Lone Star vs. Silicon Valley [Why Companies are Moving to Texas in 2021]

Planning to relocate your business to Texas? You are not alone. In the past few years, the number of tech companies moving to Texas is on the rise. In fact, this has given rise to a Texas vs Silicon Valley debate.

There’s no doubt that Texas has a welcoming environment for businesses. Moreover, it has been frequently named among the best states for business in America. Still, there are a few more reasons behind the top companies moving to Texas.

After taking a closer look at the issue, we will discuss the main reasons behind the rising popularity of Texas in this article.

So, Which Companies are Actually Relocating to Texas?

Consider this. Even during the pandemic, around 150 companies have outlined their plans of relocating or expanding to Texas. Here’s a quick rundown on some of the bigger players:

  • In 2020, Oracle shifted its corporate headquarters from Redwood City to Austin. The company announced that it is a part of their policy of offering flexible employee work locations.
  • Apple will set up its second-largest campus in the same place.
  • Elon Musk is moving Tesla’s headquarters to Texas. Tesla is setting up a  Gigafactory with over 7.9-million-square-foot space that will employ around 5000 people. 
  • Hewlett Packard Enterprise is moving its HQ to Houston from Silicon Valley. The new campus should be complete by 2022.
  • Amazon has already chosen Houston as one of its prime hubs a few years back. 
  • Other tech companies moving to Dallas include the infrastructure consulting firm AECOM and the CBRE Group.
  • Greentown Labs has opened the first “climatetech” startup incubator in Houston which is its second location after Massachusetts. 

Biggest Industries and Labor Sectors in Texas

Texas remains the second biggest economy in the U.S., just behind California. It also has the best growth prospects among all the states. At present, it is the ninth-largest economy in the world.

After the effects of the pandemic, the economy of Texas has bounced back in the first quarter of 2021. The higher rate of growth has also resulted in an overall employment gain of 4.7 percent. The forecast for income and employment growth is also strong for the coming five years.

The prime driver of the economy is the energy sector. However, as a result of multiple companies moving to Texas and high expansion rates, other sectors including information technology are making a major impact. It remains the number one state in the U.S. in terms of technology exports.

With the rise in growth rate, the construction industry is another fast-growing sector. While the year 2020 saw a steep drop in construction work, 2021 has seen a slow recovery of the same. The demand for residential real estate is also high at present. 

Beyond that, the transportation sector is also a major driver of the economy. As per the planning of the Texas Department of Transportation, the state will need around $21 billion annual funding for developing the various transportation modes.

Last but not the least, leisure and hospitality have emerged as one of the major players in propelling the economic growth of Texas. In August 2020, the industry employed 1.147 million people, especially in food and drinking establishments. This is a figure that is higher than the rest of the country. 

What Makes Texas a Favorite Choice of CEOs

A recent survey has revealed that there are three main factors that are considered while choosing a spot as a headquarter. These are:

  • Tax policy
  • Regulatory climate
  • Talent availability

It goes without saying, Texas is a favorable destination from all three aspects. In comparison, California has high tax rates, high housing costs, and strict regulations for businesses that have made it challenging to live and do business in the area.

Moreover, as per the data from the U.S. Census, the population flow from California to Texas is on the rise for the past few years.

The Tax Scenario in Texas

Obviously, lower tax brackets will be more attractive to any business. Business taxes in Texas are on the lower side and there is no personal income tax. Besides, the state is also one of the best when it comes to offering incentives to businesses.

At present, the combined state and federal corporate tax rate in Texas stands at 21%- the lowest in the U.S. So compared to the high tax rates in California, Texas is definitely a more attractive choice for businesses. 

Texas also has a pro-business environment that is favorable for smaller and younger businesses. The tax on businesses or franchise tax is just 0.375% for businesses with annual receipts between $1.18 million to $10 million. If your receipts are lower than $1.18 million there is no need to pay any franchise tax.

Low Housing Prices In Texas

In general, Texas is considered as a more affordable place for living than the coastal belt. The most populated belt for living in Texas is the area around Houston, Dallas-Fort Worth, Austin, and San Antonio. This is also called the “Texas Triangle”.

 In fact, Dallas is one of the best cities to move to in the U.S. The cost of housing in most of these cities remains within a reasonable range.

Apart from that, Texas also offers a low cost of living and lower utilities and transport costs. In addition, the entire process of land acquisition and getting a building permit is extremely efficient. The corporate rent figures in Texas are also lower than those in other top cities.

A recent survey after the pandemic has pointed out that a segment of the employees will prefer to work from home permanently. Moreover, some of them would like to move to locations with a low cost of living index. That makes a location like Austin a good choice for any business.

Texas also has the advantage of being located in the center of the country. This also saves travel time and costs for the relocation of corporate employees.

Availability of Tech Talent

The rich talent pool is another reason for companies moving to Texas. In recent years it has also evolved as an innovation epicenter. While there are some existing skill gaps in the talent levels, the talent costs are lower than those in Silicon Valley.

With the rise in the number of tech companies moving to the state, the rate of domestic migration is also increasing. This is resulting in the rise in the number of skilled workers across a variety of industries.

Note, the state also has a number of higher education institutions. This allows the constant infusion of fresh graduates from the streams of technology, engineering, and services into the workforce. 

Conclusion

These are the main factors that have made Texas a worthwhile destination for companies. As more companies discover the benefits of moving to Texas, the rate of corporate relocations is bound to rise in the coming years.

As with every other area that witnesses rapid growth, there are some challenges of moving to a new state that are important to consider. That is why you need to seek professional help for developing a hassle-free relocation strategy for shifting your company to Texas.

As an independent relocation management company, we can help you with your relocation to Texas from every aspect. Our expertise, experience, and top-notch customer service can help in ensuring a smooth relocation from all aspects.

Feel free to get in touch with us for a consultation.