By Mark Calvey – Senior Reporter, San Francisco Business Times
Oct 9, 2018, 5:35pm
Every week brings news of yet another Bay Area company that plans to move its headquarters out of the region — essentially saying enough is enough.
Enough with drug-users shooting up across from Twitter’s San Francisco headquarters. Enough with walking by someone defecating in the street in the city’s Financial District, enough with avoiding confrontations with the homeless who appear mentally ill.
Those quality of life issues are on top of the escalating housing costs, growing traffic congestion and higher taxes that are likely to only get worse as President Trump’s tax overhaul means many of the Bay Area’s most successful residents will be paying more to the IRS.
The list of companies expanding elsewhere, or actually moving their Bay Area headquarters out of state, reads like a growing casualty count as the region’s business and civic leaders grapple with these quality-of-life issues. Depomed, Bare Escentuals, Jamba Juice, Krave Jerky and Bechtel are all relocating their headquarters while Charles Schwab Corp. (NYSE: SCHW), Lyft, New Relic (NYSE: NEWR) and Slack, just to name a few, are expanding beyond the Bay.
BAY AREA EXODUS
Cities like Austin, Atlanta, Salt Lake City and Denver are attracting companies to set up shop as they flee the region's sky-high office prices and cost of living.
WHERE COMPANIES ARE GOING
On Tuesday, Oakland-based startup Localwise said it will soon move its headquarters to Denver, where it plans to hire 50 people next year. The company has eight employees in Oakland.
“The big thing was quality of life,” Localwise co-founder and CEO Ben Hamlintold the Denver Business Journal, a sister publication to the San Francisco Business Times. “It’s never easy to ask people in the company to relocate, but it definitely helps when it’s a place where people really want to go. Our team members prefer to live in Denver versus Oakland.”
The rising costs of doing business in the Bay Area are also raising concerns among entrepreneurs and venture capitalists that the region’s reputation for risk-taking on promising startups could suffer.
“I believe the early-stage-startup ecosystem is at risk in Silicon Valley,” said Naveen Jain, co-founder of cryptocurrency startup Tari and a life-long Bay Area resident who moved to Nashville over the summer. “The goal for any early stage startup is not to die before you are able to find product-market fit and scale to a point where you are sustainable or able to raise money. This is becoming harder and harder to do in Silicon Valley.”
The Bay Area is also seeing large companies moving their headquarters out of the region. The states trying to attract the headquarters of California companies are becoming more aggressive. Tennessee is moving more squarely onto the list of states with no individual income tax when it eventually eliminates an income tax on interest and dividends above a certain threshold. That tax will be eliminated altogether in 2021, placing Tennessee on more equal footing with Texas, Florida and the handful of other states with no individual state income tax.
Back in Texas, the Dallas Business Journal is hosting a seminar next month for those wanting to join the 75 companies from around the country that have moved their headquarters to Dallas-Fort Worth in the last seven years. “Nearly as many regional offices have done the same,” the newspaper says in asking, “Ready to relocate?”
One recent victory for Dallas was San Francisco-based Core-Mark Holding Co. Inc., (NASDAQ: CORE) a Fortune 500 company moving its headquarters to that Texas city in 2019.
Core-Mark President and CEO Scott McPherson said the central location, favorable operating costs and lower taxes in Dallas were big draws.
“It’s getting us in a much better position as a nationwide company to service our customers to be in a market that is, I’d say, employee friendly with a really high quality of life,” McPherson said.