While various pockets of the U.S. market are known as hotspots for certain industries―like the mid-Atlantic for cybersecurity, Silicon Valley for technology and Indiana for life sciences―there’s another far-reaching sector that’s roaring down the expanding inroads of the Sun Belt.
That sector is headquarters. It took a punch to the chin during the COVID-19 pandemic, but has shown steady progress since; today, it’s getting a boost from the back-to-the-office movement.
With “solid activity” reported in the headquarters sector, “many deals are coming to fruition,” said Dennis Donovan, a principal for Bridgewater, N.J.-based WDG Consulting. “Relocation has remained steady since the pandemic and from where I sit, it’s not slowing down.”
Myriad Reasons
Companies are moving for “substantive reasons,” said Donovan. They can include strategic transformation, merger and acquisition activity, operational synergies, changes in CEO and/or executive leadership, cost reduction, business climate dynamics or the basic need to be closer to customers.
While he pointed out that not every exploration results in a move, “a solid percentage of the serious searches I am involved with do come to fruition,” he said, “particularly when there’s strong internal alignment on why the move makes sense.”
More recent corporate headquarters shifts tending to gravitate toward certain regions. They “are increasingly clustering toward dynamic U.S. markets where talent, infrastructure and business climate align,” said Marc Selvitelli, president and CEO for Herndon, Va.-based NAIOP.
Selvitelli said while established global hubs, such as New York and Chicago, continue to anchor finance and corporate leadership, innovation centers such as San Francisco, San Jose and Seattle draw companies seeking deep technology and life sciences talent, for instance. But there are numerous other hotspots in this complex mix, too.
“At the same time, high-growth Sun Belt (and nearby) metros, including Dallas, Austin, Houston, Atlanta, Miami, Charlotte, Phoenix, Nashville and Denver, are attracting relocations,” he said, “with competitive tax structures, lower operating costs and strong population growth.”
The broader trend reflects a strategic shift, Selvitelli said. “Companies are selecting headquarters locations that combine economic efficiency, access to skilled labor, connectivity and quality of life to support long-term growth.”
Donovan’s observation is that “most of the activity” gravitates toward moderate-cost Tier One metros—markets that offer the full package of deep talent and established business infrastructure, including a headquarters ecosystem: reasonable operating costs, attractive quality of life, moderate living costs and extensive air services, many of which are, as Selvitelli noted, “in the South and the Sun Belt.
“Dallas and Atlanta consistently lead this category with Houston, Phoenix and Miami also key players,” Donovan said. “Growing Tier Two metros are gaining traction, especially those anchored by a major industry cluster. Austin and Raleigh-Durham remain magnets for tech, Nashville has emerged as a true health care headquarters hub and Charlotte continues to outperform in financial services.”
These markets offer “momentum, affordability and a sense of upward trajectory that many companies find compelling,” he said, also echoing Selvatelli’s observations about other Tier Two markets such as Denver, Orlando, Fort Lauderdale, San Antonio and Tampa. A few Tier Two metros have also attracted new headquarters “due to a unique asset for the pertinent company,” like St. Louis, Kansas City, Indianapolis and Cincinnati.
But what companies are seeking, first and foremost, is easy to ascertain, Donovan said. “It’s talent.”
“Companies want depth, scalability, and an ecosystem where peer firms already operate,” he said. “Where headquarters clusters exist, the talent pipeline tends to follow.”
Work/Life
The next boxes on the checklist in the location search game concern operating costs and tax structure, particularly for firms looking too vacate high-cost regions like New York or the Bay Area. Real estate, labor, and state and local tax burdens also factor heavily in any decision.
Then comes what may seem like a non-work point but, after all, a happy (and productive) life is often a balanced life. “Quality of place has also moved up the list. Employers recognize that if the workforce they need does not want to live in a location, the strategy fails,” Donovan said. “Housing affordability, schools, child care and cultural amenities now play a measurable role.”
And the return-to-office trend is providing that final boost.
“I think it’s more of a driver than people give it credit for,” said Donovan. “Return to office policies make cost of living realities immediate for employees, which in turn forces leadership to reassess whether an expensive headquarters location still makes sense. I have seen a few situations where return-to-office mandates comprised the tipping point.”
While the above points all factor into a final decision, remember that the individual who runs the company can throw it all out of the window. The CEO’s personal preferences can be the biggest (and sometimes the only) aspect of the decision.
“The CEO absolutely has to endorse a relocation. I have never seen one move forward without genuine leadership conviction behind it,” said Donovan, “and yes, a CEO’s personal connection to a city can tip a close call. That’s just human nature, and that’s not always a bad thing.”
But can CEOs routinely steer companies toward locations based purely on personal preference?
“In my experience, that’s largely overstated. It is rare for a CEO to mandate relocation to a market that cannot support the talent requirements of the business,” he said. “The CEO’s preference tends to operate within the guardrails of a disciplined site selection process.”
That notion was seconded by Chris Lloyd, senior vice president and director, infrastructure and economic development with Richmond, Va.-based McGuireWoods Consulting. “The one subjective factor is that the move can be driven by the gut reaction of the CEO,” he said, “so that individual decides if the location in question is a place where the person wants to live, has family, an active arts community, outdoor activities,” etc.
So a move is still about people, but it has to start with a talented people, and enough of them to build a high-performing team with. “Decisions concerning where to locate a headquarters office are often driven by one objective factor,” said Lloyd, which is finding professional talent, and that extends beyond the CEO’s own needs “to the ecosystems of pro services like law, accounting, advertising,” etc., “followed by business climate and access to markets.”
As for burgeoning new markets, he said the above reasons “are part of why Denver, Salt Lake City and Boise have become attractive in recent years, and smaller cities like Asheville (N.C.) and Roanoke (Va.) have played up the quality of life and/or quality of place angle.”
So the smaller cities and/or bigger towns can also get in the mix, too, though there are still parameters to follow. “And how a state ranks in its region and nationally matters in areas that also include not only quality of life, but transportation the road network and the airport,” said Owen Rouse, vice president for Baltimore-based MacKenzie Commercial Real Estate Services.
With some companies “working to avoid various congestion issues in densely-populated areas, going to rural can be an option,” said Rouse, “but if you don’t have a good airport and you’re not near an interstate highway, that’s not good.”
That can matter in the medical field, for instance. “Then,” he said, “you would want to be near a research leader, like The John Hopkins University and/or Hospital, The Mayo Clinic, Baylor University Medical Center,” etc.
Headquarters for manufacturing companies are evolving as well, as Victor Hoskins, CEO for the Fairfax County Economic Development Authority, in Tysons, Va., can attest. “We’re seeing small, private space commercialization companies move into dual-use locations,” he said.
Interestingly, Hoskins said these dual-use locations tend to be on the smaller side. “While we’ve seen a few large leases, in general its smaller concerns taking down 3,000-to-5,000-square-foot headquarters that include office and space for production, which are often flex spaces,” he said.
“That part of the market is changing, because a few years ago they would have opted for office-only, then opened a second, less expensive location for production,” Hoskins said. “But now, under one umbrella, so they can work to bring their products to market faster, but they often need exhaust hoods, for instance―which these flex spaces can accommodate.”
Red/Blue
Like Rouse, Brad Lindquist, an executive consultant formerly of Chicago office of Deloitte & Newmark, said that need for access extends to having high-quality air facilities. And like Hoskins, he said the leases have gotten smaller.
“There is absolutely a move back to the office, with companies are seeking less overall space,” said Lindquist, “but for higher quality [space] with better amenities for employees. We’re seeing more of what companies are looking for, which is the pollination of people being together. Of these office projects, headquarters projects and relocations seem to be experiencing an uptick in activity.”
As for taking to the skies, “We’ve seen headquarters locations shift, but as airlines have merged and changed in the past, we’ve seen markets like Cleveland, St. Louis and Cincinnati losing status as a core hub for a brand airline,” said Lindquist, “as we have seen the rise of Charlotte, Dallas, Chicago, Atlanta, along with smaller markets like Denver and Salt Lake City.”
But any headquarters change will need to balance and access talent, logistical assets, and potentially set a new corporate culture. Also, “It’s important to note that relocations get expensive,” he said. “When you start making plans to do so, the financial model doesn’t always work out, so the other corporate objectives may need to trump costs and the return-on-investment.”
And often enough, it does. “Years ago, we helped a financial services firm move from New York to Nashville to get out of a hyper-competitive market,” said Lindquist. “Not only is there more space for them in the market, but there’s less competition for talent, too. They even have their name on their building.”
While the tax environment is always an issue, the political climate has also become a finer point and is always a consideration in the total package in any market, with other potential incentives.
“For many states, it can be easier to utilize incentive programs to attract net new businesses and jobs to their market, compared to those states trying to keep a company from leaving,” he said, “but one of the biggest changes we’ve seen in recent years is the implications and influence of politics.”
“Considering a red versus blue state didn’t used to make much difference, but now it does, depending on who’s in the C-suite. We’re seeing that issue arise much more often,” said Lindquist. “It’s interesting, because at this is a point in time, moving a company is a generational move, while elected officials change often.”
Starting Up
Large corporate concerns, whatever their size and need, aren’t the whole story when discussing headquarters searches. Placemaking for startups and other smaller concerns―which will hopefully turn into a big thing―certainly has similarities, especially when it comes to workforce needs.
Like established firms, “Startups and high-growth ventures typically look for the most fertile locations for talent,” said Startup Maryland CEO Michael Binko.
And that’s a key to success, Binko said. “Hyper-growth success is often won or lost in the recruitment realm,” he said, “and yes, being in a location where your primary industry sector(s) also operate can be a good customer affinity decision.
“However,” he said, “revenue and growth per employee is often the metric that matters to myriad stakeholders (management, investors, the board and partners). During the past couple of decades, this has meant proximity to four-year higher education campuses. However, with the advent of AI and agentic business solutions, some savvy startup leaders are realizing that highly-skilled employees of the future may come from non-traditional talent pipelines. They can also come from community colleges and private sector training/certification programs.”
Geographies with a diverse palette of these offerings “may present a more attractive scenario for these companies,” he said, particularly during the critical ramp-up and scale-up lifecycle stages.
Beyond the talent pool, headquarters decisions for these growth companies “will also skew toward amenities that upwardly-mobile talent demand,” said Binko. In other words, these are smart people who want stuff to do.
“This can be recreation, nightlife, vibrant food culture or an eclectic arts scene,” he said. “Attentive economic and workforce development agencies are realizing this shift and encouraging their jurisdictions to prioritize these work-life-balance factors, with investments in infrastructure,” he said, “as well as incentives for ‘Main Street’ entrepreneurs to provide these services.”
Just Say No?
Regarding the return-to-office trend, “planning for scale is critical,” said Binko, though he doesn’t think remote working choices are going away.
“Most top-performer employees are very vocal about flexibility, so hybrid in-office/remote accommodations should rate high on their list of attractive corporate culture elements,” he said.
All told, “early planning and constant evaluation will be the nature of the headquarters decision beast for the foreseeable future,” Binko said. “Ecosystems that calibrate these factors best will be rewarded with the best ventures putting ‘root down’ in their communities.”
But back to one of Donovan’s points, not all the deals come to fruition. And that’s not always a bad thing.
“Sometimes not making the move can pay off, too,” said Lindquist, “but these seem to be more the exception, if a company is publicly thinking about a relocation there are likely strong undercurrents in place to make that happen. Think of it like the Chicago Bears contemplating moving to Gary, Indiana.”
On that note, many projects that use a cost vs. conditions evaluation process will more likely lean toward the costs factors when making decisions,” said Lindquist. “However, headquarters projects certainly buck that trend and will need to consider not only costs and conditions, but also risks.”
And that often comes down to what might have been termed numbers crunching, but are now part of diving deep down the analytics rabbit hole.
“Site Selection consultants focus on using data and due diligence to help clients identify and mitigate that risk,” he said, “while helping them position and execute the best deal for each project.”
