n California, the Silicon Valley area remains the hub of the world's digital economy. Even with the recent shake-up in the high-tech markets, Silicon Valley is still the center of the tech universe. But with rising housing and labor costs, many firms are exploring other areas.

"Tenants are migrating following their commuter shed," says Ed Del Beccaro, managing partner of real estate services firm Colliers International in Walnut Creek, Calif. "High-tech companies are now exploring sending divisions out of the Silicon Valley area simply because they can't afford to hire people here."

It's no secret that competition for labor in San Jose and Santa Clara, Calif., is extremely tight. Standard sponsored corporate extras include weekly car washes, back rubs and grocery deliveries all offered to attract and retain the best and the brightest. "Wage rates are outrageous," adds Del Beccaro. "The local McDonald's can't hire people at US$14 per hour."

But many startup firms simply can't afford the San Francisco/Silicon Valley area and are moving out beyond the bay. Emeryville and Oakland, Calif., are now the new spots for startups, offering affordable rentals within uncomplicated commute of labor. "I bet Emeryville had over 32 startups last year alone," says Del Beccaro. "Both Emeryville and Oakland are reasonably affordable and offer redundant wiring for these firms. The critical mass of high-tech companies has to stay here in the Silicon Valley area where the venture capital is located," says Del Beccaro. "But firms are beginning to look at 24-hour cities, where they can be hooked up on the Net all the time. There are other affordable options out there, and firms are beginning to look at them."