Is the shine wearing off of Texas’ economic development star?
Multiple recent studies have knocked the Lone Star State down a couple of notches from its usual perch at the top of various measures of business friendliness for corporate headquarters relocations, business expansions and the like.
Texas fell to fourth in business news network CNBC’s annual ranking of best states for business, dropping two spots from its 2019 ranking. Virginia, North Carolina and Utah, in that order, beat out Texas. The network didn’t rank states in 2020 because of the COVID pandemic.
Another new study looking at economic growth across the United States in 2021 gave Texas the 20th lowest score among all large metros. That study, conducted by real estate tracking firm Stessa, analyzed several employment and housing metrics to generate a composite score and ranked locations accordingly.
In another comparison, Texas didn’t even make the top five in accounting for recent large corporate headquarters projects in a blog by Dallas-based Site Selection Group.
From the beginning of 2018 through the end of May 2021, some 791 headquarters deals were announced in the United States, according to the blog by Kelley Rendziperis, principal and leader of the economic incentive division of Site Selection Group.
Indiana, Ohio, Florida, New York and Virginia, in that order, made up the top five states with the most announced headquarter projects from 2018 through May 2021. The top five represented 40% of all announced headquarters projects.
The numbers of HQs announced for those states in that period were 113 for Indiana, 79 for Ohio, 47 for Florida, 45 for New York, and 41 for Virginia.
Turning to employment, 47% of all estimated net new jobs created by headquarters projects in the 29-month period committed to Virginia, Utah, North Carolina, Ohio and Tennessee. The totals were 30,937 jobs in Virginia, 12,884 in Utah, 11,312 jobs in North Carolina, 10,771 in Ohio, and 10,418 in Tennessee.
Quantifying by investment, Texas again failed to make the grade. Virginia, with $2.89 billion capital investment committed; North Carolina, with $1.87 billion; Ohio, with $1.72 billion; Florida, with $1.34 billion; and Tennessee, with $1.34 billion, topped the list. The top five states attracted 46% of all committed capital investment.
The results were heavily influenced by two major projects. Communities nationwide courted Amazon in the Seattle-based retail goliath’s pursuit of a second headquarters in 2018, and ultimately the company was offered $968 million in incentives by Crystal City, Virginia, according to Site Selection’s research. And North Carolina offered Centene Corp. a $439 million package in the second half of 2020 to spur their relocation.
Virginia made the top five of all three categories primarily because of Amazon HQ2, which invested $2.5 billion into their second headquarters and created 25,000 new jobs in the state, Rendziperis’ article notes.
Switching to the CNBC rankings, Texas dropped to fourth in those largely because the network added a broad category called life, health and inclusion. CNBC evaluates 85 areas within ten broad categories.
Longtime Waco-based economist Ray Perryman noted that “while fourth is not terrible, it is worse than we normally fare in such listings.”
Texas topped the CNBC rankings in the workforce area, which is based on items such as educational attainment, the attraction of college-educated workers, concentrations in key job skills, productivity, availability and diversity, Perryman, president and CEO of The Perryman Group, said in his weekly column published on his web site. Perryman notes that the state also ranked highly in access to capital (third) and economy (fifth).
However, the state ranked 49th in life, health and inclusion, which Perryman called “abysmal.”
The CNBC ranking called out Texas for “policies that run counter to inclusiveness,” such as current and proposed restrictions on voting and LGBTQ rights. CNBC also cited Texas’ underfunded public health system, low COVID-19 vaccination rate and the fact that the state has the nation’s highest rate of uninsured residents.
Highly educated “knowledge workers” and high-growth companies are far less likely to locate in places that are not seen as inclusive, and this tendency is increasing in Texas, Perryman writes in his column called “This Stuff Matters.”
Perryman called the ranking “a compelling early warning signal that short-sighted, counterproductive policies risk eroding the progress over the past 30-plus years in building Texas to be the most competitive economy in the country.”
There’s no sign of an economic development or corporate relocation slowdown in Dallas-Fort Worth, said Mike Rosa, senior vice president of economic development for the Dallas Regional Chamber.
About 115 corporate recruitment projects, including 24 headquarters, are in the chamber’s pipeline, Rosa said. The projects that aren’t HQs are regional or other significant corporate offices, he said.
Judging from the interest in DFW, the Lone Star State is more than holding its own in corporate recruitment and maintaining a business-friendly environment, Rosa said.
He said that the 115 prospects are about twice as many projects compared to the number the chamber is typically tracking at any one time.
Meanwhile, the Stessa study looked at the percentage change in total employment this year, the unemployment rate, the average monthly building permits issued per capita, and the average monthly home sales per capita at the metro level. Researchers issued Dallas-Fort Worth a composite score of 41.6—the 20th lowest among all large metros based on those criteria.
Based on Stessa’s metrics, Utah and Florida are the two states with the most economic growth this year. Both states saw employment grow by 1.5% from January to May and have lower than average unemployment rates, respectively, at 2.7% and 5%. When housing is in short supply across much of the country, new residential construction is booming in these states, with 107 and 79 average monthly building permits per 100,000 residents, respectively — far above the national rate of 43.
At the opposite end of the spectrum, Louisiana and Alaska reported the least economic growth so far this year, according to Stessa. Louisiana employment decreased slightly from January to May, while employment in Alaska increased only marginally. Both states have higher than average unemployment rates and lower than average residential construction and home sales per capita.
Dallas-Fort Worth’s percentage change in total employment was 0.4%, compared to 1.5% for the entire United States. DFW’s unemployment rate is 5.3% compared to 5.8% nationally.
DFW is issuing an average of 89 building permits per 100,000 residents monthly and averaging 73 home sales per 100,000 residents per month. That compares to 43 building permits and 165 home sales per 100,000 residents monthly nationwide, according to the figures compiled by Stessa.
Another national study, this one of remote work trends, ranked Texas fifth out of the 50 states for remote workers looking to relocate in the next 18 months.
California, at 21%, topped the list, followed by Florida at 20%, New York at 13.45%, and Georgia at 11.34%.
Almost 11% of respondents chose Texas, out of which half cited both a desire for a decreased cost of living and a different climate. This was followed by meeting new people, cited by 34.6%. Affordable housing, a more favorable tax climate, desire to live in a big city and finding a place to live on a large piece of property were all reasons cited equally by almost 31% of respondents, said Evan Hock, co-founder of MakeMyMove.
Hock said Texas has plenty of advantages for relocating companies and individuals.
“When you look at the benefits of remote work generally to employers, it essentially opens up the labor pool globally, Hock said. “They don’t have to just look for talent that is around their headquarters. They can find the best software engineer, designer, marketer, all around the world. When we look at the tax landscape, as a business, you’re paying the payroll taxes of wherever our employees are. Most areas are going to have higher income payroll taxes than what Texas has.
Hock doesn’t see a slide in Texas’ appeal for corporations or individuals.
“Historically, you’ve been pretty good (in Texas) about attracting businesses to the state and I think that’s a testament to the business-friendly landscape,” he said.
Texas slipping in 'best-for-business,' headquarters relocation rankings – Dallas Business Journal – Dallas Business Journal
Is the shine wearing off of Texas’ economic development star?