Technology’s impact on the labor force affects the location and types of real estate in demand. As Artificial Intelligence displaces our nation's workforce, we believe Silicon Valley and New York City will thrive and gain market share as epicenters of technology. As a result of growing demand by Tech companies and limited supply due to geography and regulation, Silicon Valley and New York will offer the best risk-adjusted returns across all asset classes.
The Future of Our Economy
Look to other OECD economies such as Japan and Europe, and it is clear that the economic headwinds are deflationary.
As the world continues to urbanize and AI + Automation advances, the type and quantity of labor in demand will dramatically change. Cities will increasingly dominate our national economy and the economic gap will grow between the "haves" who own technology and the "have nots" who are displaced labor. Technological centers will thrive as liquidity dries up in second-tier markets.
Silicon Valley and NYC
In Real Estate, one should go where wealth is created. Cheap land, cheap labor, and low taxes are no longer drivers of growth when wealth is created by Tech and labor demand is reduced by AI + Automation.
Silicon Valley and NYC's market share of venture capital investment is growing.
Silicon Valley, the global center of technology, is home to Apple, Google, Facebook and the largest pool of high-skilled tech workers in the world. Silicon Valley captures the highest percentage of all venture capital investment and over two-thirds of AI-specific venture capital investment.
New York City has historically been a number two Tech center and is rapidly growing as Tech giants move in. Apple, Google, Facebook, and Netflix are all expanding their presence in Manhattan. Columbia, NYU, and Cornell Tech - a new graduate-level tech campus on Roosevelt Island - provide a pool of highly skilled labor. New York City's market share of venture capital investment nearly doubled in the past decade and is an emerging hub for AI and cybersecurity startups.
Silicon Valley and Manhattan are supply constrained by geography and tight regulations. Low vacancy rates provide strong residential rental demand during bear markets, while high labor demand by Tech provides a higher beta and greater appreciation during bull markets.