Research article

San Francisco And The Bay Area At A Glance

San Francisco’s residential market was the strongest performer of major world cities in 2015

The Bay Area is among the wealthiest in the US

▲ The Bay Area is among the wealthiest in the US

Located in Northern California, the San Francisco Bay Area is home to 7.5 million people and covers an area of 7,000 square miles. San Francisco, its cultural and economic heart, is bound together with other urban areas including Oakland and Silicon Valley by a network of roads, commuter rail and metro services. The Bay Area is among the wealthiest in the US and its residential offer is as diverse as the region’s climate and landscape. Vibrant cities and leafy suburbs are complemented by national parks, mountains and Pacific coastline.


The San Francisco and San Jose metro areas have a combined GDP of $665 billion and are home to four of the world’s top 10 most valuable companies by market cap, namely Alphabet (Google), Apple, Facebook and Wells Fargo. If the Bay Area were its own country it would have an economy larger than Switzerland.

The Bay Area’s success is underpinned by San Francisco and Silicon Valley’s position as a center of innovation and the global capital of tech. The roots of the industry lie in university research bases, the presence of venture capital and early on, US Department of Defense spending. Today, the region is a magnet for innovative, alternative-thinking talent which actively shapes the development of the online world.

The region is also a major center for sustainable energy, bio-tech and medical services. Oakland is home to the fifth largest container shipping port in the US. The Napa Valley is an important wine producer and led the organic farming movement. Tourism is a another major economic driver; in 2014 San Francisco alone received 18 million visitors, contributing $10.7 billion to the economy.

Innovation capital

San Francisco has ascended on the world stage and is now challenging the major world cities for global prowess. AT Kearney ranks San Francisco 22nd in its global cities index, but puts it number one globally for future potential due to its strength in innovation, economic prospects and its appeal as a place to live (see Figure 1).

The Bay Area’s knowledge economy is closely linked to the strength of its higher education offer. Stanford University alumni are responsible for founding today’s biggest tech names, including Google, Yahoo, LinkedIn, PayPal, Instagram and Snapchat. The University of California, Berkeley counts 29 Nobel Prize winners among its alumni, while the University of California, San Francisco runs a highly regarded medical center.

Figure 1

FIGURE 1AT Kearney Global cities outlook ranking (future potential)

Source: AT Kearney

Wealth drivers

Rapid job growth in high-value industries is fueling demand for prime residential property by creating wealth and housing demand from new employees. This job growth has been led by the professional, scientific and technical services sector, incorporating many ‘tech’ related roles (Figure 2). Between 2000 (the ‘dot com’ peak) and 2015 Silicon Valley added 36,800 jobs in this sector, an increase of 31%. Meanwhile San Francisco added 81,500 jobs in the sector over the same period, a 77% increase.

These figures illustrate the increasing draw of San Francisco over neighboring Silicon Valley as an attractor of tech companies, start-ups, scale-ups and entrepreneurs. Young singles and couples with creative talent want to live and work in a vibrant, urban environment. For growing tech and creative businesses, human capital is the most important asset. It would seem that, in the digital age, cities are better attractors of footloose human talent than suburban campuses and business parks. This means San Francisco has an edge over the valley and job creation has therefore outpaced Silicon Valley since 2008.

Another major growth industry in the Bay Area has been healthcare and bio-medical services. Silicon Valley has added more jobs to the education and health services sector (73,600, +83%) than San Francisco did (44,200, +48%) in the last 15 years. Conversely, financial activities in San Francisco have contracted over the same period (down 27%), reflecting the relative decline of the financial services sector in the US as a whole.

Figure 2

FIGURE 2Sector employment trends (2000-2015)

Source: BLS

Bay Area residential markets in a national and global context

The USA’s housing market or, more specifically, its sub-prime mortgage market, was the source of the North Atlantic debt crisis of 2007/2008. It is therefore unsurprising that America’s housing markets were among the hardest-hit in developed nations and remained suppressed for longest. With a return to economic growth, the housing market recovery is now well ingrained in first tier US cities.

City outperformance has been led by San Francisco, which recorded average price growth of 16.5% per annum between 2011 and 2015. Prime prices on a dollar per square foot basis in San Francisco have risen from $760 per sqft in 2008, to $1,150 per sqft in 2015. This represents an increase of 50% in the seven-year period but San Francisco still remains 32% less expensive than New York, 56% cheaper than London, and some 73% below the price per square foot of Hong Kong (Figure 3).

Figure 3

FIGURE 3Global prime price league

Source: Savills World Research

Bay Area Billionaires

San Francisco and the Silicon Valley are home to 51 of Forbes’ 400 wealthiest people in the US (70 billionaires in total), a density of one billionaire every 6.3 square miles, second only to New York. With a combined net worth of $329bn, 55% of these billionaires made their money in tech industries (wealth of $259bn). Billionaire enclaves are found in San Francisco, Palo Alto, Woodside and Atherton.

Figure 4

FIGURE 4Concentrations of US-based billionaires

Source: Forbes 400, Savills World Research

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