Austin at the Center of a Growing U.S. Tech Hub

April 12, 2023

Dilys Chan

A favorable tax environment, strong talent pool, and an easygoing, creative charm have made the Lone Star state’s capital a popular destination for tech companies looking to grow or relocate in the U.S.

The remarkable rise of Austin

Austin and the surrounding region have been steadily gaining momentum over the past two decades. The population of the metro area has grown by an average of 156 new residents every day since 2010, according to the Austin Chamber.

The Texas State Capitol houses the offices and chambers of the Texas Legislature and of the Governor of Texas. (Source: Adobe stock)

While the pandemic hurt population growth in many metropolitan areas around the world with many residents choosing to move further out from cities, the pandemic had the opposite effect in Austin. In 2021, the region counted its most relocations from other areas than ever before in its history, followed closely by 2020.

Greater Austin is seeing the fastest net migration among the 50 largest metros in the U.S. (Courtesy: Austin Chamber/Opportunity Austin)

The region's population growth during the pandemic has been welcome news for the Austin Chamber, who initially formed a regional economic development initiative called Opportunity Austin in 2004. The goal of their initiative has been to bring prosperity to the region, build jobs, and diversify the local economy — and their efforts seem to be paying off.

Statistics provide a clear picture of Greater Austin’s growth:

The Greater Austin metropolitan area is the 11th largest in the country by population.
Greater Austin is the fastest growing among top 50 metropolitan areas in the country.

The population of Greater Austin is projected to double between 2020 and 2060. (Courtesy: Austin Chamber/Opportunity Austin)

Most commonly, people relocate to Austin from nearby state California or other parts of Texas. Other origins for relocations are the northeastern U.S. states (New York, New Jersey, Illinois), as well from international locations.

The Austin area has been successful in attracting new residents from outside the state, but relocations from inside the state are also common. (Courtesy: Austin Chamber/Opportunity Austin)

Growing in Austin’s business-friendly environment

Austin has developed a reputation as being a friendly place to do business. For one, the state does not impose a personal income tax on residents. Secondly, the state has been offering generous incentives to attract companies to the area. These two factors are among the many reasons more startups and investors have been bringing business to the Austin region.

Where we win is on the cost of living and the cost of doing business in the state of Texas.

-Roland Pena, SVP of Global Tech and Innovation, Austin Chamber/Opportunity Austin

The Austin Chamber often sends companies documents listing the area’s taxes and incentives, and their incentives portion appears notably longer than the taxes portion. “When they see the tax portion, [their reaction is] always like, ‘That’s it?’” says the Austin Chamber’s Senior Vice President of Economic Development, Charisse Bodisch.

Her colleague agrees: “Where we win [compared to doing business in other jurisdictions] is on the cost of living and the cost of doing business in the state of Texas,” says Bodisch’s colleague Roland Pena, Senior Vice President of Global Tech and Innovation at the Austin Chamber.

The areas covered in Austin’s regional economic development initiative. (Source: Austin Chamber and Opportunity Austin)

The incentives seem to be working to stimulate the region’s economy. Austin has continuously ranked as having one of the fastest-growing GDPs in the U.S. The Austin Chamber also publishes economic indicators online every month.

Over the past two decades, the economy in Austin has both matured and diversified. The area that first earned the nickname of “Silicon Hills” in the ‘90s is now home to a diverse array of companies, including startups and tech unicorns that are scaling up quickly and enhancing the entrepreneurial feel of the area. They also include mature, legacy companies that continue to grow.

Tech overlays everything. Technology is in industries that you wouldn’t think of.

-Charisse Bodisch, SVP of Economic Development, Austin Chamber/Opportunity Austin

The area has also been attracting big names in tech since around the mid-2010s. Large players such as Apple, Google (Alphabet), Oracle, Facebook (Meta), Samsung, and Tesla have all established major office campuses in the region. While their Austin-based campuses may not necessarily be a replacement for their Silicon Valley headquarters, these campuses often serve as second headquarters.

Austin’s skyline at sunset. (Source: Adobe stock)

In addition to the more obvious tech names, Bodisch says that a number of large corporations are increasingly playing in the tech space — names like Charles Schwab, who have a software development team, or Ford and Chrysler, who are conducting R&D on autonomous vehicles.

“Tech overlays everything. Technology is in industries that you wouldn’t think of,” Bodisch says, referring to examples in the region related to semiconductor and automotive manufacturing, and in the agri-food sector.

One example of a traditional company delving into technology is in John Deere. Known for making tractors for the agri-food industry, Deere opened a new innovation hub in Austin in February 2022, where they are now developing technologies that can read soil conditions, tell farmers how to treat the soil, suggest ideal conditions to grow certain crops, and help with sustainability.

Lifestyle, culture and work-life balance in Austin

Aside from being called the “Live Capital Music of the World”, Austin is also known around the world for its vibrant SXSW conference. Anyone who has visited Austin can recall the region’s many novel charms, and the region regularly welcomes many business and leisure travellers. In fact, we at Volaris held a leadership development event in Austin called Volaris 101 in early 2023.

SXSW is Austin’s world-renowned annual music, film, and interactive conference and festival. (Source: Adobe stock)

“The vibe here is definitely laid back, and I think it’s a welcome change to most large cities,” says Dean Hebert, who is the General Manager of a Volaris-owned division of AssetWorks. He has been living in Austin for 25 years.

“The thing that sets Austin apart is that you can be whoever you are,” Bodisch says. “You might go to lunch and see people in suits mixing with people in shorts and t-shirts. Everybody is there together, and it’s not about what’s on the outside – it’s about who you are on the inside. That mindset makes it much more collaborative and creative.”

The advantages of being located in Austin are already apparent to several leaders in the Volaris community, many who have been based in the Austin area for several years.

Festivals, nightlife, and other fun activities make it a great place to meet new friends and become a part of a thriving community.

-Dean Hebert, General Manager, AssetWorks SaaS Division

Volaris businesses that call Austin home include Charity Dynamics, FacilityForce, and a division of AssetWorks. Other Volaris leaders, such as Portfolio Leader Tony DeSilvester and Group Leader Cristina Wheless are based in the areas surrounding Austin.

In Dean Hebert’s case, he was a co-owner and partner at InCircuit in 1997 when the then-startup initially moved to Austin. After the move, the owners of the SaaS provider of enterprise asset management and inventory software made the decision to sell to Volaris in 2010. After finding similarities with Volaris-owned AssetWorks, InCircuit made the decision to be tucked in to the AssetWorks brand.

Austin has developed a reputation for a vibrant culture rich in food, music, and the arts. It’s a beautiful city that provides a unique combination of city and outdoor life.

-Dean Hebert, General Manager, AssetWorks SaaS Division

“In Austin, there is really an effort here for balance between life and work, and that makes for better employees,” says Bodisch. “People come here because this is a chill place to hang out!”

The Barton Springs Pool draws a diverse crowd of people to the grounds of Zilker Park in Austin. (Source: Adobe stock)

Her colleague, Roland Pena, agrees that the quality of life in Austin helps attract talent. He says tech workers especially like the Austin area’s open spaces, recreation, parks, lakes, and live music scene. Pena has put together packages for CEOs who have requested high-adrenaline experiences like surf gliding, parachuting, running clubs, and biking — activities that are all easy to access nearby.

While Austin’s popularity has helped push the cost of living in Austin up, it is still less expensive to live in Austin compared to many other metropolitan areas in the U.S. This means employee salaries can go a long way, especially compared to more expensive cities.

While the cost of living in Austin is going up, it is still lower than many of the other areas where people migrate from. (Source: Austin Chamber/Opportunity Austin)

Hiring software and tech workers in Austin

Hiring in Austin has advantages as well as challenges. The Austin region has a low unemployment rate: 2.8% as of December 2022, as compared to an unemployment rate of 3.7% in the U.S. overall during the same month. The Austin Chamber estimates that a ratio of two job openings exist for every unemployed worker.

For small to medium-sized software businesses in Austin, this means that hiring skilled workers can be competitive, shares Hebert. Demand for talent is high. However, the growing popularity of remote work has helped alleviate some hiring challenges, while at the same time allowing employers to create more flexibility for employees.

I believe that the work-from-home model is, in some form, here to stay.

-Dean Hebert, General Manager, AssetWorks SaaS division

Hebert’s division of AssetWorks leases an office space and their team meets at the office at least once a week. It’s a hybrid model that has been adopted at many of the software businesses owned by Volaris.

Similar to many parts of the world after the pandemic, Austin is experiencing the same adjustments to remote and hybrid work. As of the fourth quarter of 2022, Austin’s office vacancy rate was 14%, up from 12.6% in 2021. That puts Austin’s office vacancy rate slightly lower than the global rate of 14.7% in the same quarter of 2022, according to data from commercial real estate company JLL.

The talent pool in Austin is deep, with a constant flow of people moving to the area.

-Dean Hebert, General Manager, AssetWorks SaaS division

Employers in Austin enjoy the advantages of being able to tap into a strong and constantly growing talent pool. The region boasts a labor force of 1.3 million people, and nearly a third of them are between the ages of 25-44 years old. The population is also highly educated, with close to half of the population holding a bachelor’s degree, compared to a third of the population in the U.S. overall with the same level of education.

(Courtesy: Austin Chamber/Opportunity Austin)

The city is also home to University of Texas at Austin, the state’s biggest public research university. The Austin area also has more than a dozen other universities, colleges, and educational institutions.

(Courtesy: Austin Chamber/Opportunity Austin)

“With all of these universities, we get a lot of diversity in the student population that graduates out of them,” says Bodisch. “That diversity is attractive to a lot of the companies that we talk to.”

(Courtesy: Austin Chamber/Opportunity Austin)

What’s next for Austin’s business landscape?

Despite recession fears and layoffs hitting the tech sector in 2022 and 2023, the Opportunity Austin and Austin Chamber staff believe the diversification of the region in different industries will keep them resilient enough to weather difficult economic times. Their confidence is supported by robust job market data, with a number of new first-time job openings posted monthly, as well as a steady stream of company relocations to the area. Tech jobs make up a significant number of those new postings, but so do jobs in healthcare.

“I believe that we have more opportunity during economic downturns than most metros in the U.S.,” says Pena. “During times of recession, we like to say we’re the last in, first out.”