The expansion of the Sun Belt has come primarily from an infusion of mid-level jobs, often back-office jobs, or the headquarters of older, workaday corporations. Meanwhile, the coastal cities, even the sluggish ones, have remained the key locations for the highest value employment and the highest skilled people, and have been the places with the greatest blend of innovation, cultural power and wealth.
But things are starting to change in the Sun Belt, as cities such as Miami, Austin and Nashville have started moving up the food chain. The pandemic, rising crime and homelessness, and dysfunctional governance have caused a number of high-end businesses further north to rethink where they should be located.
The best example is the Miami/South Florida area. The hedge fund giant Citadel, which was founded and based in Chicago and which maintained a large office in New York, announced recently that it was moving its headquarters to West Palm Beach, Fla. The notable New York hedge fund Elliott Management Corp. also moved its main office there. BlackRock is opening a West Palm Beach office, intended as a place for its senior executives to work. Several other major Wall Street firms have opened offices there as well, calling some locals to tout South Florida as “The Wall Street of the South.”
It's not just traditional finance. It’s also bigtime venture capital. And it’s not just West Palm Beach. Andreessen Horowitz is opening an office in Miami. The Founders Fund and Point72 Ventures have done the same. Miami has become a hot spot for cryptocurrency companies. All of this activity is drawing business services as well, including more corporate law firms.
Similar things have been happening in Austin, Texas. Although the city is famous as a tech hub, a lot of the tech firm jobs in Austin have traditionally been no more than mid-level. Apple’s operations there included a relatively low-status call center. But now actual headquarters are moving to Austin. This includes gadfly billionaire Elon Musk’s Tesla and SpaceX, but also traditional firms such as Oracle. A slew of other, smaller tech firms have relocated to the Texas capital.
Nashville too is seeing some of this higher value influx. Money manager AllianceBernstein moved its headquarters there from New York. Amazon is opening a big office. Like Austin, Nashville is seeing a celebrity influx. Long home to country music personalities, it’s now drawing a broader range of culturally influential newcomers. Although a progressive city, Nashville has become a draw for conservative figures. Media personality Ben Shapiro and his company the Daily Wire have moved to Nashville. The conservative social media site Parler is headquartered there.
Let’s not overstate the case. The center of gravity in technology has not moved out of Silicon Valley. Nor has finance moved out of New York. Many of the moves have come from more conservative leaning or maverick personalities.
But let’s not undersell it either. The fact that Greater Miami is now seen as a legitimate venue to conduct high finance and other elite business — not just as a Latin American gateway or consumption destination — is a sea change. Austin and Nashville are now legitimate home-base locations for top management, not just the finance and accounting team. As long as a major recession or other unpredictable event does not extinguish it, this trend of shifting high-end activity away from the traditional coastal centers could ultimately reshape the American economic landscape.
The change does pose some profound challenges to the new destination cities. As wealth and high-end business flow in, housing prices have soared. These Sun Belt cities used to tout their lower costs compared to the expensive urban coasts. But perhaps that was partly a function of them having middle-tier economies, not just permissive homebuilding regimes.
Now that their economies are becoming more like those of the older elite cities, problems such as high housing costs are starting to emerge as well. But for these cities, the challenges of not just growth, but a more elite kind of growth, is at least another dimension of the problems of prosperity rather than the challenges of decline.
Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.
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