The Benefits and Drawbacks of Setting Up Shop in California

The Benefits and Drawbacks of Setting Up Shop in California

The quality of commercial real estate depends on its location. Therefore, it is impossible to overestimate the significance of having the ideal location.  

As tenant representatives, we have seen firsthand how a company's whole budget may be affected by a single location. The best state or city might result in enormous savings. The incorrect location, though? You could have to pay millions extra over the course of the lease.  

Thus, stop wasting time and money. Rather, find out where your company is now most likely to succeed. We'll go over the benefits and drawbacks of having your corporate headquarters in California so you can decide what's best for your CRE portfolio. In this manner, you will possess all the necessary data to determine whether this is the best site for your business property.  

Advantages of California  

 Strong Economy  

 Competent Labor Force 

Drawbacks to California  

Exorbitant Living Expenses  

Unfavorable Conditions for Business  

Corporate Exodus from California  

Benefits of Putting Your Company in California  

There's a good reason why California is among the most favored states in our nation. It offers status, easy access to the tech and entertainment hub of America, breathtaking scenery, and pleasant weather all year round. It may be the ideal combination for the right company. Let's examine the benefits of setting up shop in California in more detail.  

America's Greatest Economy  

For businesses globally, locating in California may be a huge advantage. Why? The biggest economy in the country is located there. Its GDP is the sixth most important globally.  

The Golden State has a thriving business community. California's economy has strong roots in a variety of industries, including tourism, filmmaking, agriculture, and STEM innovations. Access to a strong industrial and life sciences presence is another benefit. You can probably find your niche in this state, no matter what your specialization is.  

With 39 million residents, California is also the state with the largest population. There are a ton of amazing prospects in this area. To put things into perspective, the state's worth for professional sports alone is $34 billion!  

In addition, it has a number of destination cities that are quite popular with travelers and immigrants. California is home to San Diego, San Francisco, Los Angeles, and other well-known cities. Californian commercial real estate is so linked to prominence and international accessibility.  

Expert Personnel  

California is a pioneer in innovation and development because to its vast post-secondary education system. Because of this, the business sector values its highly trained work force. Even with its high cost of living, the state never fails to draw in young talent.  

Approximately 3,000,000 pre- and post-graduate students reside in the state. Additionally, it is home to many of the most prominent colleges in the country, such as UCLA, Stanford, Berkley, and CalTech. The university systems in California bring in over $60 billion a year in revenue.  

Your personnel are your most precious resource as a company. Choose a place like California to locate yourself in order to guarantee that you are sourcing the finest and brightest talent pool.  

A corporate recruiter's dream, its personnel is highly skilled and competent. Regretfully, your rivals are using it if you're not.  

Drawbacks of Setting Up Shop in California  

These same regions happen to be the worst cities for business, despite the fact that California is home to some of the most well-known cities. Let's examine the reasons why the state may be your company' worst nightmare in more detail.  

 

Exorbitant Living Expenses  

Due to its exorbitant pricing, California is gradually pushing out both companies and its local population. As a consequence, the cost of living and rent in many locations is rapidly rising beyond reasonable levels. The state's overall cost is over 1.5 times higher than the federal average.

However, when you include metro centers like Los Angeles or San Francisco, the measure gets even more outrageous.

San Francisco (194)

150 Los Angeles

With just New York City ahead of it, San Francisco is the second most expensive city in the nation. The high cost of living has an impact on all aspects of life, increasing the cost of real estate and taxes, for example.

High Taxes

At 8.84 percent, California also has one of the highest corporate income tax rates in the nation. A few of states do not even impose any corporate income tax. Now, compare almost 9% to 0% and think about the amount you may save on corporate income taxes alone. For those in the highest income band, California now has one of the highest personal income taxes in the nation.

Houston, Texas, and Jacksonville, Florida have business-friendly corporate income tax rates, whereas New York City and San Francisco have business-unfriendly rates.

Higher taxes affect the price of everything else in the supply chain, making it more costly because of the demand. Together with the taxes, you also feel the burden of rising petrol and payroll expenses.

Expensive Rent

California has very expensive real estate due to the state's high cost of living. Class A office space in San Francisco, for instance, costs $68 per square foot. When you contrast that with a business-friendly city like Jacksonville, Florida, you can really see how much this is.

Unfavorable Conditions for Business

More red tape affects Californian companies than any other state in the union. From exorbitant costs to complex restrictions, businesses face:

• A greater living expense

• Increased payroll expenses

• Increasing prices for various company expenses, such as electricity, utilities, taxes, etc.

• Strict regulations

• Difficult and costly lawsuit

Problems with worker's compensation

In actuality, Californian firms are treated more like overseas manufacturers than domestic ones. They suffer from excessive expenses, which are worse than those of certain overseas manufacturers.

California also enforces pricey workers' compensation for companies and complex environmental regulations. Corporate tax rates can have a negative impact on businesses that are fighting to survive. For example, the Golden State is one of the few places that taxes the acquisition of capital equipment.

The California Corporate Exodus Has Already Started Businesses are leaving California in unprecedented numbers. The corporate exodus that has resulted from the shift in culture is seemingly unstoppable.

Businesses have come to the conclusion that California is not worth its exorbitant costs and onerous restrictions.

Searching for business-friendly locations that support affordable company development is significantly more practical.

California is starting to lose its innovators. Well-known companies, such as Tesla and Oracle, have already relocated to Texas and other states with far more business-friendly legislative frameworks. In the first half of 2021, relocations outside of California increased by more than twofold.

It could already be too late if you're thinking of relocating to California. It is doubtful that the corporate sector will revert to its optimal level of performance without significant policy changes.

Is California the Best State for Your Company?

The state of California has one of the strongest economies in the nation. Access to one of the best talent pools is another benefit. Notwithstanding its advantages, its high costs, intricate restrictions, and the upcoming business exodus might offset them.

You have choices if you're in this condition. Many states that are business-friendly have more affordable prices and advantageous laws. Work with a tenant representative if moving is something you're interested in. Whether California is the best option or not, they can assist you in making the best real estate options.