They will presumably be building this out in the middle of nowhere in CA, not in a downtown urban core. But it is helpful to be in driving distance to a metropolis with a high degree of excellent engineering talent.
People from out of state assume everything in CA is nuts expensive but you have to remember the state is also full of farmland, forests and deserts.
I was thinking it makes sense in that California, sort of following I-5, is where the Hyperloop would supposedly go... but no. There's no reason to construct a proof of concept track there. Go buy some flats in the middle of nowhere and get a working prototype going first.
Makes sense if you're Musk and want to jot down to Santa Monica to see your mistress Friday evening. (Come on seriously this is what this is all about, you know it, I know it) Not so good if you want to commute to your worker bee cubical job Monday morning.
People from out of state assume everything in CA is nuts expensive but you have to remember the state is also full of farmland, forests and deserts.