The Texan Epicenter of Technology
If you ask people on the street for the location of America’s leading tech center, the response will invariably be Silicon Valley. That reputation is fair and well-earned. However, the greater Dallas area is home to the fifth-largest U.S. concentration of tech talent, a total of 189,200 professionals in 2020 and the largest talent pool in Texas, according to CBRE.
So many people with common interests in one place provides the benefit of proximity. You never know if a trip to a nearby park or an evening out will lead to a new client, a new sale or an idea that will change an entire industry.
Part of the migration to places warm includes the very people most likely to be employed in commercial office settings. Jones Lang LaSalle (JLL) published an in-depth study that included the Dallas area this summer, a study that lays out many of the market’s attractions.
- The greater Dallas area — also known as the Metroplex or Dallas-Fort Worth — is the Nation’s fourth-largest metro area with 7.7 million people.
- Almost 1.2 million people moved into DFW since 2010; it was the largest migration to any major metropolitan area.
- Between 2019 and 2045, it is estimated that an additional 3.5 million people will move into DFW, an average of 142,000 people per year.
In effect, Dallas is a growing presence on the national stage, a major technological hub and — as we shall see — a growing center for corporate leadership.
Dallas Means Business
The greater Dallas area includes headquarters for 22 of the Fortune 500, according to the Dallas Morning News. Among the big names are McKesson, AT&T, Exxon-Mobil, Kimberly-Clark, Charles Schwab, Southwest Airlines, and American Airlines.
The headquarter numbers fail to tell the whole story, however. There’s also the matter of reach. In 2019 — the last year for which we have figures — 65 Fortune 500 companies with headquarters in the greater New York area had revenues of almost $1.8 trillion in 2019. New York was first by big company revenue. And what about the Fortune 500 companies with headquarters in the greater Dallas area? They were second with revenues of $996.2 billion.
If you want to do business with big companies, it can be an advantage to locate in the same community where you can find their leaders, decision-makers and buyers. That may be why Dallas is so hot. The market — according to Real Capital Analytics — saw more commercial construction starts from Q2 2020 through Q1 2021 than any other metro area in the U.S.
There are more than 40 commercial submarkets in the greater Dallas area, according to CoStar. This submarket diversity makes it possible to locate in downtown areas, suburban settings or closer to the Dallas-Fort Worth International Airport, the country’s second-busiest airport.
KBS, with nearly 2.9 million sq. ft. of commercial Metroplex space, has been active in the area’s growth since 1993. KBS has invested in many Class A office properties in the area including 3811 Turtle Creek, Highland Park Place, Preston Commons, Sterling Plaza, and Providence Towers.
KBS also recently finished construction on more than 300 luxury apartments at Novē at Knox, a hospitality-inspired high-rise apartment complex that serves the affluent Knox/Henderson district.
The Land of Small Mortgages
As Redfin CEO Glenn Kelman once explained, “the technology companies, the Wall Street companies, they’re chasing the talent, [and] the talent is chasing affordable housing.”
And that, in a nutshell, explains one of the many great attractions of Dallas.
Texas is big. Really big. There are at least 10 ranches in the state with more than 225,000 acres, according to Wide Open Country.
There’s lots of property available for residential development and, as a result, Texas homes can be had at what might seem like bargain-basement prices, a big deal for many prospective employees. According to the National Association of Realtors, the typical home in the greater Dallas area was priced at $338,700 in the second quarter. In comparison, there are metro areas where median existing home prices are four- and five-times greater.
It’s not just that the Metroplex tends to have less expensive housing when compared with many areas. The typical home in the greater Dallas area is also likely to be larger — often by hundreds of square feet — than median-sized homes in other metro areas throughout the U.S. The difference in space can mean larger rooms and — most importantly — the space people often want for a better work-life balance.
The greater Dallas area — like most metro areas — has seen real estate prices appreciate. According to Texas Realtors, the typical home that was priced at $149,900 in 2011 sold for $291,000 in 2020. Currently, because Metroplex real estate prices are relatively low compared to real estate in places throughout the country, it means a wide range of employees can readily find affordable housing.
With more affordable real estate costs, employees need less money down to buy a home, less cash for closing, and less money for property taxes and insurance than had they bought at a higher price in another primary market. Affordable housing, in turn, directly impacts the commercial office market.
“Housing availability and costs are two of the most important factors in determining quality of life that companies take into account when moving into a metropolitan region,” explain Aaron Shroyer and Veronica Gaitán at the Urban Institute. “Why do they matter so much? When employees cannot afford to live near jobs, employers must spend more money on wages or turnover costs.”
Aleksandar Tomic, associate dean for strategy, innovation, and technology at Boston College, told Forbes that the “lack of affordable housing in relatively expensive areas poses a problem for companies across the skill and income spectrum. Companies find that they have trouble recruiting people with experience who are not at the very top of the earning distribution, especially as they build families and try to purchase homes.”
No Texas Income Tax
In addition to low housing costs, there’s also no state income tax in Texas. Moving to a jurisdiction without a state income tax can mean big and visible savings for employees, especially as the money adds up year after year.
For organizations hotly competing to get the best talent, no state income tax is a perk that can’t be bought.
Employees are increasingly reconsidering the whole concept of work, their work-life balance, and career paths. Given their finances and preferences, employees are seriously weighing the best place for them to live.
A just-released Gallup study found that “48% of America’s working population is actively job searching or watching for opportunities. Businesses are facing a staggeringly high quit rate — 3.6 million Americans resigned in May alone — and a record-high number of unfilled positions.”
Gallup makes these points:
- “The lost productivity of not engaged and actively disengaged employees is equal to 18% of their annual salary.
- “For a company of 10,000 employees with an average salary of $50,000 each, disengagement costs $60.3 million a year.
- “Replacing workers requires one-half to two times the employee’s annual salary. So, it costs $9,000 a year to keep each disengaged worker and between $25,000 and $100,000 to replace them.”
The idea, then, is to both attract top talent and retain them.
Figures from Kastle Systems show that on average, 34.3% of the workers in 10 major cities were working from their offices in early August. However, the percentages varied. Some metro areas were as low as 21%, while the greater Dallas area occupancy level stood at 49.6%.
Given this background, the case for Dallas as a business location is simply that it has a huge talent pool and people want to live and work in the area. How else to explain the fast-growing population and rapidly-expanding office sector?
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