Cities throughout America are experiencing domestic migration from one state to another, but what makes a state attractive to business leaders and employees alike? The US real estate landscape is in constant flux based on the changing policies of state governments and the soft power that influences decisions on personal preferences and better quality of life.
Corporations tend to make decisions to relocate headquarters or open new factories based on tax incentives and the availability of qualified workers. But the employees of these businesses also have choices and exercise their right to relocate (or not) by weighing the options between financial security, affordable housing, top-tier education systems, and lifestyle factors.
How can multifamily property managers and developers capitalize on this trend of corporations moving to business-friendly states along with the employees that are relocating with them?
Which States Are Corporations Relocating To?
In February 2022, Chief Executive Group conducted a survey of CEOs to determine which are the Best and Worst States for Business. Based on the report’s findings 4 states rose to the top of the list.
Florida
In Miami, a mix of sunny skies and the state’s legislation requiring businesses to only pay 5.5% on their corporate income tax return, and no payroll tax continue to draw top firms from the Northeast to its alluring climate.
In fact, based on data from CommercialEdge, “Miami emerged as one of the biggest winners from the pandemic, being one of the few office markets where vacancy declined in the past year.” Crypto companies Blockchain.com and BlockTower Capital, in addition to other corporations in the Finance and Tech space now choose to call Florida home.
Reflected by the U.S. Census, Florida’s population growth during the last decade was 14.6%, which is the most extreme of any state. Some of these inbound individuals came along with corporate relocations, but many others are arriving as remote workers and freelancers. The pandemic has given rise to people’s ability to work from virtually anywhere, and when posed with the task of landing in an affordable but desirable destination, many select the seaside properties of Florida.
Miami’s increasing rents that come along with the demand are also driving investments in multifamily projects. Other regions in Florida including West Palm Beach and St. Petersburg are being eyed by investors as areas capable of delivering high ROI. Multifamily projects that want to compete may need to consider the unique needs of the state’s remote workers. Properties that build in amenities such as smart home features, high-speed connectivity infrastructure, and common spaces with video call booths and co-working oriented interiors could be the advantage that leads to a signed lease.
Texas
Texas is the ninth largest economy in the world and COVID does not seem to have slowed things down in terms of real estate growth or corporate relocations. It also remains the top US exporter for 20 years in a row and exported $375B in 2021.
Flaunting big name companies who recently made the move to establish headquarters in Texas, businesses like Oracle, Tesla, Hewlett Packard, and Charles Schwab are all in agreement that the benefits this state offers are enticing enough to pack up and move.
Lower tax rates, business-friendly policies, reasonable housing prices, and an educated workforce combine to lay a solid foundation for any company to thrive. Texas is also predicted to be one of three states to account for 40% of future apartment demand by 2035.
The Austin and the Dallas-Fort Worth region are two Multifamily Unit Real Estate Markets reaping the benefits from the addition of new talent. Austin saw a 23.9% year-over-year increase in rent prices, and Dallas rent grew by 18.5% in Q1 2022.
Tennessee
Nothing sounds sweeter than no personal state income tax – and that’s exactly where Tennessee excels. Combine that with Memphis International Airport’s position as one of the most bustling cargo airports in the world, and a reasonable corporation tax of 6.5% to make this state’s position on the list of most desirable places to do business a no-brainer.
According to the Nashville Chamber of Commerce, Nissan North America, iHeartMedia, Mitsubishi, and The ICEE Company are among those who have settled their headquarters in Tennessee.
Commercial Real Estate financing firm Walker & Dunlop claims that in 2022, Nashville Tennessee was way ahead of the pack when it comes to new developments of multifamily properties. The city outperformed the rest of America with its rising reputation as an excellent choice for corporate relocations, which brought a healthy injection of tech workers. Also worth noting, in 2020 and 2021, Nashville’s suburban areas saw rapid growth, but the city center is now experiencing its own expansion of MDU property investments.
Arizona
Cited by CRBE – “Phoenix ranks 6th for multifamily investments over past four quarters with $17.6 billion in total volume.” Similar data is also backed by Greater Phoenix Economic Council, which reports that in the fiscal year 2023, they are working with 61 international businesses to identify sites in the area for corporate relocation projects.
Both domestic and global conglomerates are attracted to Arizona’s newly assigned title “Silicon Desert” due to the accelerating trend of Silicon Valley, California businesses finding more attractive offerings in this major hub of the Sun Belt.
Fewer government regulations make Arizona a low cost business environment, and the state even provides up to $9,000 of income or premium tax credits over a three-year period for each new job a company creates.
Multifamily properties are accommodating the new population of young tech job seekers; many of whom choose to rent as mortgage payments in metro areas like Phoenix are too steep for would-be first time home buyers. This is in line with a new study from Apartment List, which found that the millennial homeownership rate is 48.6%, 20% lower than Gen X and 30% lower than Baby Boomers. Through a generational shift in priorities – 22% of millennial renters declare they don’t have any intention to ever own a home.
Where Will America’s Relocated Workers Choose to Call Home?
Multifamily growth as a result of corporate relocations is an opportunity ripe for action. Employees have more and more freedom to advocate for positions and locations that meet their demands. And companies negotiating these impactful moves need to consider their recruitment and retention packages if they want to secure the manpower needed to operate their new facilities.
Property Managers and MDU Developers need to constantly reassess if they are in a position to win the contracts of renters who have a plethora of options. Smart and sustainable homes are aspects younger generation tenants frequently look for. Lockly Pro offers total access solutions to support residential communities, contractors, and multifamily properties.
