Frisco-Based esrp’s Susan Arledge on What’s Driving Corporate Execs to ‘Look South’ » Dallas Innovates

Susan Arledge says we have to look at the state of Texas as a whole to understand what’s driving more and more growth to DFW. The prospect of a diverse talent pool, lower taxes, cheaper cost of living, and lifestyle benefits is driving more execs to look south.

Arledge, a site selection expert at commercial real estate firm esrp, points to a comment from the CEO of a company that relocated to Texas from California, by way of example: “My employees were constantly saying, ‘Look, my commute is horrible, and my rent is astronomical for what I’m getting,’” the exec said. “And to be perfectly honest, I also told them, ‘I’m not going to pay you $400,000 per year so you can buy a house in Silicon Valley.’ So, we were really looking at improving their lives and moving somewhere where they could start accumulating assets.”

Why Dallas-Fort Worth? The exec puts it bluntly, “It’s almost corporate malfeasance for a C-level executive at a Fortune 500 publicly traded company in San Francisco or New York not to be considering or studying a potential move.” Arledge ticks off the reasons in the Q&A below.

Arledge is among the experts invited to share their thoughts on the CRE market for our recent DALLAS® magazine that focused on how DFW punches above its weight in commercial real estate. Here’s what she had to say in “View from the Top Tier.”

Why is Dallas-Fort Worth now one of the nation’s hottest CRE markets?

DFW is usually at the top of that list because: 

  • Businesses can generally save 20% on overall costs by making the move from California to DFW.
  • Combined federal and state corporate taxes total 28% in California and 21% in Texas
  • On average, an employer in the Bay Area can save about 15% to 20% in annual payroll costs by moving to DFW.
  • San Francisco typical home value is $1.38 million, and the average apartment rent is more than $3,000 per month.
  • In DFW, the average cost of purchasing a home is about $350,000, and apartment rent is $1,200 a month.

What demand are you seeing across sectors?

With such an influx of new residents to DFW, demands for e-commerce support and the challenge to global supply chains have all contributed to the demand for industrial space and especially for large spaces. 

More than 33 million square feet have been absorbed in DFW in the last 12 months—most of which occurred since the start of 2021.

In the office sector, the DFW market is making a slow but steady comeback.

And despite the coronavirus pandemic, DFW completed more commercial real estate deals than any other major metro last year. 

What are the contributing factors? 

DFW’s cost of living, nearly 22% below the national large metro average, and its job market was one of the most resilient among major U.S. metros during the COVID-19 pandemic, adding 260,200 jobs between May 2020 to May 2021.

What are relocating and expanding companies looking for?

Corporations are almost always focused on cities with access to a highly educated and skilled talent base.

70% of Fortune 500 HQs are in metros that rank in the top 25% for talent, measured as the share of the population with a bachelor’s degree or more, and 90% of those HQs are in metro regions with populations of more than 1.3 million people, and the same share is in metros with international airports.

Dallas, Houston, Austin, and Phoenix have been major beneficiaries of this trend.

How can the region best improve the quality of talent here? 

Talent attraction starts early.  The cities with the most successful attractions results have invested in education including K-12 programming, career and technical, higher ed, and workforce development agencies. 

Tell us more about the role of population trends in site selection.

Site selectors will always analyze population trends to gain perspective on where the pool of available labor is most abundant or growing most rapidly—two very desirable locational characteristics.   

According to the U.S. Census Bureau, four out of five metropolitan areas experienced growth over the past decade—easing the task for those choosing destinations for white collar operations, such as headquarters and R&D centers, which tend to locate in or proximate to medium and larger cities.  

At the same time, however, the Census Bureau reported that more than one-half of U.S. counties were smaller in 2020 than in 2010, posing challenges for some manufacturing and assembly employers who often choose to locate in more rural areas, closer to sources of supply, available land, and energy. 

The main takeaway from these new census data is that making a corporate location decision is likely to be even more complex as the country ages and diversifies and as growth continues to slow.  As importantly, execution—after site selection—will be critical if one is to access talent from emergent demographic cohorts and thus ensure a fully successful location decision. 

One of the most effective and proactive steps employers can take is to expand quality internships for young people of color.  In addition to internship programs, industry and skills-specific programs are partnering with businesses to provide students of color with effective learning opportunities.  

Quincy Preston contributed to this report. The interview has been edited for brevity and clarity.

A version of this story first appeared in the print edition of DALLAS® Commercial Real Estate 2022, published by Dallas Next for TREC and the Dallas Regional Chamber. Read more in the digital edition of the magazine below, and request the next print edition here.

 

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original article can be found here

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