Tech giant Hewlett-Packard Enterprise (NYSE: HPE) is officially joining the California exodus. The company recently announced it will leave its current San Jose home and head south -- to the Houston area.
Apparently, HPE has already broken ground on its new building, a 440,000-square-foot campus set in the Metro's Spring area. It will feature two five-story buildings and is set to open in spring 2022.
Higher-ups noted Houston's "diverse talent pool" as a driver in their decision, but a more favorable tax climate probably doesn't hurt either. According to the Tax Foundation, California is the 49th worth state in terms of business taxes. Texas comes in at No. 11.
There's also the sheer cost of Silicon Valley real estate to consider. In 2019, office space cost an average of $42 per square foot in San Jose. Over in Houston? It was just $30. With many tech companies now operating on a remote basis -- and likely for the long haul -- is the added California commercial overhead really worth it anymore?
For HPE, it clearly wasn't. But what about other tech hubs? Is Houston poised for an influx of new businesses? Let's take a look at what Houston has working for it.
The case for Houston
Houston's largely known as an energy town -- and rightfully so. It's home to major countless oil and gas companies, including ConocoPhillips (NYSE: COP), Kinder Morgan (NYSE: KMI), Halliburton (NYSE: HAL), Occidental Petroleum (NYSE: OXY), and a number of other big names in the industry. Basically, if you want a career in oil or gas, you move here. It's that simple.
But that may soon change. First off, the oil and gas industry has been pummeled by the pandemic. Oil and gas lost 107,000 jobs between March and August, and layoffs have been rampant.
On top of this, the city is building out what it has dubbed the "Innovation Corridor," a four-mile complex designed for incubators, accelerators, and start-ups. It boasts a connected light rail and is already home to tech companies like ABB Robotics (NYSE: ABB) (robotics manufacturer), Greentown Labs (climate tech), and The Ion -- a collaborative workspace for the "entrepreneurial, corporate, and academic communities" to work together. Together with NASA, The Ion also hosts the Aerospace Innovation Accelerator.
There are also the sheer number of universities in the area to think about -- a great source of talent for up-and-coming tech hubs. Rice University, the University of Houston, Sam Houston State University, Texas Southern University, Houston Baptist University, and the University of St. Thomas are all in the area. Texas A&M, known nationally for its engineering programs, is also just a short drive away
Finally, HPE isn't the first to recognize Houston's promise. While the city is hardly the next Silicon Valley (not yet, at least), companies like PROS (NYSE: PRO), HostGator, FlightAware, Cybersoft, Merrick Systems, NetIQ, Honeywell (NYSE: HON), and BMC Software already have outposts here. It's a small list, sure, but certainly one with some notable names on it.
The bottom line
There's no predicting the future, of course, but following in HPE's footsteps wouldn't be such a bad idea in today's climate. Houston may be an oil and gas town, but the bones for a tech-friendly city are certainly there. Throw in the talent pool and affordable real estate prices, and the picture's looking even brighter for H-town.