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November 30, 2018

Volume 40, Number 35

Dear ,

As we move into December its time to look ahead to 2019.  This is especially true when you single out real estate an essential portion of the Austin economy.  It also affects personally so many residents of the fast-growing 5-county Austin metro area.  So, what can you expect to happen next year?

The Urban Land Institute and PWC’s Emerging Trends in Real Estate:  2019 gives high marks to the Austin area and to Texas’ major metros.  In fact, Austin ranked #6 in the study, but it took a back seat to #1 Dallas/Fort Worth.  San Antonio ranked #20, while Houston ranked #37 in the review of the nation’s major markets.  These strong Texas cities have a significantly higher percentage of a younger population than the rest of the US.  This means there should be strong labor force growth and productivity.

As a result, demand for housing in these Texas markets is expected to remain strong through 2019,” Dillon Cook, founding partner and COO with Range Realty Advisors (RRA), told GlobeSt.com.  “Also Millennial demand for housing in these Texas markets is expected to continue for many years as a growing share get married, attain higher income levels and have children.”

There’s more to this positive real estate outlook than just demographics.  “Housing demand continues to be fueled by relatively low interest rates, low unemployment and continued economic growth,” Cook pointed out.  And Austin is among the nation’s leaders in these categories.

Yeah, but, what goes up must come down, right?  This may be true, but it’s all relative.  Range Realty Advisors points out “the ups and downs of economic cycles can vary substantially globally, regionally and by state.”  Cook says it is entirely possible the next nationwide economic downturn will look and feel very different in Texas compared to other states. In previous economic downturns, there have been several causal factors – rampant speculative development for oneIn Austin most speculative real estate development is leased/sold as soon as its finished.  There are other national and international factors that are not currently apparent.  Conclusion:  “Add to this strong economic and job growth, high level of consumer confidence and business investment, and many believe Texas will continue to be a magnet for real estate investors and developers for years to come,” notes RRA. Read More

November 9, 2018

Volume 40, Number 32

Austins reputation as a home for heavyweight companies of the future is well-recognized and well-deserved.  After all, when you start calling the roll of Austin majors Dell, Google, Apple, Facebook, Indeed, 3M, etc., its hard to know where to stop.  The list is long and impressive.  But what about smaller enterprises that could be the biggies of the future?  Where does Austin stand as the site for startups?  New information late this week:  startups accounted for a larger share of businesses in Austin than in nearly all major US metros in 2016.

Young companies account for a larger share of businesses in Austin than in nearly all other major US metros.  So, it’s important to note that for the first time, the Survey of Business Owners compiled as part of USCensus Bureau data, included data regarding the number of years a firm has been in business.

Here’s how the numbers break out.  Take the newbies, those firms with less than 2 years in businessAustin with 4,444 companies, or 11.6% of all employer firms, ranks #3 in the nation, behind #1 Las Vegas and #2, Orlando.

Those Austin companies that have been in business a little longer, but less than four years, break out this way:  10,807 Austin businesses, or 28.1% of employer firms, place Austin at #2 in the nation, behind #1 Las Vegas.

And the oldies?  Austin firms in business less than six years15,077 Austin businesses, or 39.3% of firms, place Austin at #2 in the nation, behind #1 Las Vegas.

How did other major Texas metros fare in this review of the 50 largest metros in the US, in business less than 6 years?  The Dallas-Ft. Worth metro was 5th in the nation, Houston was ranked #10 and the San Antonio metro was 13th in the US.

In the past, Austin has been noted as a good place to start a company.  After all, Dell started in a UTAustin dorm room.  But, this is the first report putting precise numbers to the entrepreneurial environment in this area.  This late report came to us from the Austin Chambers VP/Research Beverly Kerr.  Her analysis goes much deeper by the way.  For instance, she breaks it down by women-owned firms, minority and veteran entrepreneurs.  And she reports on Austin’s #4 US 2016 ranking for firms receiving significant funding from outside investors. Read More

October 19, 2018

Volume 40, Number 29

UTAustin is without doubt one of the Austin areas most important economic engines.  (Years ago we made a speech titled If you want to stop growth in Austinmove the university to Amarillo!”)  So,how is UTAustin doing?  Especially, how does it compare with other peer institutions?  In the world?  How about this UTAustin rose ten points to be ranked #39 worldwide by one of the most respected global rankers of universities.  Impressive.

The editors of Times Higher Education World University Rankings (THEWUR) singled out Yale University and UTAustin for making major advances this year.  It attributed UTAustin’s leap to “significant increases in its institutional income and research volume.”  The ranking relies on a combination of reputation surveys and quantitative metrics in five areas:  teaching, research, research citations, international outlook and industry income.

It’s difficult to get detailed information on the specifics underlying THEWUR’s ranking but, according to UTAustin, it “correlates with recent expansions in research funding, research reputation and academic reputation.”

UTAustin ExecVP/Provost Maurie McInnis said investments in faculty compensation and interdisciplinary research, combined with the addition of the new Dell Medical School, are enhancing UTAustins research impact.  (If memory serves us correctly, UTAustin’s rankings have suffered in the past because most peer institutions boasted medical schools.)

And UTAustin’s future appears even brighter.  McInnis said “by placing greater emphasis on doctoral programs and strategic hiring, the university aims to become even stronger in years to come.”

Other Texas universities placing in the ranking include Rice University (#86), TexasA&M (#159) and UTDallas(lumped into a range of #201-#250).  UTAustin has done well in several other global rankings:  Center for World University Rankings, #31 … USNews&World Report’s latest ranking of Best Global Universities (#32) and Nature Index’s ranking of #23 in the world for scientific research. As its stature grows nationally and worldwide (and this growth is expected to continue surging), UTAustin enhances much of what makes Austin, Austin. Read More

October 12, 2018

Volume 40, Number 28

Its a rare sight in Austin:  powerful activist environmental interests disagreeing among themselves.  Usually the environmental community leaders in Austin publicly march in lock-step -- fighting for or against the same issues.  Not now.  Distinct lines have been drawn over an issue that will be on Austin ballots November 6th.  Which side prevails may go a long way toward defining the shape of Austins growth.

The ballot item is Proposition J.  Huh?  What’s that?  Simply put, it would require any comprehensive change to Austins land use rules go to voters for approval.  Just getting on the ballot was controversial.  It took a grass-roots effort to bypass the Austin City Council to get Prop J on the ballot.  This grew out of the CodeNEXT development rules process that inflamed such strong opinions, it was ultimately abandoned. So, how has this pitted Austin environmental leaders against each other?  We need to credit Mose Buchele, an award-winning reporter for KUT-FM, for bringing this to our attention through his writing in Austin MonitorIt boils down to differing environmental philosophies as they relate to growth and climate change.  How so?

If Proposition J passes, then the voters will have the right to check the Councils work if we resurrect CodeNEXT and we have a comprehensive rewrite of our Land Development Code,” longtime environmental activist Bill Bunch argues.  Arguing against passage of Prop J is the director of Austin-based Environment Texas, Luke Metzger.  Where do they differ?

Bunch opposes development being shoved into the Central city where you would “scrape our existing city neighborhoods and try to force it on top of existing communities.”  He doesnt like adding density in downtown Austin and wants growth moved away from the city core.

Metzger disagrees:  “Are we going to increase sprawl, increase traffic, or are we going to do it in a much more walkable, transit-friendly way and bring people into the city core?”

They both cite strong, passionate environmental reasons for their approach.  Itll be interesting to see which approach prevails in this environmentally-centric Austin community. Read More

September 28, 2018

Volume 40, Number 26

Dear ,

Within the next few weeks, Capital Metro is planning to unveil an ambitious, long-term plan to bring high-capacity public transit to the Austin metro area.  What form will it take?  Well, thats what will be revealed.  Project Connect could include any, or all, autonomous buses, light rail, extensive expansion of the existing MetroRapid bus service, or other rapid bus service.  It could be a big deal.  And highly controversial.

Big – because the plan would probably propose a system so large it will provide a major alternative transportation mode attractive to motorists who currently drive city streets.  Controversial – because it will likely result in the removal of car lanes.

Underlying whatever is proposed may be the biggest concern of all:  which routes will the system run along, and importantly, what dedicated right of way will be needed?  Remember Capital Metro doesn’t have jurisdiction over roads their vehicles use.  In other words, CapMetro can’t dictate what happens to acquire needed right-of-way.  These roads either belong to the city, county or state.

Why right-of-wayWithout it, buses simply line up in the same slog cars get bogged down in.  Okay, what about light rail?  Well, in most cases, you would probably convert vehicle lanes to rail lanes.  You would likely also build boarding platforms in the middle of roadways.  Again, right of way problems.

For a transformative transit system to be successfully instituted, you will need leaders of differing governmental entities heavily involved, making serious decisions – and, in some cases, probably angering some of their constituents.  Complicated?  Oh, yeah.

And cost?  No estimate yet.  But local leaders like to look to Seattle and other similar cities for examples.  Seattle committed several billion dollars to convert a major downtown artery entirely to bus serviceIt runs as many as 200 buses an hour on the roadway.  It worked.  Seattle has seen a major reduction in car use.  But, at what price in dollars and to auto mobility?

What can you expect?  First of all, this is – as we said – ambitious planning and it is very, very long-term.  CapMetro will likely take the first public step within a few weeks to begin a more extensive planning and coordination effort.  The implications are huge.  Stay tuned. Read More

August 17, 2018

Volume 40, Number 20

Mexico is the most important international trading partner for Texas by far.  Austin also benefitsRelations recently have been a bit dicey, especially with the NAFTA trade agreement between Canada, Mexico and the US under review.  “Review is a soft word.  Soon NAFTA that went into effect in 1994 -- may no longer resemble its former self.  With a newly-elected president of Mexico starting a 6-year term December 1, 2018, lets examine what may happen.

This is not the stuff of everyday headlines.  In fact, many find a discussion of international trade pretty boring.  But this is very important for the future growth of the Austin area and the Texas state economy.  Take Texas first.  Texas has been the nations top exporting state for 14 years in a rowAnd Mexico, by far, is the top country for Texas exports -- $97 billion to 2nd place Canada’s around $30 billion in 2017.  All other nations are back in the pack.

Austin takes a big chunk of this dynamic export business.  In fact, the Austin-Round Rock area is the 26th largest exporter region in all of the US.  And it is growing.  Exports grew 30% over a 10-year period from 2006 to 2016.  The metro area exports approximately $10 billion in goods and services a year.  More than 2,000 businesses in the Austin metro exported $540 million worth of merchandise to Mexico in 2016.

So what could impact this significant hunk of our economy?  First of all, President Donald Trump has long maintained the US gets the short end of the stick in NAFTA saying the trade agreement favors Mexico and Canada.  He even called for abolition of NAFTA (which stands for North American Free Trade Agreement).

Now Trump is playing Mexico against Canada, saying the US might end up with two agreements, a different one for each nation.  Hes saying negotiations with Mexico started again July 26th and are coming along nicely.” But talks with Canada are on hold.  Trump is even praising Mexico’s left-leaning president.

So, what is likely to happen?  Former USAmbassador to Mexico Tony Garza (who lives and works in Austin and Mexico City) said the new Mexican president has his own man sitting in on current negotiations.  “The new administrations embrace of the talks has sparked renewed optimism for a quick finish, with some negotiators even pointing to completion by the end of August,” said Garza.  Stay tuned. Read More

August 10, 2018

Volume 40, Number 19

If you look at the calendar with eyes that have some economic development expertise, you can logically assume Amazon will soon publicly announce the next big step in the selection of a city that will be its choice for its second headquarters, Amazon HQ2.  In January, 20 cities including Austin were told they made the cut from 238 original submissions.  Since that time, Amazon has made no public utterance.  But, its self-imposed deadline is nearing.

Don’t expect Amazon’s next announcement to be the city.  Amazon initially said it will decide the HQ2 city in 2018.  But, if Amazon follows standard site selection procedure, a handful of finalist cities will be revealed a Final Four,” or some small manageable number.  Winnowing down the smaller number to the “winner” will probably include further site visitations, negotiations and a comparative analysis.  This could take a few months.  And by this time, Amazon’s own deadline will be upon them.  For these reasons, you can expect the final cut of cities should be announced sooner rather than later.

Amazon earlier confirmed site selection teams visited all 20 cities.  The visits were very private.  Even some city officials didn’t know they were in town.  And those who met with the site selectors were asked to sign confidentiality agreements.  Even the HQ2 team members didn’t reveal their full names.

This, by the way, is the norm for most economic development visits, though usually it is to make sure the company’s competitors are not aware of their plans.  However, in this case there are no competitors.  Amazon announced it would invest about $5 billion in the chosen city, and HQ2 would grow to about 50,000 new high-paying jobs over the years.  Amazon HQ2 has no peer.

The Austin and Dallas regions were the only two Texas sites among the 20 that made the first cut.  And, an Amazon team not only visited these sites, they also met with the Texas governors office to gauge the states role.  So, make no bones about it, Texas’ no-income-tax, low-regulations, business-friendly-leaders add tremendous clout to local presentations.

A final note about Austin’s chances:  from Day One, Austin Chamber of Commerce officials who guided the Austin effort, have used the phrase Austin Region” – not City of Austin.  So, if Austin makes the “Final Four” – and it is considered one of the favorites – dont be surprised if the physical location is outside Austins city limits. Read More

July 27, 2018

Volume 40, Number 17

Dear ,

As the state of Texas goes, so goes Austin.  Some think the vice versa is more true.  But since Austin is the home of the massive state government that must keep up with the impressive growth of Texas, its important to examine the economic health of the Lone Star State.  Especially as the Texas Legislature will meet in Austin in less than six months for its every-two-years decision-making sessionAnd, legislators will have a lot of money to spread around.

When you think about it, it’s really impressive how the amazing Texas economy is churning out enormous amounts of money to run the government.  And, unlike the vast majority of other states, Texas is doing this without a state income tax.  The single largest source of revenue for Texas is the General Sales Tax instituted in 1961.  And, get this, the state sales tax rate of 6% has not increased since 1990.

The booming state economy has caused the sales tax source of revenue to zoom almost 10% since last year at this time.  As a result, State Comptroller Glenn Hegar now predicts legislators will have more than $110 billion (with a b”) to spend during the next biennium -- $2.8 billion more to spend than originally anticipated.

Now then, enough about mind-numbing big bucks.  Let’s talk about another economic factor.  Separate from the sales tax, Texas has “benefitted from rising oil prices and production,” Hegar pointed out.  This translates simply into a 2019 balance in the states savings account – the Rainy Day Fund” – growing to almost $12 billion, the largest ending balance in the states history.  Talk about economic stability.

Not only that.  After voters approved a constitutional amendment in 2015 to increase funding for highways, the adopted formula means $2.5 billion will be allocated to highways from collections this 2018 fiscal year.  This is huge.  And it is occurring because of the increased sales tax receipts.

At least one group is urging legislators to “buy down some existing taxes” with additional funds. (Explanation:  Back in 1992, the legislature allowed municipalities and special districts, such as transit authorities, to levy local sales taxes.  The maximum municipal rate is 2%.  This is why some sales taxes are as high as 8.25%, depending upon the locale.) Read More

July 6, 2018

Volume 40, Number 14

In this holiday-shortened week, it seems appropriate that a number of short items should dominate this edition of the newsletter.  Not that they are any less significantIts just they can be covered with a few sentences or paragraphsTake the now-defunct ban on single-use plastic bags as our first example.

It didn’t take long after the Texas Supreme Court ruled local bag bans ran afoul of state law for the state attorney general to take action.  (Austin has had a bag ban since 2013.)  This week, Attorney General Ken Paxton officially notified Austin and other Texas cities their local ordinances were illegal and therefore unenforceable. To make sure the word got out, Paxton directly notified the City of Austin, Mayor Steve Adler and the 10-member Austin City Council, then he issued a press release to the media.  Now what?  The ruling that banning plastic bags is illegal as of this moment should stand until some counter action – if at all – is taken.    

It may not be long now before you see electric-powered, autonomous transit vehicles circulating in Downtown Austin.  It will be a pilot program instituted in two phases technology testing and actual service runs.

The testing by Capital Metro and the City of Austin Transportation Department could begin later this month and take up to 60 days.  During the second phase, proposals will be evaluated to lease six vehicles, carrying up to 15 passengers, to run in the pilot program for 12 months. CapMetro thinks the fleet of vehicles will be in operation on downtown streets in late fall.  Not to worryCapMetro says operators will be on board while the autonomous electric vans are being evaluated and running in service.    

For Austin airport travelers, and those picking up arriving passengers, the renovated cell phone lot is offering this month a Texaco fuel station, 120 parking spaces, a convenience store (serving tacos, BBQ, etc.) and electric vehicle charging stations.

Read More

June 29, 2018

Volume 40, Number 13

As Texas grows, so grows state government.  Right?  Uhhhh, not necessarily.  Government payrolls are a significant part of the Austin economy.  Always have been, always will be.  But, as the rest of the Austin area economy expands at one of the fastest rates in the nation to what extent is government keeping pace?  Bottom line:  private sector jobs are quickly growing in the Austin area.  And the jobs in the government sector are not in step.

This is not to downplay the role in Austin of steady government paychecks.  Far from it.  In fact government sector jobs are more than 17% of all jobs in the Austin area.  (These stats are lifted from a June report by the Austin Chamber’s VP/Research, Beverly Kerr.)  Other cities would die for such a solid job base.  Instead, the current economic situation is a testimony to the private sector that it is outshining the government jobs in the metro.

Without relying on the 17% government jobs (because government job growth was essentially unchanged) the Austin area added 33,900 net new jobs in the 12 months ending in May.  Let this sink in.  This growth of 3.3% made Austin the third fastest growing major metro in the US.  And it was basically in the private sector.  For the nation, private sector growth was 1.9% for the same period.

A half-century ago, we were quoted in TIME magazine as saying “Austin is a state government, state university town.”  True, then.  Not so much, now.  And it has occurred in less than one lifetime.

By most measures, the Austin area boasts of one of the most vibrant economies around.  And private sector jobs have been the defining difference compared to the area’s historical past.  This is a major economic sea change that has taken place in front of your very eyes.

Oh, by the way, all this is underscored when you understand that almost as soon as new jobs are created in the private sector, they are filled.  In May, Austins outstanding unemployment was at an eye-popping 2.8%.  Economists will tell you this is full employment – anyone who wants a job can get a job.  Other major metros in Texas are also doing well.  Their unemployment percentages are solid – ranging from 3.2% in San Antonio to 4.2% in HoustonDallas and Fort Worth were at 3.4% in May.  These are all better than the unemployment rates seen a year ago. Read More