Are Texas and Florida the new California and New York?
By: Business Insider
Tags: Real Estate, Florida, Texas, Silicon Valley, Finance

By Hillary Hoffower

Sunnier locales, lower taxes, and a more affordable cost of living. California’s tech elite and New York’s financiers are in pursuit of all three, and they’ve found that trifecta in Texas and Florida.

Out west, there’s a Silicon Valley exodus to Texas, headlined by Elon Musk’s and Oracle’s moves to the Lone Star State. And on the east coast, there’s the Wall Street exodus to Florida, marked by the relocation of Charles Schwab himself and reports of Goldman Sachs shifting some of its operations to the Sunshine State.

The pandemic-era rise of remote work has spurred companies and the individuals who work at them to reevaluate their locations and the lifestyle that comes with them.

The migration that has ensued is transforming the no-state income tax lands of Texas and Florida into the California and New York equivalents of 2020, but really only for the time being.

Silicon Valley is headed to Texas

San Francisco’s increasingly high costs, safety, and political climate are pushing some tech elites out of San Francisco, Business Insider’s Meghan Morris and Berber Jin reported.

And it’s not just the bigwigs reconsidering their lifestyle. More than a third of Bay Area tech workers said in a recent survey they’d consider leaving if they could permanently work remotely.

While Silicon Valley’s fleeing residents have scattered everywhere from Miami to Denver, most have flocked to Texas. Austin, long the center of Texas’ tech scene, has been a hot spot in particular. Dropbox CEO Drew Houston and Opendoor cofounder JD Ross are moving to the city, while companies are also relocating there, including software giant Oracle and the investment firm for venture capitalist and Palantir cofounder Joe Lonsdale.

Oracle cofounder Larry Ellison is moving Oracle’s headquarters to Austin, Texas. Photo: Robert Galbraith/Reuters

Tesla also has a Cybertruck factory under construction in the area. Its founder and SpaceX CEO Elon Musk is the latest high-profile tech figure to announce a move to Texas, but it’s unclear where in the state he’s moving.

Even Houston has been attracting tech talent, with Hewlett Packard Enterprises relocating its headquarters there from San Jose.

“There are lots of people that have already moved that haven’t been written about that are pretty high profile,” venture capitalist Keith Rabois, who headed to Miami instead of Texas, told Morris and Jin. He declined to name who else left. “Post-COVID, I think the concentration of talent has atrophied, perhaps permanently.”

He said that pre-pandemic, San Francisco’s spot at the top of the tech hierarchy outweighed his dislike for the city, but remote work has scrambled that hierarchy.

Wall Street is flocking to Florida

While California’s tech elite are packing up their bags for the Lone Star state, New York’s financiers are trading in skyscrapers for sunshine in Florida.

Hedge fund Elliott Management is moving its headquarters to West Palm Beach. Its co-chief investment officer, Jon Pollock, has reportedly been living in his West Palm Beach home during the pandemic. Charles Schwab, founder of the eponymous brokerage and asset management giant, also relocated to Palm Beach this year, voting registration records show.

Blackstone, the world’s largest private-equity firm, headquartered on Park Avenue in Manhattan, is opening an office in Miami with plans to bring as many as 215 technology-focused jobs there. More recently, Goldman Sachs has been considering plans to shift asset management operations out of New York, Bloomberg first reported.

Big Apple financiers are heading to spots in South Florida, such as West Palm Beach. Photo: Shutterstock

Business Insider recently spoke with 13 finance and real estate professionals about Florida’s ascendant appeal amid the pandemic, many of whom described an uptick in bigger and longer office-space leases by out-of-state firms and high-end real estate inventory running low as Big Apple financiers flood the area.

Stephen Rutchik, Colliers’ executive managing director of office services for the South Florida region, had told Business Insider during these talks that low taxes, warmer weather, and a low-key vibe had lured financial services firms in recent years.

But interest really popped off in July, he said, when the industry had become more comfortable with remote work. Rutchik said his team is seeing unprecedented interest, with the call volume from prospective tenants increasing “overnight” to “torrential” levels.

“We’re touring hedge funds on our agency side one to three times a day,” he added.

CA and NY are still top, but TX and FL are officially in the game

While Texas and Florida are enjoying the limelight as the new hotspots, experts say they won’t come to dominate New York’s Wall Street and California’s Silicon Valley.

Jonathan Woloshin, head of real estate and financials research at UBS, acknowledged to Business Insider that Texas and Florida have been and will continue to be the beneficiaries of further population, job, and business growth, and job inflow will contain a greater percentage of “front line” work as opposed to back office-related functions. But they aren’t necessarily the “new” California and New York, he added.

Ron Conway, the founder of SV Angels who’s been called “the godfather of Silicon Valley,” recently told Business Insider this isn’t the end for Northern California’s dominance.

“The Bay Area’s challenges can be frustrating, to be sure, but there’s still no place on earth like the Silicon Valley and the San Francisco Bay Area when it comes to talent, access to capital, and the tech ecosystem for startups that have created so many successful companies and founders,” he said.

Wall Street won’t lose its grip in the long run, experts say. Photo: Andriy Blokhin/Shutterstock

Regarding Florida, several experts Business Insider previously spoke with highlighted a few challenges that could ensure the real Wall Street hangs on to its core position: a tighter labor market, expensive relocation costs, and a shortage of available luxury homes, to name a few.

Across the pond, similar fears that London would lose its luster after the Brexit vote have (so far) proved unfounded. Despite UK fund managers predicting 16% of Britain’s asset management jobs would relocate, a Financial Times survey found the majority of international banks and asset managers have actually increased their number of London employees since 2015.

California and New York may remain unparalleled in the long run, but Texas and Florida’s elevated status as the current main attractions could give the former two a run for their money.

Woloshin said that as more individual wealth becomes concentrated in Florida and Texas, it’s likely that more venture-like and private equity fund-raising and investing could occur in both states.

“New York and California are likely to remain strong business destinations given their attractiveness to the talent pool,” he said. “However, going forward, they will not be the only game in town in terms of high-quality job and wealth creation.”

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