Big Tech is expanding outside of its Silicon Valley base as executives turn to a nationwide talent pool with broader expertise to fill thousands of new job openings in the coming decades.
Amazon recently announced it would open three new sites in Nashville, Washington, D.C., and New York City, a decision that came after a high-profile contest pitting cities across the U.S. against each other in offering lucrative incentives including tax breaks.
Apple is poised to open a new $1 billion facility in Austin, Texas, as well as offices in Seattle, Pittsburgh, and Boulder, Colo. Google is pouring $1 billion into its New York City office in preparation for an influx of nearly 7,000 employees in the next 10 years.
“This is a completely talent-driven exercise, so you’re seeing a focus on locating in talent-rich areas,” Steven Van Kuiken, a senior partner at consulting firm McKinsey & Co., told the Washington Examiner.
Spurring the moves is a growing worry that West Coast technology hubs aren’t replenishing skilled labor markets at the rate needed to sustain high-tech workforces.
“There’s a massive war on talent,” Eric Swiezynski, vice president of recruiting at Randstad Technologies, said in a recent interview. “At a certain point in any location, you would tap out with that talent market. There’s not enough folks that can fill that demand.”
Experts point to the slew of top universities — many that also bring in a significant number of qualified immigrants who tend to stay after graduation — as a reason why the East Coast offers a more robust labor pool. With offices in a wider array of metropolitan areas, companies can capitalize on the move by younger generations to urban centers.
One recent study found that millennials, the biggest generation in U.S. history, are 21 percent more likely to purchase homes near cities than prior generations. Many of the fastest growing locales are in the southern and western regions of the U.S., such as Denver, San Antonio, and Houston.
The ancillary effects of the shift to the East Coast may be major. Along with proximity to talent, start-ups will gain greater access to capital. That in turn feeds the larger companies, who often acquire small firms to expand their own operations.
“This becomes a virtuous cycle of development,” said Van Kuiken, who helped Newark with its bid for the Amazon headquarters.
The e-commerce giant, Apple, and others are also planning to expand into traditionally East Coast industries, such as healthcare and financial services. Apple is reportedly negotiating with the Department of Veterans Affairs to provide military veterans electronic access to medical records, while Amazon recently purchased PillPack, a burgeoning drug delivery company, and is beefing up its healthcare talent.
Access to the federal government remains an important factor, particularly for the tech sector, which is under greater pressure in Washington, D.C. Both Republican and Democratic lawmakers say legislation to launch a nationwide privacy framework is a top priority in 2019.
The migration could be beneficial even to cities that aren’t selected for the new offices. Georgia, which offered Amazon incentives like free parking at the Atlanta airport, saw a boom after the e-commerce giant announced it would not pick the state for its new office.
“Since that time, we have had over 5,000 new jobs come our way without Amazon being in that mix,” Republican Gov. Nathan Deal told reporters recently.
Amazon’s contest forced government officials, civic leaders, and others to analyze the unique benefits of their respective regions, and such analysis — which, for some areas, costs millions of dollars — can help those cities or states determine how their resources align with the needs of specific industries.
“A lot of learning has come about because of the Amazon competition. That’s sort of like training camp for a lot of these economic developers,” said Stephen Fuller, a professor at George Mason University and the head of the namesake Stephen Fuller Institute, which studies economic development in the Washington, D.C., region.
While Amazon will receive billions of dollars in subsidies from Washington, D.C., and New York City, the contest proved that other incentives are critical, including investments in higher education and mass transit.
“Companies will get more sophisticated in terms of what they are looking for,” Van Kuiken said. “Cities, regions, and states are going to have to get much more attuned to their natural advantages.”
