Is it Too Late to Start Doing Business in Austin?
This article was part-derived from the interview above with Keith Zimmerman & Chris Peddie of Cushman & Wakefield.
It is little secret that Austin has been one of the hottest cities to do business in. And this isn’t just because of the warm Texas sunshine!
Austin has been consistently cited as one of the fastest growing US cities. We have been singing the praises of Texas over the last number of years, so much so that we moved our own HQ there at the beginning of 2021!
However, due to the booming popularity of Austin, many business leaders considering a new US location may think they are behind the curve if they move into the city now, and that they have missed their opportunity to move into Austin before it has “peaked”.
That’s why we talked to some experts from Cushman & Wakefield to further probe into the pertinent aspects of doing business in Austin, exploring why companies are making the move there, and what further development lies ahead for the city.
Background to one of the fastest-growing cities in the US
“Explosive growth over the last number of years”
As Keith points out in the video above, the city of Austin has seen consistent growth across the last four decades, but it is truly in this last 10 years that the city’s growth has sky-rocketed.
Austin’s population is just shy of 1 million people, as per the latest US census. The metro area grew by 33% from 2010 to 2020, ranking as the fastest growing large metro in the US.
Austin ranks as the joint 2nd highest US metro for growth in GDP between 2016 and 2021, matching Seattle’s growth of 31.2% while only being outperformed by San Jose.
As capital of the 2nd largest US state, it is unsurprising to hear that historically many of the working population of Austin were government employees. To this day it remains a significant sector for employment with the US Federal Government and the State of Texas employing around 80,000 people in Austin. However, there has been a surging increase in a range of industries which has led to Austin regularly topping the charts as not only one of the best state capitals, but one of the best places to start a business.
What are the thriving industries in Austin?
“There is a cluster of industries that are accelerating in Austin”
Austin has become a hub for a number of industries which has attracted companies to relocate and do business in the city.
Tech & Digital media
We’ve previously cited Austin as a hotspot for tech companies as it featured on our list as one of the fastest growing US tech hubs.
The tech industry in Austin is rapidly growing and has become a hub for innovation and entrepreneurship. With a thriving start-up culture and a skilled workforce, Austin has become a top destination for tech companies. The growth of the creative and digital sector is best highlighted with the presence of industry behemoths such as Amazon, Google, and Oracle.
The city has a diverse range of tech companies, from established corporations to smaller start-ups, spanning across sectors such as software development, artificial intelligence, and biotechnology. Dell, which was founded in Austin in the 1980s, still maintains a significant presence in the city, employing thousands of people in the area. IBM has also invested heavily in Austin, establishing a research and development centre that focuses on emerging technologies such as artificial intelligence and blockchain. Apple has recently expanded its operations in Austin, with plans to build a new campus that will employ thousands of workers.
In addition to the strong presence of tech companies, Austin is also known for its skilled workforce. The city has a high concentration of tech talent, with a large pool of software developers, data scientists, and engineers. The University of Texas at Austin has a world-class computer science program, which produces a steady stream of skilled graduates who are ready to join the tech industry.
Automotive
Tesla made waves in 2021 when it announced Austin as its global headquarters on a 2400-acre site, a location that is set to employ 12,000 people.
However, they aren’t the only big industry name in the area. General Motors has an Innovation Centre which employs 3500 people while the famous Circuit of the Americas track is home to many motor racing events, most notably the Formula One United States Grand Prix. In the video above, Keith comments that the introduction of a global phenomenon like Formula One really opened Austin up to a worldwide audience.
In addition to established companies, Austin also has a vibrant start-up ecosystem that is focused on developing innovative solutions for the automotive industry. Some of the notable start-ups in the city include SparkCharge, a business that is developing portable charging solutions for electric vehicles.
Semiconductor
The semiconductor industry in Austin is a thriving and competitive sector that has been instrumental in driving the city's economic growth.
Austin has emerged as a hub for semiconductor manufacturing due to its highly skilled workforce, favourable business environment, and proximity to key markets. The city is home to some of the biggest names in the semiconductor industry, including Intel, NXP Semiconductors, and Samsung. Regarding the latter of this trio, Austin is home to Samsung’s largest semiconductor production centre outside of Korea.
The semiconductor industry is a critical component of Austin’s technology ecosystem, providing the foundation for many of the devices and technologies that the growing tech and digital media industry relies on. This growth has been driven by several factors, including the increasing demand for semiconductors in a range of applications, from smartphones to self-driving cars.
Overall, there are about 150 semiconductor and related companies in Austin, employing over 60,000 people.
Why are people moving to Austin?
“People come from New York, Chicago and Seattle during our spring and summer month and sometimes they never leave!”
The warmth of the Austin climate matched with the warmth of its hospitable people is just part of the story as to why people relocate to Austin.
One of other the main reasons why people are moving to Austin is because of the job market. There is a high demand for skilled workers, particularly in the tech industry. As Chris mentions above, Austin has been the fastest growing US city of the last decade and ranked as the number one city in the US based on recovering jobs lost in the pandemic and adding new jobs.
As a matter of fact, according to the US Census Bureau, Texas was the second most popular state for domestic migration between 2020-2021.
Austin has become known as a hub for start-ups and entrepreneurs, making it an attractive destination for those looking to start or grow their own businesses. Another reason why people are moving to Austin is for the quality of life. The city has a thriving arts and culture scene, with several museums, galleries, and theatres. It's also known for its music festivals, such as South by Southwest and Austin City Limits. The city has a reputation for being friendly and inclusive, with a strong sense of community. This is reflected in the numerous events and festivals that take place throughout the year, including the Texas Book Festival and the Texas Craft Brewers Festival.
Finally, the cost of living in Austin is relatively affordable compared to other major cities in the United States. While housing prices have risen in recent years, they are still lower than cities such as San Francisco and New York. This, combined with the strong job market and high quality of life, makes Austin an attractive destination for individuals and families looking to relocate.
Why are companies moving to Austin?
“There is a direct relationship between why these businesses are moving to Austin and why the talent is moving to Austin”
In recent years, Austin has become a go-to destination for businesses looking to relocate. Texas is the home of more Fortune 500 companies than any other state in the US. Many people and businesses have made the move to the Lone Star State, so much so that Verizon have had to increase their infrastructure investment in Texas to cope with demand and serve their customer base, increasing capital spending in the state by almost $100 million. From January 2020 to April 2022, Austin saw a data traffic spike of over 300%, prompting the additional investment.
As previously illustrated, the city has experienced a surge in economic growth, attracting an influx of new businesses and start-ups seeking to capitalize on the city's thriving industries.
Many companies are taking advantage of Austin's favourable business climate, which includes low taxes, a highly skilled workforce, and a business-friendly environment. Texas does not have any state personal or corporate tax, whilst the minimum combined 2023 sales tax rate for Austin is 8.25%
One reason why companies are moving to Austin is the city's reputation as a hub for innovation and entrepreneurship. Austin is home to a number of highly respected universities, including the renowned University of Texas which have helped to cultivate a highly educated and skilled workforce.
Austin is certainly a hot location that we’ve witnessed many UK & European recruitment agencies making the move to. Check out our interview with a UK recruitment leader who relocated from London to Austin in 2020.
Ready to start doing business in Austin Texas?
With all of the above considered, it is quite clear that Austin will continue to grow and develop. In fact, the city is projected to be the fastest-growing US metro economy right through to 2027. With an economy that is not just reliant on a single industry, construction projects in the city skyline, and a light rail project in the works that will improve mobility for the growing working population, Austin is certainly preparing to maintain itself as a key region that companies will want to do business in.
If you are considering joining the host of companies relocating to Texas, Cushman & Wakefield is best placed to help support you in that move. Cushman & Wakefield is one of the world’s largest commercial real estate service firms. They have a wealth of knowledge and have helped businesses crack new locations with their market-leading insights and their real estate expertise.
Additionally, if you’re ready to get your feet on the ground in Texas and start hiring employees, PGC has got you covered to ensure you remain compliant with the state's different employment benefits and requirements.
Disclaimer: PGC does not endorse any personal views or opinions of the interviewee. All information here is for general informational purposes only and is not intended to be a substitute for professional and/or legal services.