Good News/Bad News for Phoenix: A Closer Look at Emerging Tech Cities

The race is on among cities vying to become the next Silicon Valley. A quick google search of “best tech cities” or “emerging tech cities” will lead to dozens of articles and hours of research. And Phoenix, Arizona receives its fair share of press. The sixth biggest city in the U.S. is becoming a hub of innovation. And unlike other parts of the U.S., Phoenix is still growing. Some projections have it becoming the fourth biggest U.S. city in the next 10–20 years. While Phoenix has much to be commended for, techies like myself have a few questions that need to be answered before packing our bags. A closer look at the tech scene in Phoenix shows bad news mixed with good news.

Silicon Valley Isn’t Going Away

Silicon Valley isn’t going away anytime soon, but the current tech boom is much larger than Silicon Valley. As rents escalate and space becomes scarce in places like San Francisco, Silicon Valley, and Manhattan, the lure of more affordable prices have high-tech companies seeking talent and real estate elsewhere. Or, as the Dave Partners Team wrote, “as San Francisco becomes increasingly expensive and competitive, tech talent is drawn to places where they can spend less to have a higher standard of living.” And plenty of cities are popping up as lower cost alternatives with plenty of promise. Phoenix has a lot going for it, according to Taylor Soper of GeekWire. Low living costs, favorable tax policies, nice weather, and a supportive community give Phoenix a chance to be a thriving startup hub.

Technology Helps Cities Become Better Places to Live

“As goes the high-tech industry, so goes opportunity,” according to Arizona Commercial Real Estate Magazine. “Once a high-tech company anchors a neighborhood, housing prices rise, new amenities spring up and unemployment dips.” Tech talent growth rates are the best indicator of labor pool momentum. Even during tough economic times, technology is often seen as the one bright spot. In the past year, technology jobs outpaced overall rate of new employment nearly four times. So, every city should be putting its best foot forward to attract entrepreneurs, software developers, and knowledge-based workers.

The Good News

“Phoenix is definitely an emerging high-tech market,” said Andrew Medley, Vice President, Tenant Relations in the Phoenix office of JLL. But Phoenix represents a paradox. While the population growth and home sales are almost exclusively in the West Valley, the tech presence is in a different location. “The most interesting part of this growth,” Medley said, “may be the building locations themselves — a huge percentage are in suburban markets like Chandler, Tempe and South Scottsdale.” For those not familiar with the area, these suburbs are in the East Valley. Medley points out that when Apple moved to the Phoenix area they went to Mesa- another East Valley city- and introduced hundreds upon hundreds of new jobs. Medley points out that the same can be said for many other companies… Intel, Honeywell, GoDaddy, InfusionSoft. The list goes on and on. If the nickname Silicon Desert applies, it’s because of the tech presence that has gathered in the East Valley.

The Bad News

The top three zip codes for home sales in metro Phoenix were in the West Valley. The new construction, the most home sales, the future projected growth- all in the West Valley. It really began when the Glendale Arena was built in Glendale- the West Valley. The arena is home to the NHL’s Phoenix Coyotes. Next came the stadium that is home to the NFL’s Arizona Cardinals and numerous big sporting events. Glendale exploded. The West Valley exploded. Next came major College Football Bowl games, concerts, a Super Bowl, and all the hotels and retail shops you can ask for. The West Valley became the retail and entertainment hub of the Phoenix area. It exploded. On top of that, the West Valley is expected to grow by 1 million in the next 10 years. The West Valley has the region’s newest freeway, Loop 303, which will only invite more growth. But the East Valley still has Arizona State University which makes its home in Tempe. And the East Valley has the tech corridor.

The Tech Corridor

The Cushman & Wakefield Technology Group focuses on commercial real estate trends, stats, and tools for Phoenix’s technology industry. They took all the high technology companies across Phoenix and placed them on a map. When they did that, Loop 101 in the East Valley took on a whole new look. As the Phoenix Business Journal reported, the growing clusters of knowledge-based and manufacturing technology businesses are all clustering along this tech corridor in the East Valley. The tech corridor runs from North Scottsdale to the southern parts of Chandler. This good news for the East Valley is bad news for the West.

Transportation, Education, and Employment but No Technology

The West Valley is trying, but there focus seems to be in a different direction. “In the past 10 years, the West Valley has worked on improving the three most important things for better growth,” said Kevin Johnson, past chairman of the Buckeye Chamber of Commerce (West Valley emerging suburb) and owner of RE/MAX Assured of Goodyear (you guessed it, West Valley suburb). Those three areas according to Johnson are transportation, education, and employment. The shining stars of the West Valley are Avondale, Glendale, Goodyear, Buckeye, Peoria, and Sun City. Any Major League Baseball fan can travel to a lot of spring training games just focusing on those West Valley suburbs. The West Valley is booming, but in a city already known for urban sprawl, this could be making the problem worse.

More Bad News

Phoenix residents already drive a long ways to their jobs. The West Valley is where the top home sales are. The West Valley is where the future population growth continues to be. But the East Valley has the tech corridor. A 2015 Brookings article by Natalie Holmes and Alan Berube reported that jobs in greater Phoenix are growing, but getting further away. The report looked at the growing distance between people and jobs across U.S. Metropolitan areas. In general, residents of suburban Phoenix have fewer nearby jobs than neighborhoods in central Phoenix. In other words, Phoenix is spread out. Residents do not live close to where they work. So with people already traveling further to their jobs, and with the East Valley already having an established tech presence, how will the West Valley compete to attract entrepreneurs and technology companies?

Google Fiber = Tech Cred

Even Google Fiber recognizes the East Valley as being the major player in Phoenix. Phoenix city officials, business owners, and techies are clamoring for Google Fiber. Google Fiber was founded with the goal of making the web faster and better; it starts with a connection that’s up to 1,000 megabits per second. Kansas City was the first Google Fiber city. Phoenix is listed as a “potential Fiber city.” But look at Raleigh-Durham to get an idea of how this works. They are an “upcoming Fiber city.” Carrboro, Cary, Chapel Hill, Durham, Garner, Morrisville, and Raleigh will be the specific locales. For Phoenix, the list includes two: Scottsdale and Tempe. As John Berryman wrote when discussing Nashville as an emerging tech city, “We got Google Fiber- that’s gotta be a good sign right?” Google Fiber represents another win for Phoenix. Another win for the East Valley to be specific. And another hurdle for the West Valley.

Access to Venture Capital

Location matters. “It’s a good thing when a city has access to venture capital funding, when a city attracts a lot of start-up capital,” writes Enrico Moretti in The New Geography of Jobs. And Phoenix did make Inc. Magazines list of top 20 cities for tech startup funding. They came in at 17. Angel investment groups like Arizona Tech Investors and Desert Angels have formed to provide entrepreneurs in their backyard with financial backing. So access to funding and air transportation are not limiting factors in Phoenix the way they are in Tampa, Florida. The main limiting factor in Phoenix is the East Valley-West Valley dichotomy.

The West Valley Needs a Sponsor

“Life in the desert has never been so sweet for those pursuing a career in tech,” writes Jesse Bouman on Medium. Bouman writes, “Phoenix has recently ranked in the top five cities worldwide both for most tech job postings, and for fastest tech salary growth annually.” But the good vibes for Phoenix as a technology and innovation hub are because of the East Valley. West Valley cities need to make a strong effort to attract techies, start-ups, and entrepreneurs in order to form their own tech corridor. While the West Valley holds the top three zip codes for home sales and the areas of greatest future growth, what will West Valley city officials do to build a strong tech presence? Las Vegas has Zappos Founder Tony Hsieh. Detroit has Dan Gilbert of Quicken Loans. Tampa has mayor Bob Buckhorn and Tampa Bay Lightning owner Jeff Vinik. My question is who will step-up for the West Valley?

Thanks for reading- I’m Scott Raymond. I’m a volleyball husband, writer, and avid reader of non-fiction. I write primarily on emerging cities, technology, and horse racing. In May, I will begin a 12-week software developer boot camp. I love seeing how cities like Phoenix and Cleveland and Las Vegas are emerging as hubs of technology and innovation. Perhaps our technology and club volleyball life will take us to a new work in the East Valley.

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