The pandemic has catalyzed companies to rethink their space and operational needs and many companies are now moving towards what is known as the “hub-and-spoke” model of office real estate. Instead of a single, centralized HQ, usually located in a commercial core, companies are now favoring multiple, smaller satellite offices that are strategically located in existing and growth markets as well as talent clusters. Facebook is an example of a company that is reassessing the viability of its iconic Silicon Valley HQ. Mark Zuckerberg had recently announced that they will be setting up new company offices in Denver, Dallas, and Atlanta while looking to hire in cities such as San Diego, Portland, Philadelphia, and Pittsburgh, as they search for additional talent near their existing offices.
If you are also rethinking your company’s corporate real estate strategy, here is a list of the top 8 business-friendly cities for your consideration.
- Austin, Texas
- Houston, Texas
- Salt Lake City, Utah
- Provo, Utah
- Richmond, Virginia
- Orlando, Florida
- Washington, D.C.
- Phoenix, Arizona
The Lone Star state is known for its low business tax rate, lack of an individual income tax, and a reasonable cost of living. Furthermore, Texas is the second-largest US state by both area and population, and home to a diverse and growing labor force. In a pre-COVID-19 survey by West Monroe Partners, 80% of 200 business leaders surveyed said they are considering moving to Texas in the next three years to take advantage of its strong talent and employee base. Although Texas is historically known for its oil and gas industry, Texas has diversified its economy and is gaining ground as the latest tech hub.
The city of Austin is nicknamed “Silicon Hills” and is one of America’s top start-up meccas thanks to its strong and supportive entrepreneurial ecosystem as well as the presence of tech leaders including Dell and Advanced Micro Devices. In 2020 alone, 35 companies relocated or opened new facilities in the Austin area. This is likely due to firms wanting to take advantage of Austin’s attractive corporate tax incentives. For instance, businesses relocating to Austin will be eligible for up to 3% wage reimbursement per job per year and up to 50% property tax reimbursement under their Business Expansion Incentive Program. For instance, Austin approved a total of at least $60 million of property tax rebates for Tesla to build their Cybertruck factory in its city.
Given that Texas is one of the best states for companies to set up their headquarters, we have decided to include two cities in our list. Much like Austin, Houston is a strong contender for companies as a relocation destination. Its tax structure makes it a low-cost center for doing business and has more Fortune 500 headquarters than any American city other than New York. Under its Greater Houston Partnership, a range of local and state tax initiatives are made available to qualifying companies in the Houston area to support new, expanding and relocating companies. However, what sets Houston apart is that it is the only Texas city to make it to Arizona State’s University’s overall ease of doing business list which focuses on rules for small to medium-sized business. Apart from its diversified industrial economy, strong healthcare and academic institutions, Houston is also currently pushing for affordable housing in the city’s most expensive districts via a tax credit program.
When it comes to small business friendliness, Utah comes out on top. In Thumbtack’s 2019 Small Business Friendliness Survey, 49 states and 44 cities were evaluated based on factors including licensing requirements, tax regulations and labor and hiring regulations. The Beehive State received an outstanding A+ on its report card and was particularly praised for the ease in which small businesses can get started. The low unemployment rate as well as low cost of living are also reasons why small businesses are moving to Utah.
For reference, the state’s key targeted industries include: advanced manufacturing, aerospace and defense, financial services, life sciences, healthcare, software, and IT.
Salt Lake City regularly receives attention as the best city for young professionals and center for tech entrepreneurs in competition with Silicon Valley. Tech tenants remain the biggest office leasing force in Salt Lake City due to the city’s affordable downtown leases compared to tech hubs in other cities such as Seattle, Los Angeles and San Francisco. In addition, Salt Lake City has one of the largest concentrations of millennials in the country and contributes to the thriving and educated workforce that fuels the local companies to grow and expand.
Utah has an attractive flat tax system, where personal and corporate tax rates are kept at 5%, and the government continually reviews state laws and regulations to encourage the growth of its free enterprise economy. For instance, Utah offers a post-performance tax rebate model to support companies that are willing to invest and create jobs within the state. To attract companies seeking relocation and expansion of operations to Utah, the state offers a job creation tax credit where eligible companies are able to receive tax credit rebates of up to 30% of new state revenues over the life of the project.
Given Utah’s attractive state incentives for businesses, we’ve added another popular city to the list. Notably, Utah’s tech corridor, also known as the Silicon Slopes, stretches from Salt Lake City to the other Utah city in our list, Provo. Though the city is small, it is a growing heavyweight in the tech industry and boasts one of the fastest growing tech employment rates in the nation. It’s worth mentioning that Provo has been called one of the happiest cities in America due to its “intoxicating blend of city culture and outdoor recreation.”
In CNBC’s ‘America’s Top States for Business’ in 2019, Virginia emerged as the number one winner and gained top scores for its workforce and education in its scorecard. This is the fourth time that Virginia has achieved the top spot in CNBC’s business rankings ever since it was number one in 2011. Through the years, Virginia has committed to reviewing its foundational business policies in order to promote a strong business climate. This year, they are continuing their practice of collaborating with elected officials and business leaders from around the state to develop the next state-wide strategic plan for economic development, entitled Blueprint Virginia 2030, with the explicit goal of keeping Virginia as the top state for business. Virginia also offers discretionary incentives, financial assistance, recruitment and training incentives as well as tax incentives. A summary of select state incentives can be found here.
Richmond has been Virginia’s capital for commerce for over 300 years and is known for its strong backbone in the financial, medical, biotechnology, knowledge-based services, manufacturing, and transportation industries. Richmond has the nation’s highest concentration of Fortune 500 and 1000 companies within its city limits. Richmond is also home to four top colleges and universities and the city has a Workforce Pipeline Program to assist businesses with a comprehensive workforce development program. Besides its business-friendly environment, the City of Richmond has a vibrant cultural and creative landscape and was featured in the New York Time’s 2020 list of ‘52 places in the world to visit’.
You may know the Sunshine State as a world-famous tourist destination but did you know that it is home to more than 60 universities? Florida’s strong university system gives the state a competitive edge, especially in today’s knowledge-based economy. With Florida’s universities churning out a pool of STEM talent, this has fast-tracked the growth of the finance and technology industries, particularly in the sector of cybersecurity. The Sunshine State also has one of the nation’s most business-friendly tax codes with its lack of a personal income tax and limited corporate taxes. In this regard, Florida offers the advantage of a competitive high-tech state without the high price tag.
Orlanda has come far from its roots as a theme park destination. In fact, 80% of Orlando’s employment is outside of hospitality and tourism. Rather, Orlando has become a homeground for many innovative industries such as advanced manufacturing, aviation and aerospace, lifesciences, medical technology, virtual simulation, and IT. Orlando’s strong talent bench, particularly with STEM expertise, is sufficiently coveted to attract STEM companies to relocate to Orlando in order to tap into the talents of the well-educated workforce. With Orlando’s niche in the technology sector, it is no wonder Foreign Direct Investment magazine named Orlando as one of America’s Large Cities of the Future for three years running.
As the capital of the country as well as an important economic hub, the District of Columbia is home to government-related industry, technological innovation and ever expanding knowledge sector. It has a unique economic climate largely due to the presence of the federal government. This provides a steady economy with large amounts of federal R&D. The nation’s capital has also garnered attention as a top city for restaurants as well as women’s employment, particularly in the tech sector.
According to its official government website, Phoenix is home to a large number of high-tech, IT, renewable energy and bioscience industries. The city’s economic base also includes a viable financial and advanced business services enterprises as well as a robust health sciences sector.
The state of Arizona has a pro-business climate in which regulations are limited and does not enforce any corporate franchise taxation. Furthermore, businesses in Phoenix are able to take advantage of tax credits and incentives such as the Angel Investment Tax Credit scheme which eliminates capital gains tax liabilities for investments in qualified small businesses. This certainly helps solidify Arizona's capital rankings as one of the best mid-sized cities for growing business as well as a top city to found your startup in.
Additionally, real estate is extremely affordable in Phoenix. The average rent for office space in Phoenix is $24.22 per square foot compared to an average of $100 in Silicon Valley, San Francisco and Seattle. In Phoenix’s most affluent areas, such as Tempe and Scottsdale, average rent costs are about $29.12 and $31.26 per square foot respectively.
If creating a talent pipeline for your business is one of your considerations, you’ll be assured that almost 30% of the 4.6 million inhabitants hold bachelor degrees or higher. Three Arizona public universities and nine private higher-education institutions that offer undergraduate and graduate degrees are all located in Phoenix.