The Pros and Cons of Locating Your Business in Texas

It is no secret that Texas is a state with solid business foundations. Its regulations, taxes, and cost of living make it a haven for corporations.  

In the past few years, Texas has been the source of multiple household name relocations. As a result, corporate America has its eye on the Lone Star State. The interest in Texas commercial real estate is also a part of a more significant corporate migration away from business-unfriendly states to the regions that stimulate growth.  

How do we know this? As tenant reps, it is our responsibility to be on top of where the best locations for our corporate clients are. We would be remiss if we did not identify the trend to the sunbelt as a premier opportunity for corporations to potentially encounter millions in savings.  

But is the Lone Star State for everyone? Well, no.

Just like any other location, Texas has its positives and negatives. For some, relocating to Texas could be the secret to unlocking reasonable overhead expenses in a region that tends towards business growth. For others, it could be the source of incredible culture shock where the pros are not worth the cons. So read on. By learning the pros and cons of locating your business in Texas, you will be better prepared to make decisions for your CRE that work for your bottom line.  

Pros  

Texas isn’t named the country’s top state for business year after year without reason. Many claim that it provides the ideal environment for corporate success. Let’s take a closer look at why Texas is home to more Fortune 500 companies than any other state: 

Texas is a gas/oil powerhouse. ExxonMobil is one of its most recognizable Fortune 500 gas corporations.

Business Environment  

Texas is home to some of the country’s most favorable business regulations. Its laws and culture provide a steady pro-business environment that has helped thousands of organizations slash overhead costs.  

Ten percent of the Fortune 500 companies have headquarters in Texas. What does this say? Our country’s most successful CFOs and CEOs are all making the same geographical decision. Due to this, there is also a great degree of connectivity.  Even Tesla has made headlines by relocating its corporate headquarters to Texas. 

This connectivity reduces the possible risk inherited from a Texas move as a robust financial infrastructure backs you. Texas also provides an abundance of secondary education institutions that allow for a strong talent pipeline. It boasts an impressive and diverse workforce.  

Low Tax Burden  

One of the most compelling reasons behind a Texas relocation is its tax conditions. Texas has one of the most favorable corporate tax environments in the country:

• No Corporate Income Tax
• No Personal Income Tax
• No Estate/ Inheritance/ Gift Tax

Businesses can save millions – in taxes alone- from moving to Texas. Why? Texas does not require corporate or personal income tax. Similarly, its sales tax regulations remain reasonable. When less money is owed to taxes, consumers and businesses generally have more freedom to spend.  

Low Cost of Living  

Despite providing one of the most powerful business environments in the country, its cost of living remains exceptionally reasonable. For example, when the national average is 100, Texas’s average living cost is slightly under at 92.  

Cost of Living across the United States where the national average is 100.

General living expenses remain reasonable even in metropolitan areas. Hotspot cities Austin, Houston, and Dallas all fall around the national average. When we compare these rates against other business hubs like NYC and San Francisco, you can fully understand how much you’ll be saving daily in Texas.  

The cost of living in NYC is over double the national average at 240, while San Francisco is at 180. So you could encounter exponential savings by relocating from one of these areas to Texas, where prices across the board are more affordable.  Even metro areas in Texas are cost-effective:

Multiple Texas cities have skyrocketed in popularity- yet their cost of living remains around the national average.

Due to the reasonable cost of living, you can also find less expensive real estate. While NYC Class A office space is around $80 psf, Houston's average property price is only $34 psf. Let’s look at how much moving would save over a five-year lease.  

By relocating from a business-unfriendly city like NYC to a premier metro area in Texas like Houston, companies can save millions in the term of a 5-year lease.

The low cost of living is also reflected in Texas’ gas prices. Texas has among the lowest gas prices in the country. When gas prices are higher, it decreases consumer spending in other realms. Low gas prices go a long way to keeping the money you earned in your pocket. 

Cons  

Even though Texas boasts numerous qualities ideal for business success, it is not perfect. So let’s go through why you may want to rethink a Texas relocation.  

Competition  

Everything is bigger in Texas- even the competition. Since many large corporations have found footing within Texas’ business environment, the state is rife with competitors.  

The state is home to millions of small businesses and massive corporations alike. On an international scale, Texas has the ninth-largest GDP of the world’s nations. With these stats, you can fully understand the pressure of succeeding in Texas.  

Companies are constantly competing for prime real estate, talent, and consumer bases. As a result, there is a tight labor market. To entice the best and brightest, you should be prepared to shell out more in payroll costs.  

Cultural Climate  

Part of the reason behind Texas’ pro-business regulations is its generally conservative culture. Depending on where you are coming from, relocating to Texas may be quite a political adjustment.  

It is nearly impossible to separate politics and business. The two are intermingled in almost any facet of work and life. You will also be forced to adapt to another cultural environment in your personal life. So if you are not prepared to conform to their regulations, it is best to look elsewhere.  

Texas adopts several controversial regulations on contentious issues, from voting rights and open carry laws to masking policies and rights for transgender citizens. As a result, many companies fear that such political controversy would negatively impact business. 

In an age where consumers want to ensure that their ethics line up with their spending, a headquarters in such a controversial state could affect what the company says about itself and its practices. Large Texas companies like  Dell Technologies, American Airlines, Apple, and IBM have already publicly distanced themselves from Texas’ stance on issues. They want to ensure that they are not isolating any customer base. 

Dell is one of many Texas companies attempting to distance itself from the state's political stances. 

Environmental Considerations  

Moving to any new area will be associated with some level of adjustment. Whether the growing pains are worth the potential gains is your decision. There are several environmental features to consider before you move to Texas.  

First, the hot and humid weather can be an adjustment, especially for Northerners. Right off the Gulf of Mexico, Texas is highly vulnerable to hurricanes and other weather disasters. It is important to remember that this is a genuine consideration for Texas’ businesses and their real estate.  

Texas is also one of the largest states in the country. As a result, intrastate travel is less accessible than other areas. Again, this is especially true for Northeast transplants used to quick travel times across their states. While Texas has many cities prime for business, these areas may be less connected than they seem at first glance.  

There is also a high rate of urbanization in Texas. As a result, it has some of the worst traffic in the country, with the highest percentage of motor vehicle accidents. The other factor concerning the booming urbanization is Texas’ property tax. While remaining reasonable for nearly every other tax metric, Texas has one of the highest property taxes in the country.  

Traffic jam on the city limits of Austin, Texas

Should You Move To Texas?  

The decision is yours. Texas provides many benefits to relocating corporations from fair taxes to low gas prices. On the other hand, its environment may cause some individuals considerable culture shock.  

It is up to you whether the pros are worth the cons.  

Whether or not Texas is for you, a tenant rep can help you make your most optimal CRE decisions. For some, this may mean finding Class A office space. For others, it could be a reanalyzing of how they use space- or a relocation into the suburbs. It is important to remember that you have options- and tenant reps can help you exercise these options within your best interests.

Check out this article to learn what the other Top States for Business are!