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Is Your City the Next U.S. Tech Hub?

Emerging Tech Clusters Offer the Benefits of Silicon Valley, Without the Cost

CHICAGO, IL -- (Marketwired) -- 08/06/14 -- Turns out Silicon Valley isn't big enough for the latest tech boom. Other tech hubs are popping up across the nation. New kids on the block, including Phoenix, Minneapolis and even Indianapolis, want a piece of the action.

Other cities are jumping in too. Chicago Mayor Rahm Emanuel is pitching Chicago as the Midwest's answer to Silicon Valley. He's promoting a digital incubator called 1871 and recently announced a $70 million grant to build a Manufacturing and Design Innovation Institute known as Digital Lab.

But what can these new Silicon-esque locations offer to emerging tech companies? Plenty, as it turns out. These cities have strong pools of tech talent associated with their local universities, a friendly business climate and an established pipeline of venture capital funding.

And, more reasonable real estate costs.

Real estate is typically the third-largest expense for tech firms, after salaries and IT. In Silicon Valley, average office rental rates run at $35.40 per square foot compared with Indianapolis, which clocks in at $17.15 per square foot, JLL research shows.

Forbes contributor Joel Kotkin, who last year offered a list of surprising cities creating the most tech jobs, believes that Indianapolis, a city that is generally less expensive than the trendier cities, could attract more tech investment once the current bubble conditions die down.

"This is a two-way street," said Greg Matter, co-head of JLL's tech brokerage group. "Tech companies are seeking talent and space wherever they can find it and cities are vying for these companies to boost their economy and position them as the next Silicon Valley."

The Twin Cities, for example, has developed a robust start-up environment, attracting high-profile IT companies such as computer manufacturing, software development and mobile apps. Google recently formed a partnership with local co-working provider CoCo as a way to tap into Twin Cities IT talent.

In Phoenix, local municipalities, state universities and incubators are driving high-tech start-up activity in the region. Arizona State University's SkySong project helps companies grow by providing capital networks and access to skilled labor. GoDaddy and Isola recently expanded in the region by leasing 150,000 and 25,000 square feet of office space, respectively.

"As the tech boom continues, we will see more surprising locations claim the tech hub moniker," said Matter. "Silicon Valley is not going away any time soon, but tech firms should quickly set their stake in the ground in the new emerging locations before they are priced out of the market."

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