Chicago metro area is 4th-hottest tech hub

The Chicago area climbed up two spots as a technology hub, surpassing Silicon Valley. Government can foster that growth.

The Chicago metropolitan area is the fourth-hottest tech hub nationally, up two spots since 2024, according to new rankings released by Site Selection magazine.

Chicago eclipsed the San Francisco region, a traditional tech powerhouse, which remained fifth in the rankings. Chicago’s high ranking is an improvement after losing out on landing Amazon’s second headquarters in 2018.

No other Midwestern city placed in the top 10. Columbus, Ohio, was ranked 12th, down two spots from 2024.

Chicago’s robust tech talent pool and strong infrastructure were key drivers of its high ranking. To remain a top tech hub, Chicago needs to ensure it businesses have the workforce and infrastructure they need to continue growing.

Site Selection considers factors such as infrastructure, tech talent availability and the number of projects from tech-aligned sectors such as telecommunications.

Chicago offers one of the best tech talent pipelines in the nation, drawing from world-class universities and scientific institutions such as the Argonne National Laboratory.

Chicago produces the second-highest number of computer science degrees among U.S. cities, creating a robust talent pool. In 2022, the city awarded 25,000 bachelor’s, master’s, and doctoral degrees.

Northwestern University leads, with about 1,000 of the school’s 8,500 undergraduates pursuing a major or double major in computer science. More than half of all undergraduates take at least one computer science course.

The University of Chicago has increased the number of bachelor’s degrees awarded in computer science by 458% from the 2013-2014 school year to the 2022-2023 academic year. The number of science, technology, engineering and math degrees awarded in Chicago has increased 3.5% annually from 2010 to 2023.

From 2013 to 2023, Chicago’s tech sector added 106,000 direct tech jobs, according to the Chicagoland Chamber of Commerce. This represents about 8% of the city’s workforce.

The tech sector has also created 147,000 multiplier jobs. Illinois’ information sector has added 5,800 jobs in the past 12 months, leading the nation.

The city’s software engineers are a notable strength. They offer the fourth-highest value for the dollar based on their quality and the average salary in the field.

Chicago’s tech infrastructure is led by the area’s quantum projects, which helped earn the region a designation as an official U.S. Regional and Innovation Hub for quantum technologies by the U.S. Economic Development Administration. The region received $280 million in funds from the 2018 National Quantum Initiative Act to build four of 10 quantum research centers and institutes. Chicago is also home to Duality, the nation’s first quantum startup accelerator.

Expected benefits from quantum computing include new and faster ways of processing, measuring and transmitting information. These advancements are expected to impact industries such as finance, energy, biotechnology and manufacturing, for example, by protecting against fraud and optimizing processes.

Chicago is positioned to capitalize on the expected economic benefits. Quantum computing could have $1 trillion in economic impact by 2035, according to one analysis.

The Chicago metro area’s tech sector is growing across many measures. In 2021, Chicago tech companies raised over $9.7 billion in venture funding. Chicago has 17 tech “unicorns,” which are private companies valued at over $1 billion, placing it sixth among U.S. cities. Chicago has the highest return on venture capital of all cities.

To rise farther in the rankings, the city needs to remove barriers to the tech sector’s continued growth.

Chicago has the highest commercial property taxes among large cities and more than double the average, according to a recent report. Chicago’s rate of 4.08% is nearly four times the 1.13% companies face in the No. 2 tech hub, Washington, D.C. High commercial property taxes discourage companies from moving to or staying in Chicago and make other tech hubs more appealing.

The city’s recent increase in the tax on cloud-based computer services, from 11% to 15%, increases costs for many tech companies and disincentivize them from expanding in Chicago.

To remain a leading tech hub, the city of Chicago needs to focus on pro-growth policies.

First is deepening the city’s tech talent pool by expanding workforce development and apprenticeship programs, which increasingly can develop talent in the tech sector. Many tech professions can be learned through apprenticeship, such as IT project managers, application developers and cybersecurity support techs. They have median wages above $100,000 in Illinois.

Second is ensuring tech companies can meet their growing energy needs. A recent resource adequacy study by the state shows energy demand is expected to exceed capacity by 2029. Now that Illinois has lifted its moratorium on new nuclear construction, the state should expand nuclear energy capacity to meet the growing needs of the tech sector in Chicago and across the state.

Policies such as these will foster economic growth across the tech sector and help it continue to expand.