Rents in Megacities Can't Go Up Forever

What does it look like if a rent bubble pops? Can such a thing even happen? Rents tend to be difficult to change without moving. I guess rents can fall if demand considerably outstrips supply and the landlords get desperate, but most landlords I've seen are pretty stubborn and will hold out until the last second before they lower the rent a single penny.

Especially for information technology, I don't understand the rationale why it has to be concentrated at certain places. As long as there is a good net connection, it could be anywhere in the world. Let's concentrate on the US for a moment. Why can't a successful startup not be in Dallas, Amarillo, Miami or Des Moines? Talented people already move from one coast to the other, so they could as well move to any other place. The rest of the country's infrastructure is so good that you could connect venture capitalists, founders and customers in any arbitrary way.

I also say to the main point of the articles: rents have a lot of room to grow under the current logic. City centers simply get voided of average earning people and replaced by high earning ones. As soon as they are the average earners, even more wealthy people move in. Also with the rents, salaries go up, so people have the possibility to pay for their accommodation again. While in Berlin you could easily live with 40.000 Dollar/year, you'll probably have to add another 60.000 so people are at least somehow able to move to work for your new shiny SV company.

To put it another way, the cost of real estate in a given area is proportional to the rate of money flowing through that area. Will ever larger flows go through New York and San Francisco, increasing without end? History suggests that is unlikely.

There are certainly a lot of factors. People want to live in trendy cities. There's a lot to consider besides rent - culture, nightlife, etc. San Francisco sure does have some of the best food in the country (and with tech consuming most of spare time the way it is, eating out is really a huge part of culture). Rent definitely ends up being the deal breaker for many, but for others isn't.

It's a lot harder for a company to hire top tech talent if they're in Miami / Des Moines, because the Bay Area has a much higher concentration of tech workers. Convincing people to move is hard, especially so for more experienced tech workers who have a life/family somewhere. You need to be getting an insane deal for it to be worth abandoning your friends and family/forcing your partner to find a new job (and I've yet to see tech companies trying to compete on comp vs SF/SV outside of them). Can't run off middle-road new grads alone (Edit: Good point below that top grad talent wants to hit the big cities too).

I work in the world of enterprise consulting where offshoring and remote work are a daily part of the job.

Yet many companies don't allow remote working to their own employees, even though all contractors (including freelancers) are doing it mostly remotely.