California is in the midst of a “brain drain” as companies leave the state at double the rate in 2021 as 2020.
There have already been a number of high-profile companies that have announced plans to move their headquarters away from California, including Oracle and HPE, both of which moved to Texas. Unfortunately for the Golden State, the pace of companies leaving is picking up.
According Stanford’s Hoover Institution, there were 265 companies that moved their headquarters out of California from January 1, 2018 to June 30, 2021. The first half of 2021, however, accounted for 74 of those defections. The monthly averages for the first half of 2021 was greater than the monthly averages for the first half of 2018 and 2019. 2021 is also on course to double the number that left in 2020.
The top destinations are Texas, Arizona and Nevada. The Hoover Institution attributes the migration to high real estate taxes, expanding civil liability and disproportionate legal costs of doing business. The COVID-19 pandemic has also opened the door for more remote work, making expensive Silicon Valley headquarters less important.
Notably, the Hoover Institution’s data is not comprehensive, as many smaller companies move without the news coverage or public awareness that major tech companies bring.