These two Bay Area cities fall in ‘best performing’ report – The Mercury News

Could the Bay Area be slipping from its peak as a destination for economic prosperity and innovation?

Absolutely, a new report suggests.

San Jose and San Francisco have lost ground to up-and-coming tech hubs in the West and South, according to the Milken Institute, which says both cities have fallen to “Tier 2” in its annual report on best performing cities. The Covid pandemic has stalled short-term job growth in the region, and high housing costs have been a drag on attracting new professionals, the Milken report says.

Researchers also saw a weakening economy in Oakland, with similar Silicon Valley woes as well as a slowdown in international trade hurting the ports.

“The cost of housing is a real issue,” said Kevin Klowden of the Los Angeles-based Milken Institute. “Affordability was hitting a limit.”

The analysis adds fuel to the concerns over the region’s deepening housing shortage, and suggests competitive challenges ahead as tech hubs expand in lower-cost cities. Provo and Salt Lake City, Utah rose to the top of the Milken rankings, along with other cities popular with Bay Area refugees: Denver, Seattle, Boise and Austin, Texas.

The Best-Performing Cities report, first published in 1999, considers job and wage growth and the size of the innovation economy. “High tech jobs and knowledge jobs not only pay more, but they are more stable in this economy,” said Klowden, executive director of the think tank’s Center for Regional Economics.

This year, researchers considered housing costs and broadband access for the first time. Klowden said the two new metrics were important in measuring how successful a region could be at attracting and keeping professionals. “We’re trying to capture whether a metro has the capacity to add more people,” he said. Housing affordability is a major hurdle for residents in most California metros, he said.

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Techies and other professionals have migrated from the region during the pandemic, choosing to work remotely in cheaper cities or finding more space outside urban cores. Rents for two-bedroom apartments have fallen 23 percent during the pandemic in San Francisco, and dropped 10 percent in San Jose. But prices for existing Bay Area homes have soared to record levels, reaching $935,000 in December.

The pandemic and restrictive immigration policies also have stifled a traditional influx of foreign professionals to work in the tech industry. Foreign entrepreneurs have been less likely to relocate to the Bay Area to seek funding and talent. “That’s had an impact,” Klowden said.


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