Two Reports Raise Concerns Over Bay Area’s Economic Future | Tim speaks | Tim hunt


Predicting what office life will be like and its impacts on expensive downtown commercial real estate has been a guessing game since the pandemic erupted last year and working from home has become routine for many.
Now, with the more contagious Delta variant of the Covid-19 virus infecting both vaccinated and unvaccinated people, many large companies have postponed reopening or are rethinking their plans.
This week, two reports, from different perspectives, added new information to the equation.
Wells Fargo senior economist Mark Vitner on a call with clients said he expected the Bay Area move to be permanent. He noted in Mark Calvey’s report in the San Francisco Business Times newsletter that initially people were leaving for vacation destinations such as Truckee / Lake Tahoe, but it turned into this. which he called “a huge migration… affordable migration”.
The second report by Hoover Institution Fellows Lee Ohanian and Joseph Vranich documented the number of companies that have left the Bay Area.
They reported that 74 companies moved out of state in the first six months of 2021, double the rate in each of the previous three years. They have identified 265 relocations since 2018.
Vitner told customers that with the Delta variant and worker concerns, companies are reexamining and wondering if they need headquarters in expensive cities such as San Francisco. He suggested that for young workers, city life will continue to be an attraction, but married people raising families will see greener pastures elsewhere. He said Brex and Coinbase are two formerly San Francisco-based companies that have switched to a headless approach.
His list of destination cities for individuals and businesses are household names – Denver, Salt Lake City, Nashville and Charlotte as well as Phoenix where house prices have skyrocketed and Jacksonville, Florida.
The Hoover Report noted that the moves are happening across all industries – manufacturing, aerospace, financial services, real estate, chemicals, healthcare, and high tech. The technology drain they write is of great concern as companies are very productive here and venture capitalists are eager to invest money in promising start-ups. The data in their report comes from public documents and media reports and they note that the actual relocation rate could be five times higher according to relocation sector consultants.
Vitner said the moves would likely be permanent due to the high cost of real estate that works for departures but is a barrier to return.

The Hoover Fellows wrote: “The loss of small but fast-growing businesses is the death knell of an economy, as long-term economic growth requires transformative new ideas that end up replacing old ideas. And transformative ideas almost invariably arise in start-ups. At one point, Kodak and Litton Industries were Fortune 20 companies. Now, these are afterthought. Outside with the old, with the new.
“Some of the small businesses of today will become the blockbusters of tomorrow, and California is losing far too many of these potential game changers. California is also losing the talented creators of these companies, creators who could start other transformative businesses in their lifetime. And if they do, these new businesses will not be launched in California.
“The main reason California businesses are leaving is the economy, plain and simple. California is too expensive, too regulated, and too heavily taxed, both for businesses and the workers they hire. These companies predictably move to states with lower costs, fewer regulations, fewer taxes, and a better quality of life for their workers, where families pay much less for a home. “
They note that Texas is the No.1 choice having attracted 114 companies since 2018, including Silicon Valley mainstays such as Oracle and Hewlett Packard Enterprise as well as financial services giant Charles Schwab – all were founded here.
They write: “Economic freedom? The American Legislative Exchange Council ranks Texas number one, while California pushes New Jersey to narrowly avoid the cellar. Ease of opening and operating a small business? California ranks 49th, barely overtaking New Jersey, and lags far behind the entrepreneurial states of Texas, Nevada, Indiana and others. Taxes? California ranks 49th (meaning the second highest) for overall tax burden as well as individual tax burden, while Texas sits near the top. How do CEOs view the business environment in California? Annual surveys show they still rank California last and Texas first.
Not a bright picture for the economic future of the former Golden State.

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