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Texas stands head and shoulders above all other states in the race to attract corporate headquarters exiting California, with Dallas-Fort Worth and Austin topping the list of destinations within the Lone Star State.
That’s according to a recent analysis shared with the Dallas Business Journal.
California lost 53 headquarters to other states between Jan. 1 and June 27 of this year, and 23 of those companies went to Texas, according to business relocation expert Joe Vranich, president of McKinney, Texas-based site-selection consulting firm Spectrum Location Services, which tracks corporate headquarters moves.
That’s 43.4% to Texas so far this year, and 56.6% shared between the other 48 states.
Longer timeframe
Taking a longer timeframe, since Jan. 1, 2018, 107 companies have moved their headquarters to Texas from the Golden State. In that time period, the next winningest destination was Tennessee with 22 relocations from California, followed by Arizona with 17, Vranich and Spectrum’s numbers show.
Nevada and Colorado landed 14 California HQ relocations apiece between 2018 and the present, while Florida got 13. North Carolina lured six while Georgie lured five. Idaho and Virginia attracted four HQ relos each from California. Oregon, Indiana, Alabama and Minnesota won three apiece, according to Vranich.
The rest of the states landed two or fewer California HQ move-ins.
RELATED: California governor on the exodus: ‘We need to step up our game’
“Texas is remarkable for the number of facilities it attracts, not only from California, but from other states,” Vranich said. “Another thing that stands out is, the relocations reflect every industry — pharmaceutical, retail, consulting, banking, real estate.”
Eleven California companies that moved or announced relocations so far this year chose Austin or its surrounding cities for their headquarters moves, while eight chose Dallas-Fort Worth. Two chose San Antonio and one chose Houston. The rest are scattered throughout the state, Spectrum’s tracking shows.
The California counties that lost the most headquarters since 2018 were Los Angeles, which had 50 move-outs; San Francisco, which lost 46; Orange, with 26; Santa Clara, with 26; and Alameda with 17, according to a spreadsheet Vranich shared.
Commercial real estate titan CBRE’s relocation of its corporate headquarters from Los Angeles to Dallas last year was particularly telling, Vranich said.
“Who, other than site selection consultants like me, know the economic makeup of the city and what the future parameters look like? Well, CBRE certainly would,” Vranich said. “The fact that they’ve selected Texas over their former California home is really remarkable.”
Interest in Phoenix
Chris Lloyd, chairman of the Site Selectors Guild and senior vice president of McGuireWoods Consulting, recently told the Phoenix Business Journal that states such as Arizona that reopened quickly and had consistent rules have been viewed more favorably by companies seeking new locations or planning to make investments.
The Valley’s economy had already been diversifying since being hit so hard by the Great Recession, and was benefiting from what Lloyd called “the gift that keeps on giving to the West,” which is the migration from California to other states.
A variety of companies, including semiconductor manufacturing, electric vehicles, professional and financial services and back office operations have become more likely to consider Phoenix for a location, Lloyd added. California industrial relocations and expansions will continue to roll into Arizona for the forseeable future, according to Lloyd.
Still, another type of California exodus is even more noticeable in Arizona — the increasing number of people fleeing higher taxes and looking for cheaper real estate as they relocate to find jobs. A recent Business Journal report noted that, even before the coronavirus pandemic, people moving to Arizona from California represented 23% of all inbound residents for more than a decade.
RELATED: Why corporate relocations are on the rise in Arizona
Gov. Doug Ducey is also hoping that the state’s new tax laws that recently passed through the Legislature will continue to make Arizona attractive in its competition with Texas for relocations. The measure would cut the state’s income tax rate to a flat rate of 2.5% over three years. Texas residents do not pay a state income tax. While Arizona’s highest earners must still pay a 3.5% surcharge for education in the wake of the passage of Prop 208, the new tax package caps their total tax liability at 4.5%.
Vranich, whose Texas company was hatched and operated in California until he decided to move it out of the state a few years back, has previously tracked corporate headquarters, manufacturing facilities, data centers, research hubs, software and engineering centers and other business relocations or expansions that likely would have occurred in California but ended up elsewhere. This is the first time Vranich has narrowed his focus to strictly headquarters that exit California and so-called “HQ2s” or “second headquarters” that California-based companies decide to locate outside of the Golden State, he said.
“There are three HQ2 instances that I included in the list because the new host city benefits from the flux of highly compensated executives, VPs, lawyers and so forth,” Vranich wrote in an email.
In 2019, 29 of the 78 headquarters leaving California landed in Texas, and in 2018, 24 of the 57 headquarters on Vranich’s list chose Texas locales.
