The Rise of the Silicon Desert: Why Tech Companies are Moving Here

Move over, San Francisco: the “Silicon Desert” is becoming a major hot spot for technology companies. According to JLL’s U.S. Technology Outlook, Phoenix has become a magnet to tech entities for three main reasons: a lower cost of doing business, a more affordable quality of life and a strong and growing talent pool.

7c16799adbfc31cccd76c3c795f1b667

Office rents in Phoenix average $24.22 per-square-foot (PSF), a significant savings compared to markets like Silicon Valley, Seattle and San Francisco, where office rental rates can exceed $100 PSF. Even in Tempe and Scottsdale, considered two of Phoenix’s most amenity-rich submarkets, rents hit an average high of just $29.12 and $31.26 PSF respectively, still offering a significant rent savings.

Beyond office rents, companies experience a lower cost of doing business here because of Arizona’s more affordable quality of life. A Phoenix resident earning an annual salary of $50,000 would have to earn $91,275 in San Francisco to maintain a similar quality of life. In Arizona, the average wage of a technology employee is $91,794, a 47.9 percent savings when compared to the average wage in San Francisco and a 59.4 percent savings when compared to the average wage in Silicon Valley. This affordable quality of life is a main factor that continues to draw high-skilled employees to Phoenix.

Compared to mega tech markets, where heavy competition has many employers overpaying on salaries just to retain skilled labor, Phoenix offers a large talent pool. Nearly 30 percent of the total 4.6 million Metro Phoenix population holds a bachelor’s degree or higher and 22 percent of the total population are Millennials, a prime demographic sought by tech companies. And this talent pool is growing every year. Residents between 18 to 34 years of age are projected to account for 24.2 percent of the total Phoenix Metro population by 2021.

There are more than 300,000 students attending one of the numerous, distinguished educational institutions in Metro Phoenix, including Arizona State University – named the No. 1 Most Innovative School in America two years in a row by U.S. News & World Report. The University awards approximately 21,000 degrees a year. Phoenix is also home to Maricopa Community Colleges, one of the largest community college systems in the U.S., with more than 265,000 students. A majority of these students want to stay in Arizona and are clamoring for well-paying tech jobs.

Overall, Phoenix is the perfect incubator for tech companies that are headquartered on the West Coast but need cost-effective site selection alternatives for their high-employee-count business functions, such as customer success and secondary operations centers. We can expect to continue to see more and more technology companies look to Phoenix as a viable home.

Click here to learn more from JLL’s 2016 U.S. Technology Outlook.

Matthew Coxhead

Author: Matthew Coxhead

Matthew Coxhead is an Executive Vice President at the JLL Phoenix office, where he specializes in representing tenants in office leasing transactions. Through his relationships with corporations both locally and nationally, he guides his clients through their most important real estate decisions.

Share This Post On

Submit a Comment

Your email address will not be published. Required fields are marked *

Share This