According to a new Hire a Helper analysis that studied recent Securities and Exchange Commission filings, around 9% of firms in the United States relocated their headquarters throughout the past fiscal year, the largest rate of relocations since 2017. These changes were motivated by cost-cutting, achieving a lower tax rate, and being closer to a desired market.
Corporate headquarters are leaving states such as New York and Seattle, while important industries such as IT and pharmaceuticals are shifting to smaller cities outside of big urban hubs.
Corporate Relocations Rate Highest in Seven Years
In the most recent fiscal year (i.e., March 2022–March 2023), 593 (or 8.9%) of the approximately 6,700 publicly traded firms in America relocated their headquarters.
Since it dropped to below 7% in 2020 (presumably due to the pandemic), the rate of corporate headquarters relocation has been increasing. In the years 2022–2023, it reached its highest level in seven years.
The 593 corporations that shifted their headquarters in 2022–23 reflect a 29% increase over the lower number of businesses (458) that did so in 2021–22 when comparing the absolute number of businesses that moved locations year over year.
According to Hire a Helper, this year’s growth outpaced even the post-pandemic recovery in 2021–22 in terms of year-over-year growth. In that stellar year, a whopping 25% more firms moved their corporate headquarters.
Not only are businesses transferring frequently, but up to 24% of those who did so decided to move their headquarters entirely to another state. This is a breakdown.
Florida experienced the biggest net gain of any state, with 86% more organizations choosing to relocate their headquarters there than those choosing to do so.
The second-highest net gain (71%) was recorded in Texas, a state that formally welcomed Hewlett-Packard and Caterpillar Inc. over the last year, among other businesses.
Arizona (+65%) and Utah (+57%), which both experienced very substantial growth in the number of corporate headquarters they now house, had two other states with particularly excellent performances.
In the sense that leaving cities like New York and California is a common thought, office relocations trends are comparable to personal moving trends.
Surprisingly, Washington was the state that businesses were most likely to leave, with 83% more businesses departing than entering the state. Arena Group, a media company, and Clearsign Technologies, a provider of pollution control technologies, are two notable withdrawals.
Not far behind Washington in terms of the states that lost the most business HQs are New York (-51%) and California (-46%), respectively.
The banking institution Assurant, Inc. and Philip Morris International are two businesses that have left New York. Among the notable withdrawals from California are the industry leader in coworking spaces, WeWork, and the provider of therapeutic nutrition, Guardian Health Sciences.
Waltham, Massachusetts, showed the highest corporate net growth overall over the most recent fiscal year (+175%) when it comes to specific locations for businesses wishing to relocate their headquarters. (Five businesses relocated to this rather small city outside of Boston, and not a single one has since gone.)
Biotech and pharmaceutical companies like Cogent Biosciences and CinCor Pharma are notable examples of notable new corporate residents in Waltham, Massachusetts.
The following two cities in terms of growth are Spring, Texas (+100%) and Burlington, Massachusetts (+133%). Software and biotech companies have shifted their corporate offices to Burlington, whereas Hewlett-Packard relocated their headquarters to Spring, Texas, in a move that received considerable media attention.
Three Florida cities—Jacksonville, FL (+67%), Tampa, FL (+49%), and Miami, FL (+33%)—are among the ten with the largest net gains.
Which U.S. cities are corporations leaving?
Unexpectedly, Cambridge, MA (-40%) is the city that lost the most company headquarters compared to the number it gained.
This well-known college town in Boston, Massachusetts, has long been a magnet for many biotech and pharmaceutical companies, which ostensibly leaves no room for former industry titans.
Just below Cambridge, Seattle (-37.5%) and several Bay Area towns in California lost more corporate headquarters than they acquired during the most recent fiscal year. Additionally, New York City (-13.4%) appears in the top 12 cities.
A number of businesses nonetheless chose to locate their new corporate headquarters in New York City over other net loss locales like San Jose and San Francisco in the past year, despite the net losses.
Top Reasons for HQ Relocations
According to Hire a Helper’s moving study, Americans typically relocate for a new or better job or housing. What, however, are the primary causes of corporate relocations?
One frequently assumed explanation is a desire to reduce expenses, which may entail moving to a region with lower taxes. This could explain why businesses are moving into Florida and Nevada at a higher rate than they are leaving.
The Tax Foundation’s 2023 State Business Tax Climate Index is noteworthy since it assesses factors such as onerous state taxes on firms. It names Florida and Nevada as two of the ten states with the lowest tax burdens. Without a business tax, Texas is just behind in the 12th position.
The high cost of office space is another justification for corporate relocations. When examining office rent rates across the nation, most cities with net corporate HQ losses (e.g., New York City, San Jose) are among the most expensive for commercial leasing expenses.
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The rising popularity of remote work throughout the epidemic has also contributed to the problem of rising office space costs. As businesses continue to operate remotely or with a hybrid work arrangement, America’s largest cities continue to suffer from high office vacancy rates.
According to Hire a Helper’s review of 2022–23 SEC filings, 62% of corporations who moved their headquarters in the last year did so to cities with lesser populations and, thus, lower leasing costs.