Why the Bay Area will see an Industrial Resurgence
In the wake of COVID, San Francisco has seen a steady decline in technology workers. The city's once-thriving startup scene has begun to collapse and many of its prominent tech companies have relocated to cities such as Miami and Austin. The city's reputation as a hub for innovation is crumbling and there is worry that SF’s glory days are over. However, by looking back into the city’s history, San Francisco may reverse this trend.
For the past five decades, every budding entrepreneur has come to the Bay to start the next big thing or to learn first by working under the titans of technology. While this has led to unprecedented growth and wealth accumulation, the past several years have seen an exodus of tech workers from the Bay due to the new realities of the world. Many tech workers started working from home during COVID and have never returned to the office. They no longer had to put up with high rent or crime to enjoy their high-paying jobs, and ultimately decided to relocate. Even with the pandemic in the rearview mirror, many of these workers want these policies to be permanent and are pushing back on a return to the office. This has led to all-time high office vacancy rates and a city that continues to be one of the slowest to recover. Founders, government officials, and investors are now wondering how the Bay Area will revitalize its tech community and once again be the chosen land for budding entrepreneurs. While housing and crime policy changes are clear steps forward, politics cannot be the only answer to these issues. However, another option could help bring back the magic of the city. This path takes a page out of the Bay Area’s history and once again brings much-needed civic boosterism to the area’s workforce: an industrial resurgence.
Before the rise of semiconductors and the internet, heavy industry brought workers and wealth to the Bay Area. In the late 1800s, many of the largest steel producers in the country such as Union Iron Works and Pacific Rolling Mill Company called SF’s Potrero Point home. WWII encouraged collaboration between the machine shops and shipyards of the Bay, ultimately spawning one of the largest shipbuilding complexes in the United States. During that period, the Oakland and Alameda shipyards employed over 40,000 workers, producing over 18% of U.S. shipbuilding volume. In the 60s, the Port of Oakland became the first on the west coast to build terminals for containers – establishing itself as a leader in naval innovation. Outside of shipbuilding, companies such as General Motors established themselves in Oakland and soon became the largest payroll around. These industrial powerhouses shaped the Bay Area and shifted the economy away from agriculture to the forefront of technology. The industrial age of the Bay Area led the way to Silicon Valley as we know it today.
There has never been a better time to build for the industrial resurgence. Investors have been warming up to industries traditionally outside the scope of traditional venture capital and are pushing for innovation in bedrock industries to help ensure continued American dominance. The federal government has passed bills such as the CHIPS Act and the Inflation Reduction Act which both help spur innovation and improvements across manufacturing, electronics, construction, and energy.
Hubs of specific talent can be seen throughout the state. Los Angeles has become the go-to location for the aerospace tech community, with companies like SpaceX, Hadrian, and Varda. South San Francisco has over 11.5 million square feet of lab space for some of the world’s largest biotech companies including Genentech, Amgen, and more. Why can’t SF and Oakland become home to leading industrial companies? The best tech talent in the world is still concentrated on corporate campuses across the South Bay. The majority of the nation's produce is within a few hour drive of the Bay Area. In 2019, there was over $118 billion spent on construction in California alone. If founders want to once again draw upon the top talent and build companies headquartered in the Bay, then they need to begin learning from industry leaders in mission-critical sectors of the American economy. We have already seen examples of this blossoming in the area. Companies like Built Robotics, Harbinger, Bright Machines, Kojo, and many others are based in SF with the goal of bringing technologies to physical industries. Emerging players like UnSpun, Skycurrent, and Ambi Robotics are already taking advantage of the vacant real estate and making The Bay their home. Companies like Mighty Buildings and Mosaic call Oakland home. There are even conversations starting among city officials to repurpose the vacant office space downtown for labs or light manufacturing.
In conclusion, I believe the Bay Area will see a resurgence of industrial startups as a result of the increased importance of reshoring manufacturing, government policies, and most importantly workers’ desire to build for the real world economy. While history won't repeat itself and shipbuilding won’t be the biggest employer in the Bay Area, the future may look more like the past than we imagine.