Are Startups and Tech Firms Market Drivers for New Construction?

by Carson BuckFebruary 22, 2017

Understanding the Economy’s Impact on New Construction

Our country’s economy and its housing market have traditionally gone hand-in-hand, because when one fails or improves, the other usually follows suit. The reason for this is simple: the economy is what drives individuals and families to buy new homes. If the economy is weak, fewer people are going to be looking to buy, which translates into a weaker housing market.

One of the most common indicators that the economy is on an upswing is an increase in startups. When entrepreneurs take the risk to start new businesses, it is usually a reliable divining rod that the economy is getting stronger. This is seen in large and small cities all over the country.
how startups affect building industry

Tech Firms May Also Indicate a Stronger Economy

The same thing applies to tech firms, and California is a prime example of this. In recent years, the cost and availability of housing in Silicon Valley has dramatically changed. Home prices and rents are exploding, while availability is lacking. For this reason, tech firms are starting to look beyond Silicon Valley’s borders, and they’re bringing the need for new home construction wherever these companies settle down.

San Francisco is the perfect example. In San Francisco, there is no shortage of tech firms and the housing market is booming and the rents are at an all-time high. And it’s all due to the city welcoming more and more tech-related businesses. But this increase in tech firms has also had another effect on San Francisco’s business landscape.

With property prices climbing and office rent prices skyrocketing, the influx of tech firms is driving out smaller companies and mom and pops. These companies have had to move elsewhere, such as across the Bay, in Oakland.

While this might not be an enviable scenario for many of the city’s small businesses, the truth is, it’s good for both San Francisco and its outlying communities because more startups are forming and existing companies are relocating outside of the city. This causes a need for more housing in these less-occupied areas.
Are Startups and Tech Firms Market Drivers for New Construction?

Additional Ways Startups and Tech Firms Drive Construction

A strong economy that’s being driven by new startups and tech firms eases the competition between building companies because there is enough work to go around. As a result, profit potential for these builders is higher, and the industry’s unemployment rate is lower.

There is also a trickle-down effect that occurs whenever the economy and building industry are both doing well. The increased need for supplies and materials bolsters several different types of industries, including lumber, glass, tools, and others.

America’s buying power is directly tied to the strength of its economy. People spend more when they have more to spend, and this is what inspired entrepreneurs to take the leap and to open new businesses.

So, yeah, startups and tech firms definitely drive new construction. Consider it the circle of life for the building trade. All it’s missing is a catchy song.
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About The Author
Carson Buck
Carson is a real estate agent based out of Phoenix, Arizona. Carson loves data and market research, and how readily available it is in today's world. He is passionate about interpreting these insights to help his clients find and buy their perfect home. Carson got into the real estate industry because he loves the feeling of handing over the keys to a new home to happy clients. In his free time, he works on his backyard bonsai garden and spends time with his wife, Julia.