Is Reno Becoming the New Silicon Valley

This is an interesting article from Bloomberg Business Week discussing the changes taking place in Reno as more high tech companies relocate here. What isn’t being mentioned is how this growth is affecting real estate prices and the ability for local residents to afford the rapidly rising home costs.

Reno the new Silicon Valley
A taste of classic Reno outside the Whitney Peak Hotel.

“Are you with Tesla or Panasonic?” the waitress asks with a smile. It’s morning in Reno, and it’s natural to assume anyone eating breakfast among the rustic wood walls and Instagram-worthy succulents of the Whitney Peak Hotel would work at the mammoth Tesla Gigafactory, jointly run by the two tech companies. For transplants landing in Reno, the boutique hotel, formerly a casino, has become a common crash pad—albeit one wrapped by an outdoor rock-climbing wall.

Around 8:30 a.m., the men arrive in waves. The Panasonic workers from Japan head for one buffet, with rice, pork, and miso soup; the Tesla crowd favors eggs. Soon they’re gone, traveling by carpools and shuttles 20 miles east into the desert to the factory, where they’ll make lithium ion batteries to power Tesla’s electric cars.

Workers on an early-morning bus to the Gigafactory.

Not long ago, Reno was a home foreclosure capital and fading casino town. “There was only one place to go, and that was up,” says Mayor Hillary Schieve. Unemployment peaked at almost 14 percent in 2011, when Governor Brian Sandoval signed a law aiming to diversify the state’s economy, recognizing that gambling alone can’t sustain a workforce.

The Reno area scored some early wins, such as a new, highly automated factory run by Ardagh Group SA that churns out 3.5 million cans of tomato paste and other food products a day. Then came the big get in 2014, when Tesla Inc. chose the Tahoe Reno Industrial Center to build what will be the largest factory in the world and promised to create 6,500 permanent jobs in exchange for $1.3 billion in tax incentives.
“What Tesla did was it took our success and made it huge by reinforcing the message,” says Mike Kazmierski, president of the Economic Development Authority of Western Nevada. More companies have expanded or moved to the area since. Reno’s unemployment rate is below 4 percent for the first time since 2006, and the fastest job growth in the region comes from manufacturing, employing almost 15,000 workers, up 15 percent in the past two years.

While 21st-century U.S. manufacturing depends on robots and automated systems, squeezing out many of the traditional middle-class jobs associated with industrial production, there’s still room for humans in new factories. They just need a lot more training to work alongside the robots, monitor their performance, code their brains, and maintain their systems.

The telltale signs of gentrification in Reno are creeping in. Thousands throng to the weekly Food Truck Fridays near downtown, dudes play cornhole while sipping cold brew coffee at a cafe by the river, and a local bartender can’t quite keep track of the number of craft breweries. Kristen Jaskulski opened Sol, a Polynesian kava bar, a few months ago and says the business is hitting its stride. The hipster scene helps young workers imagine moving to Reno, and those who can land these new kinds of factory jobs tend to have cash to spend once they arrive.

Sitting on a balcony overlooking the Truckee River, Jake Warner, the young chief executive officer of cloud-computing startup Cycle, says he considered moving his company and its handful of employees from Toledo, Ohio, to Austin, Seattle—or Reno. “Elon Musk is just my idol,” he says. “I bought Tesla on IPO day.” While Cycle doesn’t manufacture products, he figured Musk must have seen something special in Reno and that other techies would follow the hype.

The world’s tallest climbing wall (164 feet), built into the side of the hotel.

For years, students at the University of Nevada at Reno mostly left town after graduation. But after the state’s tax deal with Tesla was announced, UNR’s engineering college booked a large auditorium for an information session with the electric-car maker. When 800 students showed up, “we had to open up another room in a hurry,” says Indira Chatterjee, associate dean of engineering. At Tesla’s request, the department created two academic minors, one in battery engineering and the other in manufacturing quality, she says, but the excitement over Gigafactory work outpaced the reality of the time it took before hiring would start. “In our view, it was not fast enough,” Chatterjee says. Her grads have slowly started getting jobs; on a recent tour of the Gigafactory, she ran into three alumni.

Construction on the Gigafactory began in 2014, and Tesla and Panasonic Corp. are finally staffing up in real numbers. In January, Panasonic told Nevada that it’ll hire as many as 3,000 workers this year. In a state with an $8.25 minimum wage, the entry-level position at Panasonic starts at $14 an hour, and the next level up is $17. A technician starts at about $23 an hour, Panasonic tells applicants on its Facebook page. Nevadans can enroll at Truckee Meadows Community College in a free training program on the Fanuc robots used at the factory.

While many residents may say good riddance to the Reno of $5.99 prime rib casino dinners, the change has come so quickly, it can be tough for the region to adapt. Some locals were outraged that Reno has been spending money to install Burning Man art around the city instead of fixing potholes or adding beds at homeless shelters. The art is “supercool, but people went crazy,” says Mayor Schieve.

Rocks outside a future site of luxury apartments and townhouses.

Other industries are feeling a squeeze. “If there is a dark side, it’s that you can’t snap your fingers and create 20,000 light industrial workers overnight,” says Celeste Johnson, chief operating officer of the local staffing firm Applied Cos. The boom, she says, has driven up wages at employers such as the warehouses for online retailers. But raises aren’t keeping up with costs for everyone, so some longtime residents are worried about being displaced. Median home prices are up 18 percent in the past two years, according to the Reno/Sparks Association of Realtors. This summer, new Tesla employees will live in UNR dorms, a temporary fix.

Until then, there’s always home back at the Whitney Peak Hotel. As the sun sets over the Sierra Nevada, shuttle buses cycle by in front of the hotel, and Panasonic workers scramble down. Some cram into the hotel elevator in search of their beds. Others fan out into the downtown streets.

(Updated 13th paragraph to correct Celeste Johnson’s title)

BOTTOM LINE – While not quite everyone is seeing the upside, a run-the-robots manufacturing base anchored by Tesla’s Gigafactory has helped slash Reno’s unemployment.
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Source: Reno Is Starting to Look More Like Silicon Valley