Why Are Companies Moving to Texas? (And Why You Should Join Them)

Why are Companies Moving to Texas?

What better place to do business than the “Best State for Business”? Only one place has consistently earned this honor, named by our nation’s top CEOs, Forbes, and CNBC- Texas.

Texas provides a premier corporate environment. According to the 2016 Texas Business Climate Survey, nearly 90% of businesses in the state rate it as either good or excellent. And with good reason...Texas has a low tax burden, a healthy economy, and a skilled workforce. To keep you up to date with the latest CRE trends, we'll take a look at some of the reasons why companies are moving to Texas, who's doing it, and where they're going. 

So if you’re considering relocating or want to be in on the loop, read on. We will go through:

What Companies are Moving to Texas

Where Companies are Moving From

Why Companies are Moving to Texas

Should You Move Your Business to Texas

What Companies are Moving

Over 150 companies (even during the pandemic) planned relocations or expansions in Texas. This proves that you don’t necessarily need to relocate your headquarters to reap the benefits of Texas’ perks. Opening or expanding on satellite offices will give you access to the same pro-business regulatory environment without the level of commitment.

Numerous household names have already relocated to Texas. You'll probably recognize a few:

• Apple
• Oracle
• Tesla
• Hewlett-Packard
• Amazon
• ExxonMobil
• AT&T

Where are Companies Moving From

If you saw people running down the street in large numbers, you would probably want to know what they’re running from (and whether you should start running too.)

The same is true for businesses. Many businesses are fleeing California for Texas, and here’s why: 

• The business regulatory environment in California is stifling
• The cost of living in California is sky-high
• There is a shortage of affordable skilled workers in California
• California’s tax climate is unfavorable to businesses
• Crime rates are rising
• In some areas, homelessness has become a real problem (LA, San Francisco, etc.)
• Power outages are common

California has one of the country's highest corporate income tax rates and cost of living. These numbers force finance-minded companies out in droves. This includes Toyota, Tesla, Occidental Petroleum, Charles Schwab, and McKesson Corporation.

Silicon Valley, in particular, is the source of massive outward mobility. Investopedia explains,

       “An impossible housing market, high tax rates, and strict regulations have made it challenging to live, work, and do business in Silicon Valley. Many CEOs are opting to leave California in search of lower real estate prices, better tax laws, and fewer restrictions.”

What Does This Mean for California?

As businesses leave California for greener pastures in Texas, the state of California is feeling the effects. It’s losing jobs, tax revenue, and major points in its business reputation. 

Take for instance, the loss of Tesla. The electric car company announced in 2014 that it would build a $35 million factory in Fremont, California. However, in 2018, Tesla decided to move the production of its Model Y SUV to Austin, Texas.

This was due mainly to the state’s business-friendly environment and lower cost of living. Tesla's departure was a tough and public loss for a state already struggling with a "business-unfriendly" reputation. Of course, if California is losing some of its tax base, well then it will have to raise taxes even more of those companies and families that stay in the once “Golden State”. 

When such a mega- force of the industry moves its HQ and CEO out of California to Texas, it cannot be ignored. 

California's expenses are second only to New York (which is experiencing a similar migration outward.) Businesses are leaving not necessarily because they cannot afford the lifestyles- but because they have the power to take a hard look at their commercial real estate and make improvements where necessary. For many, expensive offices in these cities are simply no longer worth the grossly inflated rents and the many other bloated costs (construction, food, housing, etc.).

Why are Companies Moving to Texas

Texas wasn’t named the “Best State for Business” only once or twice. How do seventeen consecutive years of earning the title sound to you? This is irrefutable evidence that Texas industry is unparalleled.

The country’s largest state is also the ninth-largest economy out of the world’s nations.

This powerhouse status has companies clamoring over each other to earn a piece of the pie. When you look at the corporate environment, there's no question as to why. There are seemingly innumerable business-friendly perks about Texas. 

For starters:

1) Texas has a thriving economy with a low unemployment rate.

2) The cost of doing business in Texas is very affordable.

3) Texas has a favorable tax climate for businesses.

4) The workforce in Texas is skilled and plentiful.

5) Texas offers excellent infrastructure and transportation options.

One of the most appealing features of Texas is its low tax burden. A recent survey found that 21 percent of companies considering relocating their business are most concerned with taxes. So, let’s take a look at the taxation environment drawing in corporations:

• 0% Corporate Income Tax 
• 0% Personal Income Tax (Top Bracket of Earners
• 8.25% Combined Sales Tax Rate 

The 0% corporate income tax is one of the main reasons the International Economic Development Council consistently scores Texas as one of the Top 5 States for Business. 

Not only this, but the low taxes go hand in hand with the low cost of living. Compared to other popular states, Texas is highly affordable. And this affordability is not just for the company but for the talent you want to recruit!  This cost-effective environment bleeds into every part of life, from residential and commercial real estate to the price of gas.

As more and more businesses relocate to Texas, the state is experiencing a boom in economic growth. This is good news for Texas residents, as it means more jobs and opportunities for economic growth. It’s also attracting new residents from other states, which is helping to drive population growth. In fact, Texas is one of the fastest-growing states in the U.S.

Where in Texas 

Companies are following the regulations that will save them big money- but that’s not all. Texas is also the source of a major talent pool. Areas like Austin, Texas, are becoming hotbeds for young professionals from all over.

Still, Austin is not the only city in Texas. The state provides a wide cultural variety depending on the environment you want to maintain. The top cities in Texas each preserve low tax burdens and affordability.

Austin is repeatedly ranked as the best place to live in America by the U.S. News and World Report. It also earns the reputation as one of the best cities for young professionals with among the highest concentration of college-educated adults.

However, it’s not just recent graduates and businesses flocking to cities like Austin. CEOs are doing it, too, proving that America’s corporate brain trust has fully embraced Texas as home. Drew Houston, the CEO of Dropbox, and Douglas Merritt, the CEO of Splunk, have both recently moved to Austen homes. Not to mention, Elon Musk, one of our country’s foremost minds, personally moved to Texas along with the Tesla headquarters.

Industry leaders are inundating the Austin area. And the migration from the Bay Area has earned Austin the nickname “Silicon Hills.” Therefore tech companies will have easy access to competitors and the best talent for recruiting.

Should You Move Your Business to Texas?

With so many mainstream corporations making moves to Texas, it’s logical to consider whether you should do the same. They have done the research and run the numbers to prove that the state saves companies big.

Now, you don’t need to move to Texas or relocate to save money on your commercial real estate, but doing so will likely reduce your overhead significantly. However, there are other steps you can take to improve your CRE budget. Working with a Tenant Rep will likely save 30% of your real estate costs. If you wish to relocate, they can find you the best properties. If you want to remain in your area, they can improve your bottom line by optimizing your space utilization and renegotiating your existing leases. 

Of course, Texas is not the only business-friendly (and people-friendly) state. There is Florida, Tennessee, North Carolina (where Apple is building another 1 million square foot campus to go along with their 1 million feet in Texas), and more. 

At iOptimize Realty ®, we can guide you on your search for which business-friendly state is best for your operations.  We have the research and the knowledge of how to best optimize Economic Development to help ease the journey for your enterprise.  Feel free to reach out to us and talk to a rep today. 

Also, check out our video section in our learning center, where we cover some of the best cities to consider!