SAN FRANCISCO—The Bay Area has confirmed its place as the nation's hottest tech and job creation center with the release by the Milken Institute of its 2014 Best-Performing Cities Ranking that featured San Francisco in the top spot for the first time ever and a fourth place finish by San Jose.

The results were unveiled at a Thursday event hosted by the Bay Area Council and featuring San Francisco mayor Ed Lee and Milken Institute chief research officer Ross DeVol.

“San Francisco's meteoric rise is astounding and a testament both to mayor Ed Lee's strong leadership and our region's powerful and resilient innovation economy,” said Jim Wunderman, president and CEO of the Bay Area Council. “What's happening in San Francisco is a microcosm of what's happening around the region as the convergence of talent, technology and capital fuel a tsunami of investment, economic growth and entrepreneurialism. San Jose as the capitol of Silicon Valley is the bookend of a corridor of innovation and economic activity that is unrivalled in the nation.”

In reaching the apex of the Best-Performing Cities ranking, San Francisco leap-frogged Austin, TX, and grabbed the top position for the first time in the 15 years of the ranking. As little as five years ago, San Francisco didn't even figure in the top 10 of the Milken ranking, which includes 200 metropolitan areas across the country. The report cited wage growth in the tech sector over the past year and past five years as among the main reasons for San Francisco's surge. Median wages among tech professionals in San Francisco is $91,400, 30% above the national average, the report said.

The rapid growth in San Francisco's tech sector put it second in the nation for technology-based GDP over the last five years, and the concentration of tech is more than double that of the U.S. average. Included in the tech sector, according to the report, are companies working in social media, mobile apps, cloud-based software and storage, clean-tech, biotechnology and medical research.

Unlike other best-places popularity contests, the Milken Institute ranking focuses exclusively on objective measures tied to economic performance and vitality. The index measures growth in jobs, wages, salaries and technology output over five years, among other metrics.  

The report doesn't gloss over the many challenges that San Francisco and the region face as a result of the fast-growing economy, including housing affordability, displacement and worsening traffic. Nor does it say that San Francisco is necessarily the easiest or least-expensive place to do business.

“These challenges are real, they are painful and we can't minimize their impact,” Wunderman said. “Affordable housing and middle-class jobs are crucial to sustaining San Francisco's and the region's long-term economic success. So while we celebrate this achievement we also must re-double our efforts to create more housing, more middle-class jobs and increase investment in our critical infrastructure.”