Fifth Avenue to Palm Beach?
Silicon Valley to the Lonestar State?
If high taxes and an unfriendly business environment were mounting prior to the COVID-19 pandemic in northern and left-coast states, you might say that the pandemic was the tipping point. Just look at all the businesses that have or are in the process of moving south over the past year when public health measures and gatherings restrictions continued to hamper businesses viability and increasing tax rates.
Retailers, restaurants and other businesses are moving from New York and other northern states to Florida, specifically to the Palm Beach area where the year-round weather is ideal, there are no state taxes, and COVID-19 restrictions have been much more relaxed. Experts say there are no signs of a pandemic-induced recession in and around Palm Beach, where the real estate market is booming and retail rent is increasing due to less availability.
Before it may have been snowbirds flocking south to warmer weather during the winter months. Now it’s businesses — except the businesses are likely here to stay. While major cities like New York and Chicago are likely to take years to recover, Florida continues to thrive. And businesses aren’t just signing short-term leases, but long, 25-year ones in many cases. It’s one example of a domestic migration that is likely being spurred — and spurred quickly — due to the pandemic.
It seems that the favorite escape among California-based businesses — specifically those in Silicon Valley — is Texas. Elon Musk made waves when he announces that Tesla is building a large manufacturing center in Austin, Texas, and other traditional Bay Area giants like Oracle, Hewlett Packard and FileTrail have also relocated some operations or their full headquarters here. In fact, it’s estimated that up to 35 companies have either completely relocated or opened new buildings in and around Austin in the year 2020 alone.
Why? Similar to Florida, the desire to escape from high taxes, hefty government regulation and expensive housing are the key factors. Plus, when you throw in the fact that Austin has been an up-and-coming city for several years now in terms of attracting young professionals, there’s a certain draw to being there. You could argue that Austin is poised to become what Silicon Valley initially was — a fair-weathered, professional technological hub. In fact, many have already coined the nickname “Silicon Hills” for Austin.
Will the Migrations Last?
For the near-term, it’s very likely simply because it makes more sense to do business in these more business-friendly environments. It’s one thing to manage high taxes, but when increased government regulation and excessive housing prices also factor into the equation, companies have to rethink their options and what makes sense. For many, a migration to the south is the answer.