When a large company relocates or opens an additional headquarters in a city with room to grow, the impact reaches every aspect of the local economy. New jobs and higher average wages lead to population growth, a lower unemployment rate, increased tax revenues, and greater investment. New suppliers may follow, bringing new resources, and local businesses may expand to meet the needs of new residents.
All of these effects improve the quality of life in the city, which in turn draws even more residents, further increasing the demand for housing. It’s the process that made San Francisco, which looked like an entirely different place before the tech boom, the city it is today.
Because investors are aware of the economic benefits of corporate relocation, the impact on the housing market can be immediate, with prices rising before the move even takes place. For example, after Amazon built its corporate headquarters in Seattle in 2010, rents increased by more than twice the national average over the next seven years. It’s no surprise that when Amazon announced in 2018 that its HQ2 would be located in Arlington County, Virginia, real estate agents were inundated with calls from prospective clients and home prices began to rapidly rise before Amazon finished moving in.
For real estate investors, profiting from the impact of a corporate HQ on a city is, as with most investment decisions, about getting ahead of the change. Without insider knowledge of corporate plans or a crystal ball, the best real estate investors can do is analyze relocation trends, identify what drives companies to relocate, and focus on cities with the most business opportunities. In other words, think like a Fortune 500 CEO.
Through increased relocation activity over the last five years, several trends have become apparent.
Why Corporations Are Moving
Corporations relocate their headquarters for a number of reasons, and the primary drive varies by industry. Of the 465 relocations that occurred between 2018 and 2023, 110 were motivated by lower taxes and a more business-friendly environment, making this the top reason for relocation, according to commercial real estate firm CBRE. This was also the top reason manufacturing companies relocated, followed by attempts at portfolio optimization or operations consolidation.
But in the highly mobile tech industry, finding lower-cost talent was the primary motivator. Cities that are both a hotbed for tech talent, either because tech workers graduate there or migrate there, and also have a lower cost-of-living and lower average wages, are therefore attractive to tech companies. Tax savings or a better business climate was the second most common reason tech companies relocated.
Meanwhile, retail corporations primarily wanted to be closer to their customer base. And financial services organizations sought more available labor. In industries with low rates of relocation, most companies stayed put to remain close to their customers, among other reasons.
These industries had the most corporate moves over the five-year period CBRE studied:
- Technology (135)
- Manufacturing (120)
- Financial services (34)
- Retail (33)
- Healthcare (21)
While CBRE research showed that publicly announced corporate relocations began to drop off in 2023, an analysis of SEC data on numerous corporations conducted by HireAHelper found that relocations peaked in the 2022-2023 fiscal year, with nearly one in 12 corporations moving their headquarters. HireAHelper, a moving marketplace, also conducted a survey that found most employees would be willing to relocate with their employers, with 44.6% reporting that they would even leave the state.
Corporations Relocate to Florida, Texas, and Other States
Texas and Florida were the top choices for Fortune 500 companies relocating their headquarters between 2018 and 2023. Corporations of all sizes are favoring those states, according to data from CBRE and HireAHelper, and both states ranked highly in the Tax Foundation’s State Business Tax Climate Index for 2024.
Texas has a low franchise tax rate, and residents can avoid both business and personal state income tax. Corporate rents and housing costs, in general, are much lower than in urban hubs on the coasts.
Florida, meanwhile, doesn’t assess individual income tax and has a low corporate tax rate. Plus, state initiatives designed to encourage investment are expected to create 200,000 new high-salary jobs in Florida by 2030. The state saw the greatest rate of net inbound migration of corporate headquarters in 2023.
Both states have also seen high population growth rates, as workers with remote work arrangements have sought a lower cost of living, bringing a well-educated pool of talent from states like New York and California.
Cities that stood out across datasets for corporate relocations include:
Austin, Texas
This growing tech hub has gained 66 HQs over five years, according to the CBRE study, and Elon Musk recently announced that X headquarters is moving to Austin. Once a pandemic boomtown, housing prices in the city have fallen, but some experts say it’s still overvalued. Even so, U.S. News lists Austin as one of the best places to find a job.
Dallas
Dallas gained 32 HQs between 2018 and 2023. The Dallas-Fort Worth metro also saw the highest population gain of 2023, according to Census data, with more than 150,000 new residents. And SEC data showed a 50% net gain in corporate HQs for 2022-2023.
Frontier Communications recently relocated to Dallas and estimates a $3.8 billion contribution to the state’s economy and 3,000 new jobs over the next 10 years.
Houston
Chevron announced this month that its headquarters would move to Houston, a city that has already gained 25 HQs over the last five years. Unlike Austin, Houston’s home prices are still below the national median and are growing, according to Redfin.
Nashville
A longtime hub for the healthcare industry, Nashville drew 21 corporations to move their headquarters to the vibrant city from 2018 to 2023, and SEC data showed the number of corporate headquarters grew 40% in 2022-2023. Oracle is one of the corporations that plans to move its headquarters to Nashville.
Jacksonville, Florida
Miami, Tampa, and Orlando have all drawn companies to relocate from coastal states, but Jacksonville saw the greatest growth of the Florida cities in the 2022-2023 fiscal year, with a 66.7% net gain in corporate headquarters. Dun & Bradstreet relocated there this year.
Denver
Denver, which has faced high housing demand and rapidly increasing prices in recent years, is still more affordable than San Francisco and New York and has appealed to several healthcare and utility corporations looking to relocate in recent years. Virta Health and Redaptive moved their headquarters to Denver, and Colorado offered Oak View Group $5.3 million in job growth tax credits for relocating there. CBRE noted 11 corporate relocations during the five-year period analyzed.
Atlanta
Three Fortune 500 companies relocated their headquarters to Georgia in recent years. Georgia is a favorable state for corporate taxes, and companies such as Hai Robotics and Blaze Pizza have recently relocated to Atlanta. The housing market in Atlanta is booming, with 14.7% year-over-year price growth, but still affordable, according to Redfin.
Waltham, Massachusetts
Waltham, which will welcome Welch’s headquarters in 2025, was the fastest-growing city for new corporate headquarters in 2022-2023, with a net gain of 175%, according to the SEC analysis. The median home sale price in the city is up a whopping 19% year over year.
Corporations Leave New York, California, and Chicago
Unsurprisingly, corporations are relocating away from the states with the highest cost of living and the heaviest tax burdens on businesses, like California and New York. California, New Jersey, New York, and Illinois lost the most Fortune 500 headquarters during the period CBRE analyzed, and these cities had the greatest losses of corporate headquarters in general:
- San Francisco/San Jose (79)
- Los Angeles/Irvine (50)
- New York City (21)
- San Diego (11)
- Chicago (10)
SEC data from 2022-2023 also showed that Cambridge, Massachusetts, and Seattle had high rates of losses.
Markets to Watch in the Future
The trend of corporate relocations to cities in Texas and Florida is already well underway, and while investors may still find profitable deals, it’s also worth exploring markets with future potential for economic growth and corporate relocation, including:
Ann Arbor, Michigan
Ann Arbor is a college town ranked the seventh most educated city by SmartAsset, with a diverse pool of talent that is already drawing corporations to relocate their headquarters. Michigan is ranked 11th by the Tax Foundation for a business-friendly climate, and U.S. News ranks Ann Arbor as the eighth-best city to find a job and the 19th best place to live in the country. Niche also ranks the University of Michigan, Ann Arbor, as the fourth-best college for information technology.
Housing prices in Ann Arbor have steadily grown but remain affordable, slightly higher than the national median, and the city has a relatively high median income.
Provo, Utah
Qualtrics founder Ryan Smith announced earlier this year that Provo would be the site of a new tech incubator, and the city’s thriving economy earned it the title of “fastest growing city” in an analysis by Checkr last year. The Tax Foundation ranks Utah eighth for its business tax climate, and Provo is home to Brigham Young University, a top college for information technology. JLL announced Modere’s move to the city in January.
Home prices in Provo are on par with the national median.
Final Thoughts
These are just a couple of examples of cities in business-friendly states poised for further growth. When researching new markets, it may be helpful to get inside the mind of a corporate CEO and look for places with low tax rates, plenty of educated workers, relatively low housing and living costs, and a vibrant culture that attracts both employees and customers. A decade from now, a city that meets those criteria could become the next San Francisco.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
