Spurred On By the Pandemic, Companies Seek to Leave High-Cost States

As interim CEO of The Howard Hughes Corp., David O’Reilly has a front-row seat for the migration of both people and corporations during the COVID-19 pandemic. Howard Hughes has a portfolio of master-planned cities and communities throughout the country, including Columbia, Md., The Woodlands in Houston and Summerlin in Las Vegas.

O’Reilly is among many in real estate who say we’re in the middle of a migration of not just people but also corporations.

“You’ve seen a migration from a lot of dense urban environments and states that have higher taxes and are less business friendly,” O’Reilly says. “We’re working with a lot of those companies. We’re always seeing residential inflow from those states and from those cities.” 

Technology company SmartDraw Software left San Diego for The Woodlands. A non-tech company, Waste Connections, left Folsom, Calif., for The Woodlands.

State and local governments had a significant role in these relocations. “The state of Texas aggressively campaigned in California for corporate relocations, and they were doing this long before the pandemic,” O’Reilly says. “They’ve had some success, as has Las Vegas.” 

O’Reilly says these states are willing to incentivize companies to leave their home state.

“All of these states are willing to work with us and with the new corporations that want to relocate,” O’Reilly says. 

The pandemic has been an accelerator of these relocations. Besides just encouraging people to leave dense areas, O’Reilly says it has highlighted the importance of health and wellness and being in areas with green space and walkability.

“The trend [of moving from high-tax states] picked up speed as the tax code changed before the pandemic,” he says. “But the pandemic really highlighted the challenge of dense urban living and so much of what we’re able to offer [in master-planned communities].” 

While the cost of housing is a significant issue in coastal cities, Howard Hughes, as the owner of a master-planned community, can influence pricing.

“We’re able to offer a range of housing from entry-level, starter homes all the way up to the type of home that a C-suite executive wants to live in,” O’Reilly says. “Those are the things that other cities, whether you’re talking about California cities or cities in the Northeast, are struggling to adapt to right now. We have been able to move with great alacrity to react to these trends and enhance our ability to recruit these tenants.”

While low taxes and a business friendly environment are hallmarks of Howard Hughes’ communities in Texas and some other states, green space integrated with walkable amenities is also a selling point, according to O’Reilly. People who have been renters in high-cost cities may get a chance to purchase a home in these communities.

“That person that has been living in San Francisco and is used to having these great amenities, restaurants, shopping and groceries within a short walk can get that in the Woodlands and Summerlin,” O’Reilly says.