke a dam that was holding back thousands of even more people who were thinking about moving but held back by their job or other obligations.”

“There were some big winners and some big losers in the COVID migration, and Austin was the biggest winner,” he said.

Capital Factory works with around 120 new startups each year, and more than 20% of them are founded by ex-Californians, a percentage that’s growing, Baer said.

As they did in the Bay Area, tech giants are transforming Austin’s cityscape. Google leased a giant sail-shaped tower under construction on the banks of the Colorado River, designed by the same architect as Salesforce Tower in San Francisco. Apple is building a second campus in north Austin. After sparring with Alameda County health officials during the pandemic, Tesla announced its next Gigafactory east of Austin with 5,000 workers, which is rising swiftly.

Google is expanding in Austin by leasing a new tower, but the company is also investing more than $1 billion in California real estate this year.

Google is expanding in Austin by leasing a new tower, but the company is also investing more than $1 billion in California real estate this year.

Ilana Panich-Linsman/Ilana Panich-Linsman

Veterans of California tech are finding success in Austin. Tinder co-founder Whitney Wolfe Herd moved from Southern California to Austin in 2014 and launched the female-focused dating app Bumble, which went public in February, and is now valued at $6.8 billion.

One of the pandemic’s biggest relocations came last December, when Silicon Valley stalwart Oracle, moved its headquarters from Redwood City to a new campus in Austin after 44 years in the Bay Area. Following a year of deserted streets and quiet offices across San Francisco and Silicon Valley, it was seen as another sign of the region’s slipping tech dominance.

“Anyone who doesn’t believe that this latest departure isn’t a threat to California’s economy is a business climate denier,” Jim Wunderman, CEO of the Bay Area Council, a business group, said in a statement last December. “California for too long has willfully ignored our awful business climate, even as we’ve enjoyed incredible success and prosperity.”

As downtown San Francisco hopes for recovery, partying is back in Austin. About half of office workers have returned in buildings managed by security firm Kastle Systems, compared to around a fifth in San Francisco, and they’re filling bars and barbecue joints. At the start of summer, live music was blasting and young residents zipping around on scooters — another California import from startups like Lime and Bird.

Austin is also dangling tax incentives to lure growth. Companies like Tesla, Apple and Samsung have packages from the city and Travis County worth up to tens of millions of dollars in property and payroll tax reimbursements. In contrast, the Bay Area rarely offers tax breaks to major projects and often adds additional fees to fund nearby transportation and affordable housing.

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