World Research - December 2020 REPORT Tech Cities Savills Research Tech City Tiers Overview Foreword In an industry where people are the most important resource, Savills Tech Cities has always been about what that tech talent is looking for in a place to live and work. That talent had, in recent years, overwhelmingly favoured some of the world’s most vibrant cities. San Summary Francisco, Austin, Berlin and Tel Aviv, among others, achieved global statuses that belied their size as a result. Tech ■ Savills Tech Cities are important centres for tech in their companies emerged from, developed in region and venture capital (VC) investment hotspots. Vibrant and moved to such cities, often at the cities in which to live and work, they are magnets for talent. expense of less attractive cities, suburban and business park locations. ■ Wellness matters more than ever to both tech talent and Bustling urban environments rich with business occupiers. Our Tech Lifestyle Cities have an edge café culture, nightlife and the arts were here, with better air quality, access to greenspace and smaller all part of the appeal. footprints. Savills Digital Nomad Essentials Index highlights But the pandemic has led to a some of the factors that count to talent today. reassessment by some about what makes a good place to be. Wellness ■ In spite of 2020’s upheavals, the Tech Megacities continue matters more than ever. A city’s access to dominate VC investment, led by Beijing and San Francisco. to open space, cycle networks and clean Singapore has received a boost, benefiting in part from the air has risen in importance. US-China trade war. We had already been observing a shift away from some of the major urban ■ A new raft of Rising Global Tech Contender cities are centres in favour of smaller ones. Cost of emerging, ranging from Detroit to Yokohama. Growth is living for talent, in addition to rising office fuelled by technological advances, government initiatives rents, was a big factor in this. and cost advantages. Now health and wellness is becoming an even greater factor in location decisions. ■ While many tech companies have adopted work from home Cities, big and small, will remain essential strategies in the wake of the pandemic, their city centre offices to the tech sector as places to cluster and and campuses, in which they have invested heavily, will remain share ideas, scale and grow. However, in important as places for staff to collaborate, to instil company this edition of Tech Cities, we look at the culture, and to attract the best and brightest. different ‘tiers’ of a tech city and what makes them important to the sector. The ■ Out of town tech campuses have taken on a fresh relevance in pandemic has been a catalyst for change, a time of social distancing and newfound focus on health and and we expect to see cities of all sizes wellbeing. We explore five examples with wellness at their core. respond to the challenge. 1 2 3 Stockholm 4 Copenhagen Tallinn London 5 Manchester Vilnius Toronto 6 Dublin Berlin Paris 7 Detroit Boston Amsterdam Beijing Seattle Tokyo 8 Denver New York Barcelona Eindhoven Seoul San Francisco Chengdu Yokohama 9 Tel Aviv Shanghai Los Angeles Austin Hangzhou Shenzhen Hong Kong Bengaluru Bogotá Singapore Tech Megacities Tech Lifestyle Cities Melbourne Rising Global Tech Contenders Cape Town Source Savills Research 2 Tech Talent City living on a small footprint allows easier access to amenities and a better work/life balance Getting the essentials right The top functioning tech cities succeed in offering a set of fundamental benefits for the coding classes The flat white has long been considered the Seven of the top ten cities in this index are Lower-cost cities make an impact here. essential caffeinated beverage by many a what we class as Tech Lifestyle Cities or Rising Established tech centres face rising cost young, hip urbanista. The vegan burger is Tech Global Contenders (see p.7 and 8). It is no pressures. Detroit, Bogota, Tallinn and rapidly obtaining the same status when it coincidence that these are smaller cities by Manchester are, among others, all earlier comes to food; a healthier alternative to a global standards. City living on a small on the curve as tech hubs and still retain traditional burger with a lower environmental footprint allows easier access to amenities and a significant cost advantage. footprint to boot. a better work/life balance, usually coupled The presence of cafés that do these things with lower cost of living, but with all the ‘buzz’ well can be a barometer of a city’s of larger urban centres. The fact that these What is ‘tech’ today? functioning as a tech city. Cafés serve as a locations have better air quality only In an era where every industry is ‘tech’ to place for meetings, chance encounters and underscores their appeal in today’s world. some degree, all cities across the globe are networking. They are important to everyone Melbourne tops this index, a city located in being touched by the trends that shape it. from the lone start-up entrepreneur through the country that claims to have invented the Here we focus on the hubs of software and to the venture capitalist. flat white (although Kiwis may argue the online world. Online business has Add to that other essentials for the coding otherwise). This healthy city also offers proved particularly disruptive to the global classes: a MacBook, fast broadband, flex office access to plenty of outdoor pursuits, coupled hierarchy of cities. Untethered to space, a clean and healthy environment, as well with good tech infrastructure. Eindhoven, traditional drivers of the industry, anyone as some classic trainers and premium, wireless second, is one of our Rising Global Tech with an idea, a laptop and an internet headphones, and you have the Savills Digital Contenders. The Hovenring, the world’s first connection has the capability to create Nomad Essentials Index. This index can be used floating cycle suspension bridge, sets the tone businesses worth multimillions. In Savills to identify the locations that may be most for the city’s environmental credentials. Tech Cities we identify the locations these desirable to tech talent and therefore the Costs are lower than its northern neighbours, individuals want to be. occupiers looking to recruit such employees. particularly for flexible office space. The Savills Digital Nomad Essentials Index, Top 20 Total score 0 20 40 60 80 100 120 Melbourne Eindhoven ■ Cost of vegan burger ■ Broadband Seattle and flat white speed Denver Barcelona Detroit Austin San Francisco Singapore Toronto ■ Cost of MacBook Pro ■ Flex desk cost Bogotá (Workthere) Tallinn Boston Dublin Los Angeles Manchester Stockholm Shanghai ■ Cost of classic trainers and ■ Air quality To kyo premium wireless headphones (WAQI) Berlin Note: Higher weighting given to broadband speed and air quality Source Savills Research, Workthere, WAQI 3 Tech Funding Big capital injections usually precede investment in people and places Go with the flow Tech cities thrive on venture capital investment. Silicon Valley vs San Francisco So, where in the world is the money going? Taken as a whole, the San Francisco Bay area still dominates global funding, but analysis of Venture capital (VC) investment is a key lead indicator of the destinations that its components reveals some interesting trends. matter for tech. Big capital injections usually precede investment in people and A decade ago Silicon Valley received more places, so identifying the places it is flowing to tells us which markets to watch. investment than its northern neighbour, but San Francisco has since outperformed it as talent and companies flocked to the vibrant Sand Hill Road: the Wall Street of Tech City by the Bay. VC investment into the city of Sand Hill Road, located at the heart But as other global centres of San Francisco exceeded $70 billion over the last of Silicon Valley is the global epicentre of VC funding have emerged, global tech three years. Volumes have surpassed those of VC. Established in the 1970s, it has been hubs have multiplied. A decade ago 73% Beijing both this year and last. the source of early funding of some of the of all global VC was invested in the Silicon Valley, meanwhile, saw $59 billion of biggest names in Western tech. Silicon United States (based on analysis of top investment between 2018 and 2020. Comprised Valley, San Francisco and the wider Bay destinations). Last year, with the overall of 18 individual towns and cities (see chart) in Area emerged to become one of the most market vastly expanded, the US global the Santa Clara Valley, Silicon Valley is home to important global tech hubs as a result. share stood at 46%. Apple, Facebook and Google, and remains the hub for big tech. Changing trends in living and working, accelerated by the pandemic, are The rise of China bringing new relevance to its suburban For every US tech giant there is a three years (to Sep 2020), the largest campuses, as explored on p.11. Chinese equivalent. The US has volume globally over the period. Close ‘FAANG’ (Facebook, Amazon, Apple, to regulators, some of China’s largest Netflix, Google). China has ‘BAT’ tech firms are headquartered in Beijing. London calling (Baidu, Alibaba, Tencent) and now The growth of China as a major tech The rest of the VC top 10 is dominated by the ‘TMD’ (Tuotiao (Bytedance), Meituan player has significant implications for US and China, with one exception: London. Dianping, Didi). These home-grown property demand beyond China. The UK capital stands 7th with some $24 billion tech giants have propelled China into a Tech occupier demand in the West has invested in the last three years, and 5th in 2020 dominant tech force.