The tech sector is undergoing a reconsolidation around major hubs like the Bay Area, Seattle and New York City, as many tech companies prioritize proximity over presence and de-emphasize the return-to-office (RTO) push. As a result, once-promising markets like Austin that drew tech talent away from the coasts during the pandemic with the lure of lower taxes and a better quality of life are seeing their tech status drop, according to a SignalFire report.
San Francisco and New York continue to anchor the AI ecosystem, with more than 65% of AI engineers based in these two metros, said the report. Both markets have been able to attract more tech talent despite headwinds including rising housing costs, shrinking salaries and shifting remote work flexibility.
Two markets are leveraging their natural advantages rather than using massive budgets to bring in tech talent. Miami offers a mix of tax perks and quality of life that have fueled a 12% increase in AI roles, while San Diego increased its base of tech roles by 7%, with the help of sunny weather and lifestyle benefits. Hiring data in San Diego suggests companies are poaching talent upward, as startups lost 3.5% of their workforce in 2024. Still, San Diego County startups raised $5.7 billion in venture capital last year, making it one of the region’s best-performing years on record, according to SignalFire.
Meanwhile, Austin and Houston have been losing startup talent, a trend that SignalFire attributes to lagging infrastructure, fluctuating housing costs and a renewed emphasis on hybrid RTO policies. Austin, which was a post-pandemic growth leader, saw a 6% decrease in headcount at VC-backed startups last year, and Houston’s decrease was steeper, at 10.9%.
“I think that promise was never realized,” said Asher Bantock, SignalFire’s head of research, in an article for The Wall Street Journal. “This idea that it would become a new startup hub didn’t materialize.”
Many companies are embracing hub-and-spoke models and tailoring compensation philosophies to ensure they have the right talent mix across diverse locations, the report said.
“For many tech companies, it’s not about clocking in five days a week — it’s about being close enough for hybrid schedules and anchor days,” said SignalFire. “The result: a surge in in-state hiring as employers strike a new balance between flexibility and face time.”
Thom Singer, chief executive of nonprofit organization Austin Technology Council, said the metro remains a compelling tech hub and believes its best days lie ahead, according to The Wall Street Journal. The city is working to improve infrastructure, as fluctuating costs of living are stabilizing, he said. Austin has a unique sell, and it isn’t trying to compete with the coasts, he said.
“You can’t view a short-term slowdown following unprecedented growth as the end of the story,” he said.
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