June 20, 2024

Wall Street banks, hedge funds, and other financial institutions looking to expand their operations are increasingly turning to the business-friendly Sun Belt.

These financial firms, like other businesses that have moved into the region, are being drawn in by a number of factors, including lower costs of living and doing business, opportunities for expansion, and less government red tape. The Sun Belt comprises 15 states lining the southern portion of the U.S.

The region is home to three of the seven states with no income taxes, including Texas and Florida, making it especially attractive to firms. More than 25,000 businesses relocated to Texas from other states between 2010 and 2019, bringing with them more than 281,000 jobs, according to data from the Federal Reserve Bank of Dallas.

The southward trends were accelerated by the COVID-19 pandemic, especially when remote work made living in — and working from — traditional northern hub cities like New York and Chicago a choice rather than a requirement. From 2022 to 2023, a total of 593 companies moved their headquarters — an increase of 29% from a year earlier, according to data from moving company Hire A Helper. Those moves weren’t all companies moving north to south, but Texas and Florida welcomed the largest influx of corporate headquarters.

Several financial services giants have either expanded their presence in Sun Belt cities with swanky new multi-million dollar campuses in recent years, or relocated altogether in search of sunnier days and more balance-sheet friendly tax rules. These are some of the biggest moving and growth stories within the sector:

The South is also the nation’s fastest-growing region in terms of population, and was home to all of the top 10 fastest-growing U.S. metro areas from 2022 to 2023, according to Census Bureau data. Within the increasingly popular area, two states stand out among the rest when it comes to attracting newcomers: Texas and Florida. Last year, the two states saw the largest number of people moving into the state for the third straight year, according to U-Haul’s Growth Index report.

Read more: Florida and Texas have a surging supply of houses — but people aren’t buying

Bigger populations mean bigger labor pools for firms to hire from — and more room for growth, both in terms of headcount and for building out infrastructure in less congested cities in the South.

“What you find is there’s a lot of externalities or spillovers between these firms,” said Pia Orrenius, a labor economist at the Federal Reserve Bank of Dallas. “Initially they can start very small and there’s not a lot of momentum, but once these clusters expand there’s more of a labor pool for that particular industry and then that becomes an attractor to more industries to come into the area.”

Catching more flies with honey

States like New York and California, which have long been traditional business centers, have bled companies since the pandemic. From the end of 2019 through August 2023, 158 companies managing almost $1 trillion in assets moved their headquarters out of New York, a Bloomberg analysis found.

“It’s an issue for places like New York City and San Francisco, which have high taxes,” said Tomasz Piskorski, a Columbia Business School professor. “It’s a difficult balancing act, because as you lose companies, you start losing tax revenue, and as you lose tax revenue, you might be tempted to raise taxes, but then you might lose even more companies.”

New York has a 6.50% to 7.25% corporate income tax rate, and California has a 8.84% corporate income tax rate, making their tax climates among the worst ranked in the country by the Tax Foundation, a tax policy nonprofit.

“Mayors and governors call you up [in Texas] and they say, ‘Jamie, what can we do to get more employees?’” JPMorgan CEO Jamie Dimon told reporters after touring a Houston worker-training facility in February. “And you can look at other states, which are almost completely opposite.”

That was Dimon’s not-so-subtle way of telling leaders in states like New York, where JPMorgan is headquartered, to be a little nicer to businesses that call it home. Dimon had told Bloomberg News almost a year earlier that the investment bank is growing in Florida and Texas, states that “like business, that want you to come.”

“We love Florida, we’re growing in Florida left and right,” Dimon said. The CEO flirted with the idea of relocating the bank’s headquarters to Miami in 2013, and again in 2020, but never moved forward with it.

“We now have more employees in Texas than in New York state,” Dimon added. “It shouldn’t have been that way but Texas loves you being there.”

JPMorgan’s Texas headcount has grown to more than 30,000. In New York, the bank’s workforce has declined to less than 29,000 employees, from 35,000 in recent years. It grew its already-sprawling regional hub in Plano in 2018 with another $300 million expansion. The Texas campus hosts 6,500 employees.

And it’s not the only big Wall Street name that has seen the potential in the Lone Star State. Goldman Sachs is constructing a $500 million state-of-the-art building in Dallas, which it expects to house more than 5,000 people by late 2027. And Wells Fargo broke ground around this time last year on an 850,000-square-foot, $455 million office campus in Irving.

Too soon to say goodbye?

JPMorgan also closed its branch at 45 Wall Street last month, finally severing a more than 150-year relationship between the banking giant and the street that gave the global banking industry its name.

But it’s not giving up on the Big Apple just yet, with construction of its massive new global headquarters in the heart of Midtown Manhattan still underway. JPMorgan said the new offices were “reinforcing its commitment to New York City.” The largest U.S. bank by assets contributes $29.8 billion annually to the city’s economy, stimulating an additional 40,000 jobs across local industries, according to the firm.

Piskorski, the Columbia professor, said having different places across the country vying to be business hubs could shake cities like New York and San Francisco that have long gone uncontested out of complacency.

“We like competition, because it improves efficiency,” Piskorski said. “It’s good that cities have to compete with each other to be attractive places.”

These waves of company moves tend to ebb and flow, said Orrenius of the Dallas Fed, who has noted a correlation between corporate migrations and the business cycle. Namely, that firms will take advantage of bad times to relocate, and tend to stay put once the economy stabilizes.

And we are already starting to see some of these equilibrating effects, Orrenius said. As people flooded into Texas in recent years, home prices in Dallas and Austin surpassed the national average. She said this “congestion effect” — a typical market reaction to the surge in demand — dampens some of the pull factors that lure businesses in. And places like New York and San Francisco are not likely to take things lying down.

“You’re always going to have policy responses,” she said. “I’m sure areas that see firms move out and they’re losing that industrial base, they’re going to be reacting and trying to implement policies that help retain those businesses.”

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