Never Mind the Governor: CA to TX Migration Is Already Strong

DALLAS – Since the early days of February, business headlines in Texas and California have been focused on efforts by Texas Governor Rick Perry to woo California businesses to the Lone Star State. Much has been made in the Texas media about the millions spent by the governor’s office on public relations and advertising in the Golden State in attempts to lure businesses there to the Lone Star State.

But experts tell that the governor’s promotion activities haven’t really been necessary. The eastward migration of businesses to Texas from California has been in play for quite some time now. “This has been a phenomenon we’ve experienced during the past 10 years,” notes Mike Lewis, co-founder and principal with Dallas-based Velocis Partners. “But it’s been getting stronger recently.” Transwestern senior vice president Larry Mendez, who is based in San Antonio, pinpoints the increase of California business in Texas from before the recent financial crash, though acknowledges that there seems to be more interest than ever these days. Adds Tom Pearson, executive vice president with Colliers International’s Dallas office: “The governor really didn’t need to do this; there are plenty of people promoting Texas and coming here right now.”

Governor Perry’s office didn’t respond to requests for an interview, however, commercial real estate experts throughout Texas were more than happy to weigh in on the issue of business relocation. “This has been happening in all the major markets in Texas,” remarks Lewis. “There has been good, positive growth out of California.”

Many of the relocations have generated their own headlines over the years, as has news about comparisons between the two states. Waste Connections moved its headquarters from Sacramento to The Woodlands. Furthermore, Google Inc., Apple, Medtronic and Facebook moved their operations to various points in Texas, well before the governor opted to flood the California airwaves with the benefits of doing business in Texas. In recent months, Chevron Corp. announced it would relocate 800 jobs from San Ramon, CA to its oil exploration location in Houston (though Chevron’s headquarters will remain in San Ramon).

“We’ve definitely been seeing companies coming into Texas, not only to establish a new presence here, but existing California headquarters committing to the area here and growing,” comments Stream Realty Partners vice president Stewart Lyman, who works out of the Houston office. Adds Dallas-based KDC CEO Steve Van Amburgh: “If you look at our pipeline of prospective new projects, we’ve always had two or three large groups from California interested in the Dallas-Fort Worth area and Texas” What’s of interest, however, Van Amburgh continues, is that the amount of interest is on the rise. “Since last summer, that number has tripled. Instead of seeing two or three groups, we’ve had nine or ten inquiries,” he comments.

Certainly the reasons for the eastward migration have been touted often enough: Lower cost of living, a decent GDP, strong quality of life, the fact that Texas is a right-to-work state, no state income tax and a central location can be appealing to business owners. And it’s no secret that the propositions recently passed in California have business owners rethinking whether they want to remain and pick up stakes to move. “Those propositions lit a fire under a lot of decision-makers,” Van Amburgh observes. “Whether they’re making the move or not, they are studying alternatives and inquiring.”

Lyman also points out that Texas’ strength in oil and gas has also proved appealing to many Golden State firms. “A lot of companies have seen that there is plenty of skilled labor here for the oil and gas sector,” Lyman points out. Speaking of skilled labor, Mendez continues, the workers to be found in the Lone Star State tend to be well-educated and affordable – and many are bilingual as well. “Labor, by far, seems to be the biggest ticket,” he comments. “Real estate and intellectual property come in second and third.”

There is also the issue of space and time. Colliers International’s executive vice presidents Chris Teesdale and Tom Pearson point out that an investor or corporate user can come into the Dallas area, for example, find a decent amount of land at a reasonable price and build on it. What might take a year to 18 months in California for zoning and entitlements might take three to six months in Dallas, the men note.

Given the ongoing interest in Texas from businesses in California (and other states as well), does this mean that Governor Perry’s efforts have been wasted? Not necessarily, Lyman says.

“Obviously the larger companies, such as the Chevrons of the world, have groups dedicated to finding the right location to do business,” he comments. “But for smaller companies out there that may not have a dedicated real estate group, the governor’s campaign is an opportunity to get in front of them and to show them the potential benefits of Texas.”

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