Texas, or the Lone Star State, might be known by most people for its oil and ranches, but what many may have missed, it is now the second-largest economy in the U.S. after California and ninth in the world. Companies from the U.S. and the rest of the world are investing in the state, proving its reputation as the top-ranked state for investments right now.
Factors Contributing to Texas Growth
The fast-growing economy of Texas may have suffered a setback between 2020 and 2021. Still, the state has made up the lost ground with a fast recovery that has ensured its position as one of the fastest-growing states in the U.S. The long-term outlook for Texas remains favorable, and investor optimism is based on several factors right now.
1. Population Growth
Data from the Texas Demographic Center shows that Texas is home to an estimated 29 million people. The state’s population is projected to grow to 35 million by 2030. According to the Texas Demographic Center, Texas had the highest percentage growth of all the states in 2019 of 15.3%, double the U.S. average of 6.3%.
The increase in population is attributed to three factors – births, international migration, and domestic migration. Texas has the second-largest migration flow after Florida, with California being the biggest sending state to Texas. The population may be aging but is still relatively young at 35.1 years compared to the U.S. average of 38.5, and it is increasingly diverse, including their skills.
Population growth, particularly in the metropolitan areas, is just one of several factors making investors particularly optimistic about Texas.
2. Affordability
Real estate is very affordable in Texas, both for homeowners and entrepreneurs. The state also has a lower cost of living with some safe neighborhoods and good schools. This report by Colliers Global Capital Markets 2022 shows that Dallas is one of the most popular cities in the U.S. for industrial and logistic investments. Investors’ asset types as far as real estate goes include light industrial properties, warehousing, cold storage, and container terminals.
Running a business in Texas is also much cheaper than in most states. Companies can expect cheaper utility bills (the state generates power), low corporate taxes, and reasonable annual wages.
3. Low Unemployment
The unemployment rate in Texas started recovering from early in 2021, after having increased to 12.9% in April 2020. In this chart from the U.S. Bureau of Labor Statistics, the unemployment rate for November 2020 stood at 5.7%. From May 2020, unemployment has continued to drop, taking the estimate of employed in non-agricultural jobs to 13 million. The low unemployment figures offer a very optimistic outlook for Texas.
4. Diversity in industries
The employer base in Texas is relatively diverse, with no particular industry encompassing more than 15% of the state’s GDP. Several companies, including global corporations, have moved their headquarters to the state in recent years. Besides the move made by Tesla’s Elon Musk, others include Keurig Dr. Pepper, Pizza Hut, Toyota, Frito-Lay, Oracle, Apple, and Hewlett Packard.
5. Infrastructure
Texas has a robust infrastructure with 16 seaports (11 are foreign trade zones), 380 airports, freight rail, and public roads. The infrastructure and central location of the state offer it logistical advantages for sending products both to domestic and global markets.
6. Incentives for LLCs
Several incentives make Texas the ideal state for startups from several diverse industries. Besides the access to a large skilled workforce and affordable properties, the state offers significant tax benefits, including no tax on equipment and machinery. The state has no individual income tax, and the state levies a low corporate tax on gross receipts.
Small businesses in Texas prefer the LLC structure because of credibility and personal liability protection. Forming a new LLC in Texas is very straightforward, cheap, and easy, and TRUiC’s resources make it even easier. It costs just $300 to create your startup’s LLC, and you can do it yourself online directly with the Secretary of State. Follow TRUiC’s guide to completing the process as it takes you through the process of choosing the name of your LLC, filing the Texas Certificate of Formation, and LLC Agreement.
7. Venture Capital
Texas might not be the largest venture capital market in the U.S., but it is the fourth-largest, after California, New York, and Massachusetts. According to Crunchbase, the state attracted $4.4. billion of venture funding in 2020, which doubled in five years. Silverton Partners, Capital Creek Partners, and Seed Round Capital are just some of the 416 companies providing venture capital to startups right now.
Final Take
The framework built by Texas is attracting successful corporations and startups. The state welcomes innovation, seen in the diverse industries it is drawing, including aerospace, tech, IT, and biotechnology. Texas’ framework includes infrastructure, tax incentives, access to venture capital, and business-friendly regulations. These, and several other important contributing factors, including lower running costs and a growing population, continue to make investors optimistic about the state.
