When a large company moves or establishes a new headquarters in a city with room for growth, it has a significant impact on the local economy. The creation of new jobs and higher wages leads to population growth, reduced unemployment, increased tax earnings, and increased investment. Subsequently, new suppliers may follow, bringing additional resources, and local businesses may expand to meet the needs of new residents.
These effects collectively enhance the quality of life in the city, attracting more residents and further increasing the demand for housing. This process transformed San Francisco, making it the city it is today thanks to the tech boom.
Investors are quick to recognize the economic benefits of corporate relocations, often resulting in immediate impacts on the housing market with prices rising even before the move takes place. For instance, after Amazon established its headquarters in Seattle in 2010, rents increased significantly, surpassing the national average over the next seven years. Similarly, when Amazon announced its HQ2 location in Arlington County, Virginia, real estate agents experienced high demand and home prices started to rise before Amazon completed its move.
To profit from the impact of a corporate HQ on a city, real estate investors must anticipate the change. By analyzing relocation patterns, understanding the reasons companies relocate, and focusing on cities with abundant business opportunities, investors can position themselves advantageously like Fortune 500 CEOs.
Historical data from the last five years reveals several relocation trends.
Reasons for Corporate Relocations
Corporations relocate their headquarters for various reasons, with motivations differing by industry. Lower taxes and a favorable business environment emerged as the primary drivers, with over 110 relocations between 2018 and 2023 attributed to these factors, as reported by CBRE.
In the tech industry, the pursuit of lower-cost talent was the top motivator, particularly favoring cities with abundant tech talent, lower living costs, and wages. On the other hand, retail corporations aimed to be closer to their customer base, while financial services organizations sought a larger labor pool. Industries with low relocation rates typically stayed put to maintain proximity to customers.
CBRE’s research highlighted the following industries with the most corporate relocations during the analyzed five-year period:
- Technology (135)
- Manufacturing (120)
- Financial services (34)
- Retail (33)
- Healthcare (21)
While CBRE’s findings indicated a decline in publicly announced relocations by 2023, analysis of SEC data by HireAHelper revealed a peak in relocations during the 2022-2023 fiscal year, with nearly one in 12 corporations moving their headquarters. Additionally, a survey conducted by HireAHelper showed a willingness among employees to relocate with their employers, highlighting the impact of corporate relocations on workforce mobility.
Popular Destinations for Corporate Relocations
Between 2018 and 2023, Texas and Florida emerged as top choices for Fortune 500 companies relocating their headquarters. These states, known for their business-friendly environments, also ranked favorably in the Tax Foundation’s State Business Tax Climate Index for 2024.
Texas offers a low franchise tax rate and exemption from state income tax for businesses and individuals. Housing costs in Texas are generally lower than in coastal urban centers.
On the other hand, Florida imposes no individual income tax and maintains a low corporate tax rate. State initiatives have been implemented to attract investment, with an expected creation of 200,000 high-salary jobs by 2030. Florida experienced significant inbound migration of corporate headquarters in 2023.
Both states have witnessed population growth as remote workers seek lower living costs, contributing to a pool of skilled talent migrating from states like New York and California.
Noteworthy cities for corporate relocations include:
Austin, Texas
Austin, a burgeoning tech hub, welcomed 66 new headquarters between 2018 and 2023. Despite a recent housing price decrease, the city still remains attractive for job seekers, according to U.S. News.
Dallas
Dallas gained 32 new headquarters over the same period, witnessing substantial population growth in the Dallas-Fort Worth metro area. Several corporations have relocated to Dallas, such as Frontier Communications, foreseeing economic contributions and job creation in the coming years.
Houston
Houston attracted 25 new headquarters over the last five years, with recent announcements like Chevron relocating their headquarters. Compared to other cities, Houston’s housing prices remain below the national median and are on the rise.
Nashville
Nashville, a healthcare hub, saw 21 companies relocate their headquarters between 2018 and 2023. The city experienced a 40% growth in corporate headquarters, with notable names like Oracle planning to make Nashville their new base.
Jacksonville, Florida
Jacksonville outpaced other Florida cities in terms of corporate growth, recording a 66.7% net gain in headquarters during the fiscal year 2022-2023. Companies like Dun & Bradstreet relocated to Jacksonville, contributing to its economic and job market expansion.
Denver
Denver, while facing housing demand and price challenges, remains an affordable alternative to cities like San Francisco and New York. Healthcare and utility companies have found appeal in Denver, with incentives like job growth tax credits contributing to the city’s attraction for corporate relocations.
Atlanta
Atlanta welcomed three Fortune 500 companies to Georgia in recent years. Known for its favorable corporate tax climate, Atlanta has seen an uptick in housing market growth while remaining affordable, making it an appealing destination for businesses.
Waltham, Massachusetts
Waltham, set to host Welch’s headquarters in 2025, emerged as the fastest-growing city for new corporate headquarters in 2022-2023, boasting a 175% net gain. Despite a substantial increase in median home prices, the city continues to attract corporate relocations.
Departures from New York, California, and Chicago
Companies are shifting away from states with high living costs and substantial business taxes like California and New York. California, New Jersey, New York, and Illinois witnessed significant losses in Fortune 500 headquarters, with San Francisco, Los Angeles, New York City, and others experiencing the most departures.
SEC data from 2022-2023 highlighted high losses in Cambridge, Massachusetts, and Seattle.
Future Market Insights
Corporate relocations to Texas and Florida are well-established trends, presenting opportunities for investors. However, exploring emerging markets with potential for economic growth and corporate relocations could lead to future investment success. Some markets to watch include:
Ann Arbor, Michigan
Ann Arbor, ranked as the seventh most educated city, draws corporations seeking talent. Michigan’s business-friendly climate and Ann Arbor’s quality of life make it an attractive destination for relocations.
Provo, Utah
Provo, known for its thriving economy and tech innovation, offers a favorable business tax climate. Recent moves by tech companies and institutions like Brigham Young University indicate growth potential in the city.
Closing Thoughts
Exploring cities in business-friendly states poised for growth can lead to profitable real estate investments. Aligning with the preferences of corporate CEOs—such as low tax rates, skilled workforce availability, affordable living costs, and a vibrant culture—could pave the way for successful ventures in emerging cities, potentially leading to the next real estate hotspot.
Note By BiggerPockets: These opinions reflect the author’s perspective and not necessarily those of BiggerPockets.
