We Want All of Your Companies

• People and companies are flocking to Texas – which is obviously great for our state.
• They are doing so for our overall business friendly environment.
• But if we do not have better local leadership, the good ride could end.

Texas got some more good news this week when CBRE announced it would officially move its headquarters to Dallas in 2021. According to Bob Sulentic, President and CEO of CBRE, “it just made sense.” But why does it make sense? And does it make sense for other companies? That’s what I am going to talk about in this blog entry – the rush of foreign[1] companies to move to Texas.

Companies Continue to Flock to Texas

The first question to ask is – are people coming to Texas? Are companies moving here? The answer is undoubtedly yes. Anecdotally, in addition to CBRE, Tesla recently announced they are building a large plant just outside of Austin that will employ at least 5000 people. And its not just large companies. Smaller companies like Buff City Soap and Dasan Zhone Solutions have both recently moved to Texas.

In 2019, Texas was the fifth fastest growing State by percentage increase in population. And as we all know, multiple Texas cities are regularly among the fastest growing in the country.

In 2019, Texas was also the #1 destination for companies that were leaving California. In addition, Governor Abbott’s office recently said there are 196 active relocation or expansion projects in the pipeline right now.

Its clear, therefore, that people and companies are coming to Texas. But why? And will it continue?

Why Companies are Moving to Texas

One of the most common reasons people and companies give for moving to Texas is probably the reason you already know – taxes. Texas does not have a state income tax. That can be very attractive to a lot of folks. But its more than that. There are plenty of things that make Texas welcoming.

• Business friendly environment – Of course this includes low taxes. But its more than that. Texas – in general – has limited regulations on businesses and provides for a entrepreneurial friendly environment.

• Diversity – Texas is the second most diverse state in the country.

• Universities – Texas has strong universities to provide talent to companies, including the University of Texas-Austin and Rice.

• Affordable Housing – While we tend to think of housing as expensive here, compared to housing on the coasts, it is quite reasonable.

• Central location – Texas is pretty close to the middle of the country.

These benefits combine to help make Texas one of the most attractive locations for a company looking to move. And the result is what we talked about above – people and companies are flocking to Texas.

This is, obviously, very good for Texas. Companies bring jobs and money into the state. And its good for commercial real estate. Companies and people increase the demand for all types of commercial real estate. This is one of the reasons that two of the top 7 hottest cities for investing in commercial real estate (according to Forbes) are in Texas. As a commercial real estate investor, there is no question Texas is a great place to be.

What Could Stop the Party?

But just because things are good now does not mean they always will be. The good times can always come to an end. So what could stop them? I think the clearest example of a city hurting a good thing is right here in Austin. As a result, I am specifically looking at Austin’s mistakes and how they could ruin its future.

• Over-regulation – Anyone who has ever tried to get plans through the Austin zoning department knows all about over-regulation and how that can kill a deal. Just last week, local developer 360 announced it was backing out of a plan to work with Habitat for Humanity on a development that would have provided 17 affordable houses for Austin. Why did they back out? They could not get a deal done with the City Council.

• Infrastructure – We talked about this last week, but Austin has a very serious infrastructure problem. Hopefully Props A and B will pass this week and we can start to address that.

• Affordable Housing – Austin needs more density. A lot more density. The City Council tried to encourage this by changing the code to allow for more of it. But that has now been shot down in a lawsuit – with no end in sight.

• Homelessness – The homeless situation in Austin is out of control. It absolutely has to be cleaned up and not just kicked down the road.

• Overall business animosity – We hear it so much – this City Council has an antagonistic relationship with many companies and commercial real estate developers. Its creating a real problem.

All of these issues and more could significantly hurt Austin’s (and Texas’s) future as a leading destination for companies and people.

Lets hope it improves before its too late.

[1] And by foreign, I mean not from Texas.