IT IS SAID THAT CALIFORNIANS ARE LEAVING THE STATE IN DROVES,
BUT ARE THEY FINDING GREENER PASTURES FOR THEIR BUSINESSES?
Over the past year, many businesses have left the state due to high taxes (what many refer to as the “Sunshine Tax”) and the growing blight of the homeless population. At Triniti Partners, our industrial real estate brokerage, we have watched a large exodus of people and businesses leaving California headed for Texas, Nevada, Idaho and northeast Washington for their lower business taxes and real estate. But when we ask these business owners what their objective is in moving, most readily admit that they made their wealth and fortune in California, and furthermore, that they could only have done that well in California. So, we think the bashing of California as a place to do business should really include the footnote: “Don’t bite the hand that feeds you.”
Those business owners who have relocated to Texas and Nevada, which are typically seen as some of the friendliest states for business and industrial, have encountered new issues that make it less conducive to doing business than in California. Then there’s the extreme weather issues, which most did not expect to encounter in Texas, along with the lack of infrastructure to deal with these conditions.
Here in California, our “middle of winter” is typically a 65-degree day, while the rest of the country is experiencing freezing temperatures and snow or rain. In terms of operating a business, there really is no better state than California where we have good weather all the time. Plus, one cannot ignore the fact that the nation’s busiest port is located in Southern California, which makes it less expensive and faster to get goods and services to other markets and keeps businesses productive.
One of the biggest reasons propelling businesses to move out of state is the unsanitary state of the homeless environment which has taken over the industrial sectors in Los Angeles. Many feel that these individuals are given more rights than the property owners and while we can’t ignore this humanitarian crisis, it is going to take a proactive approach from the business sector to help solve it. As we’ve seen, city, state and federal government has not been able to solve this major problem. No one wants to pull into the parking lot of their place of business and find an RV or tent city camped out in front of their door. Considering that Los Angeles is one of the highest-priced industrial markets in the world, I understand their frustration.
But efforts are underway to find a solution. Recently, Hudson Pacific, a very large REIT, committed $20 Million dollars in housing assistance here in Los Angeles and its CEO/CoB, Victor Coleman, has challenged his fellow REIT managers to do the same. Only by housing the homeless can sanitary and noise issues be put to rest to improve the business environment and make it more attractive for companies to operate here.
As business owners, we need to lobby our politicians to figure out this problem and to work on our behalf for the taxes that we are paying.
Despite these issues, Los Angeles still has the tightest (lowest) vacancy rate in the country and we are still seeing multiple bids on industrial properties for sale. While we have stabilized the high-water mark that was set previously, rates are still among the highest in the country and activity continues to be brisk.
If you own a property that you would like to lease or sell or are looking for industrial space in Northern Los Angeles County or Southern Ventura County, Triniti Partners is always happy to share our expertise in this market. And remember: before considering a move out of state, think of the dollars you may be giving up. When you look at it from that perspective, it might make sense to stay here.