According to a new Stanford University Hoover Institution report released on Thursday, the rate at which companies have been leaving California has risen dramatically since 2018, with the 153 company headquarters relocations in 2021, more than doubling the 75 that left in 2020.
Since the late 2010’s, California’s high tax rates and cost of living, in addition to others factors, have slowly increased the number of companies leaving California. While some were located in Southern and Central California, the vast majority of companies that moved their headquarters were located in the Bay Area.
The drug distribution company McKesson left in 2018 for Texas, one of the first Fortune 500 companies to bail. However, the COVID-19 pandemic, which had businesses place a larger focus on remote work and cost cutting measures, opened the floodgates. In 2020, more Fortune 500 companies left, including HP Enterprise moving their HQ from Silicon Valley to Houston, and Oracle going from Redwood City to Austin. The next year, Tesla left, vacating Palo Alto also for Texas. This year, while not having an official total count yet, has also seen departures, such as Lucas Oil for Indianapolis.
Outside of the Bay Area, while headquarters weren’t moved, many employees were shifted elsewhere. Last year, Disney refused to move from Burbank, but did set up more employees moving from SoCal to Orlando. Chevron did the same thing this year, staying in San Rafael when they switched HQ buildings, but also moving part of their workforce to Houston.
The Hoover Institute put out the raw numbers of just how many large companies have moved their headquarters in their report, and the numbers were higher than many people expected. In 2018, only 46 had left. In 2020, 75 had left. And in 2021, a whopping 153 companies left California.
153 companies move their HQ out of California in 2021
While many notable companies have given commitments to stay, such as Apple and Disney, with others retaining large presences in California despite the HQ moving such as Oracle, the damage to California is still very noticeable. Many younger companies, which are more likely to grow and establish roots, have in particular been leaving because of the business climate and high business costs, as well as other factors mentioned by Hoover such as “reducing productivity, and reducing profitability, including tax policies, regulatory policies, labor costs, litigation costs, energy and utility costs, and concerns about a declining quality of life within the state.”
The report notes that many younger people have been leaving the Bay Area in particular because they cannot afford homes in the area, and that as a result, they are also locked out of the better school systems for their children. As a result, Silicon Valley, which in the 2010’s was one of the most attractive places in the country to live in following the Great Recession, quickly fell from grace.
“The area pretty much priced out their future,” explained Quentin Barry, a researcher who has helped identify why many have been leaving the state, to the Globe on Thursday. “LA, San Diego, and especially the Inland Empire and Sacramento? Still not the best situation for some, but it is still very doable for people to live comfortably there, especially if you know where to look. But the reason why so many companies and people have been moving to Texas, Tennessee, Florida, Colorado, and even states like Idaho and Nevada has been focused around San Francisco and Silicon Valley and the Bay. Almost every big company that left was from there.
“Many there are trying to play this off and comparing it to the dot-com bust of the early 2000’s, but this is different. Companies didn’t flock away then, they simply ceased to exist. Prices did climb in the 90’s like the 2010’s, but they fell much more dramatically back then then they are now. San Francisco has lost so much already, yet they still have the third highest rent in the country. And that’s not even getting into what they are losing tax-wise, which will have a completely different kind of horrible effect.
“This report really showed just what kind of hole California has dug itself into, and still is. The question now is what they will do about it.”
The total number of companies that left California this year will likely be released sometime early in 2023.