How small cities are luring tech jobs away from metropolises.

Byline: Timocin Pervane Partner

For decades, the dominance of large cities has been bolstered by jobs and investment from the world's best-known companies, causing labour markets to tighten and housing costs to soar. But could the age of the big city be coming to an end?

In the US, the number of tech jobs is growing at a faster pace in communities with 1-3 million people than in major cities. The coastal giants of New York and San Francisco still have the most, but places such as Raleigh, Salt Lake City and Jacksonville are seeing large increases.

Our analysis suggests that tech jobs in these mid-sized cities increased during the last decade by almost 27% on average with Orlando topping the list at 36%, followed by Austin and Tucson at 33%, Salt Lake City at 31%, Sacramento and Jacksonville at 30% and Pittsburgh at 29%. Many of these smaller cities are among the most prepared globally for the upheaval artificial intelligence (AI) is expected to create, according to our Global Cities AI Readiness Index which measures the preparedness of 105 cities.

Pittsburgh, Raleigh, and Austin ranked higher in the index than places like Atlanta and Miami. In fact, smaller cities often scored well because they are the most proactive when it comes to anticipating risks and seeking opportunities.

There's still work to do

Tech jobs are vital to the economy: in 2017, the consumer tech sector, directly and indirectly, supported 18.2 million jobs and provided $1.3 trillion in wages, $503 billion in annual taxes and $2.3 trillion to the US economy or 12% of GDP. Demand for these workers is expected to increase. The average replacement rate of tech workers from 2018 to 2026 would be 7.5% annually or nearly 600,000 workers each year.

Mega-city overflow

The tech industry has created enormous wealth and job opportunities for many big cities, as well as greater income inequality and problems for the real estate market. In 2018, the tech sector accounted for 20% of major office lease activity, pushing up prices and leaving little available in many markets, according to CBRE.

The pressure on housing has been particularly intense in places like San Francisco, where 41% of young tech workers (18-34 years old), 26% of those aged 35 to 44 and 7% of those 45 and older are considering relocation. Why leave? Around 70% of tech workers polled by the app Blind said they can't afford to buy a house near where they work.

These high costs are benefitting nearby cities like...