Regional Report: The Southwest

Silicon Valley’s loss is this region’s gain, as tech companies migrate to lower-cost states that also happen to have shown impressive GDP growth rates.

From the plains of Texas to the peaks of Colorado and Arizona, the Southwest recorded some of the highest GDP growth rates in the country in 2019. While there’s a diverse mix of industry, tech is a common tie that binds cities like Salt Lake City, Denver, Austin and Phoenix. (Number shown is that state’s ranking in the 2019 Chief Executive Best & Worst States for Business.)

#1 – TEXAS

GO BIG

In a state where everything is big, it’s not surprising that Texas generated a big GDP growth rate of 4.7 percent in the second quarter of 2019. That makes it the fastest-growing economy in the nation, with a rate more than twice the national average of 2 percent, according to the Bureau of Economic Analysis. Many companies are doubling down on big investments, and tech is gaining momentum across the state. From medical technology in Houston and fintech in Dallas to cybersecurity in San Antonio, tech startups and new offices are expanding like never before.

“There has been tremendous movement in technology and innovation…We’ve done a phenomenal job of diversifying, and it continues to set us apart. At the end of the day, we’re now the tenth-largest economy on the face of the planet,” says Robert Allen, president and CEO of the Texas Economic Development Corporation.

In August 2019, Uber announced it would invest $75 million and create 3,000 jobs at a new U.S. General and Administrative Hub in Dallas. And in October 2019, Microsoft announced it would expand its operations in Irving with an additional $31 million investment and more than 575 new jobs.

In recent years, the state has been rolling out the red carpet for California companies looking to escape high costs. Apple announced a $1 billion campus and 5,000 new jobs in Austin in December 2018. A year before that, Toyota moved its longtime headquarters from Torrance, California, to Plano. And, in February 2019, a delegation of economic developers and Texas executives traveled to California to encourage companies to expand or relocate in the Long Star state.

#7 – ARIZONA

ECONOMIC MOMENTUM

The Index of State Economic Momentum by State Policy Reports recently ranked Arizona third best in the nation for economic momentum as a measure of personal income growth, employment growth and population growth. The Grand Canyon State’s economy boasts one of the fastest growth rates in the country, and median household incomes recently reached a record high of $61,125, according to the Federal Reserve Bank of St. Louis.

There has been a diverse range of notable announcements and groundbreakings over the past year. AgJunction relocated its corporate headquarters to Scottsdale at the end of 2018. Window and door manufacturer Andersen Corporation established a $105 million manufacturing facility in Goodyear in January 2019. Progressive insurance announced 375 new jobs at its Phoenix office in February, and, in April, Zillow established a Southwest hub in Phoenix for 300 employees.

What is attracting these companies is a pro-business and pro-innovation environment, along with the strong talent base and high quality of life, says Sandra Watson, president and CEO of the Arizona Commerce Authority. “Talent is always a top driver of business success, and companies are easily and quickly finding the workforce they need to support their growth here…Our state’s unmatched quality of life and affordable cost of living make attracting and retaining talent very easy,” Watson says.

#11 – UTAH

FLYING TO NEW HEIGHTS IN AEROSPACE
UTAH: Salt Lake City is luring tech companies seeking lower living costs and a high quality of life for employees.

While the growth of the Silicon Slopes has been dominating the state’s economic development headlines in recent years, aerospace is growing stronger on the radar. Since Northrop Grumman completed its acquisition of Orbital ATK in June 2018, the industry has grown at a “very impressive rate” in the northern part of the state, says Val Hale, executive director of the Governor’s Office of Economic Development.

More than 900 aerospace industry facilities in the state now support over 31,000 jobs, Hale says. The Hill Air Force Base north of Salt Lake City, which is a primary depot for aircraft maintenance and repair, has served as a catalyst for growing much of the industry in the region, Hale says.

Meanwhile, tech is still booming in the Salt Lake City area. Fintech company Brex announced in September 2019 it would open a new location in Salt Lake Valley and create up to 1,000 jobs over the next seven years. SAP also completed its acquisition of Provo-headquartered Qualtrics in January 2019, the largest SaaS purchase in history. Online education company Pluralsight, which was founded in Farmington in 2004, went public on the Nasdaq in May 2019.

The attention of recent IPOs and acquisitions has also helped spur the migration of more California tech companies to the Salt Lake City area, many of

which are seeking lower costs and a higher quality of life for employees. “We’ve seen an increase in potentially thousands of new jobs here, and it continues to grow as there’s an exodus out of California from a lot of tech companies,” Hale says.

#12 – COLORADO

OPPORTUNITY FOR ALL
Colorado: VF Corporation is recently relocated its headquarters from North Carolina, citing the state’s ability to attract and retain talent.

In Colorado, economic prosperity is no longer just about jobs and deals, but about people and places. Gov. Jared Polis took office in January 2019 with a “Colorado for All” strategy that considers education, healthcare, rural prosperity and new energy as part of what economic development should support. While companies are increasingly attracted to Colorado’s cost-effective, politically predictable and forward-looking business climate, talent is also coming for the growing opportunities and high quality of life, says Michelle Hadwiger, global business development director at the office of economic development and international trade. Colorado recently ranked 10th on U.S. News & World Report’s best states to live in 2019.

“This is a place where they can access ideas, leadership and collaborate with their peers, a market that they can easily travel in and out of for commerce and a place where they can raise a family and live in a dynamic state that values culture and recreation,” Hadwiger says.

OEDIT’s global business development team has been taking more action to raise the state’s profile on the global stage by educating foreign investors. There have been several notable announcements in the past year, including the relocation and consolidation of VF Corporation’s headquarters to Denver. A recent state report found the value of the state’s outdoor industry has now grown to more than $62 billion.

IT is also a fast-growing sector in the state as companies from high-cost markets such as the Bay Area increasingly look to Colorado for its talent, lower costs and high quality of life. Several companies, such as Slack, Checkr and Snapdocs, have opened facilities or headquarters in the state in the past year.

#18 – OKLAHOMA

ALL BUSINESS

While many states claim to have a business-friendly climate that’s in tune to the needs of site selectors, Oklahoma is taking things to a new level. There’s almost a sense of pride that the new governor and cabinet officials have more experience in boardrooms and quarterly meetings than they do in elected positions and government buildings. “We have a cabinet and a governor who are all businesspeople, and it has been an unbelievable sea of change where literally every person involved in leading the state comes from [the private sector],” says Sean Kouplen, Oklahoma’s secretary of commerce and workforce development.

Gov. Kevin Stitt, former chairman and CEO of Gateway Mortgage Group, took office in January 2019 with a goal of transforming Oklahoma into a “Top Ten state” through greater government accountability, economic diversification and generating new solutions to address things like education. Kouplen, who previously served as the chairman and CEO of Regent Bank for 12 years before his own inauguration, says one big change has been to put workforce development and commerce under the same department.

The Oklahoma Works Together framework is a new program that brings together industry councils to identify their industry’s needs, the required skills and how they can align with educational institutions, Kouplen says. The state will then solicit proposals and select winners to become Centers of Excellence, which are eligible to receive additional funding. It’s an initiative intended to significantly improve Oklahoma’s low labor participation rate. “Our belief is that we’re connecting industry and education like no one else in the country is doing and we can turn that around,” Kouplen says.

Aerospace remains a hot sector, much of which is driven by the presence of Tinker Air Force Base in Oklahoma County. Boeing is currently adding 3,500 engineers to its operations in the state, and Kratos announced in April it would be producing its XQ-58A Valkyrie at the new Kratos Unmanned Aircraft production facility in Oklahoma City. Ferra Aerospace broke ground in September 2019 on a 50,000-square-foot expansion of a manufacturing facility in Grove and expects to create 150 new jobs within three years. Of the 45 new company announcements in the state in 2019, roughly half were related to aerospace, Kouplen says.

“We have reached critical mass and a tipping point where it just keeps growing. We now have about 1,100 aerospace companies and 120,000 aerospace jobs here,” Kouplen says.

#21 – ARKANSAS

ACCELERATING DEVELOPMENT IN THE LAND OF OPPORTUNITY

While Arkansas’ recent statewide GDP growth has been less than impressive, development abounds in several parts of the state. This past summer, Lockheed Martin announced a $142 million expansion and 326 new jobs in Camden. Global IT company DXC Technology announced in October an expansion and 1,200 new jobs in Conway. And that same month, Nucor cut the ribbon on a $230 million facility in Hickman.

The Northwestern part of the state is also continuing to grow as a logistics hub for Fortune 500 companies. The new Plug and Play program, which is supported by such partners as Walmart, Tyson Foods and J.B. Hunt, recently established one of its 23 global locations in Northwest Arkansas. The accelerator will focus on things like supply-chain optimization, blockchain, last-mile delivery warehouse automation and machine learning.

Saeed Amidi, founder and CEO of Plug and Play, said in a press release that participating organizations and the infrastructure will help cultivate a culture of entrepreneurship in the region. One such example is startup digital supply-chain platform SupplyPike, which announced in May it will locate operations in Fayetteville and create nearly 180 jobs in the next five years. “With our startups, we can bring efficiency and cost savings in the supply chain. Through this new operation here, we will be able to connect Northwest Arkansas to Silicon Valley, China, Singapore, Germany and the rest of our global network,” Amidi said.

#31 – NEW MEXICO

DISRUPTION IN THE LAND OF ENCHANTMENT
New Mexico: Lured away from California, Richard Branson’s Virgin Galactic relocated to a remote facility in Sierra County.

The Land of Enchantment is quickly becoming a magnet for free-thinking innovators and disruptors, says Alicia Keyes, cabinet secretary of economic development at the State of New Mexico.

In May 2019, Richard Branson’s Virgin Galactic moved its operations and more than 100 employees from Mojave, California, to a remote facility in Sierra County. Mark Johnson, a Silicon Valley entrepreneur and self-proclaimed “quirky guy,” founded Descartes Labs in Santa Fe in 2014 after meeting some scientists from Los Alamos labs. The company has since raised more than $50 million and now has more than 140 employees. And Santa Fe-based art collective Meow Wolf, which just a few years ago was a small group of struggling and broke creatives, now has more than 400 employees and recently raised $158 million in a fundraising round.

Stories like this attract more disruptors and non-conformists. “The trend is that disruptors don’t want to [make] do with the way others are, and they see something in New Mexico. It’s attractive to them, their employees. There’s a good quality of life here. They can go skiing, live on a river. They’re not going to be stuck in traffic,” Keyes says.

The state is aiming to capitalize on some of this newly gained momentum. Since the inauguration of Gov. Michelle Lujan Grisham in January 2019, New Mexico has gotten “incredibly aggressive” in economic development and in attracting companies to the state, Keyes says. “We’re looking for the right kind of companies that pay their employees and offer good benefits… many of these disruptors are doing that.”