The Tech Movement from San Francisco to Seattle – Will We Follow in their footsteps?
A recent NY Times article discussed the rapid change tech companies and workers have had on the city and communities of San Francisco. Seattle has often been compared as San Francisco lite or the canon to the Golden city. We have so many similarities. Both west coast cities, both with high tech driving our new economies, both with great football team history – though Seattle more recently – both with a limited real estate boundary to the city center bounded by water, and both with soaring real estate and employment.
One of the interesting bits of the Times article was that they found, “For every person who moves to San Francisco, another two start commuting to work here. Traffic is down to a crawl.” I think that is something we can certainly relate to based upon a recent study by Kirkland, WA based INRIX that we have the 6th worst traffic. We have certainly seen our influx of soaring rents, influx of tech workers to our city, and rapid change.
Is it all for the best though and will it continue?
In economic and market updates that we give we often say there are leading indicators. Is it fair to say San Fran is a leading indicator of what the Seattle future holds? Let’s compare. Median income in SEA is somewhere between $67,000 and $73,000 depending on what source you’d like to quote (Cencus.gov and Forbes.com). Compared to SFO between $78,000 and $86,000 (same sources). Median home prices are respectively $533,000 and $1,130,000 with rents coming in at $1,754 and $3,770 (rentjungle.com). Quite a disparity anyway you look at it with some far outliers probably swinging the data quite a bit. Housing typically makes up a large chunk of income whether for a mortgage or for rent (30% – 50%) – any way you slice it 49er’s territory is almost twice as expensive – especially considering median incomes are not terribly far off from each other.
Makes sense to move here
If the tech opportunities or general employment opportunities are about the same, moving up to Seahawks territory makes all the sense in the world. Buying power is significantly improved, therefore general cost of living should decrease allowing for the ability to save more for things like retirement, education, and health care or spend more on things like dining out, travel, and consumables.
Limited Real Estate
Two things that certainly tie the two cities together is the limited actual real estate in the city core. Both cities are surrounded by the Pacific Ocean or Puget Sound on the West as well as a Bay or Lake on the East. Both require travel over a bridge to head north.
Well easily the home of the Mariners win this battle. First of all WA has no income tax, we do have a high real estate tax (1.78%) and decent sales tax (6.5%) – but compared to CA at (1.2%) and (7.5%) it is still a much more advantageous State. Case in point we had a tech worker whose taxes we prepare. He works for a rather well known private tech company out of San Francisco and was awarded options valued at millions of dollars over the next several years. Taxes alone on that compensation for one tax year in California was $200,000 in tax withholding (about 10%). If his residency or that company were based in Washington that $200,000 tax bill would not exist. Now take those number for median income from above and strike 10% off the top off the SF number for CA State income tax and now you get $70,200 – $77,400 as the adjusted median – virtually the same range as Seattle. We never say let the tax tail wag the dog, but that is quite an incentive for business owners, startups, tech workers, and people in general to consider the CA > WA move.
Our two cities certainly seem to be related, but rather than big brother/little brother, I think we are more like cousins – hopefully not kissing cousins! Related, but vastly different still with our unique identifiers. Will we follow in San Fran’s footsteps? Football dynastywise I certainly hope so, but as far as business growth, employment, traffic challenges, population, and living expense. I think there is no doubt.
#NYTimes, #Forbes, #Seattle, #Census.gov, #SanFrancisco, #Rentjungle