Texas Cities Invest
Source: Urban Land Magazine (ULI)
by Jerry W. Szatan

While the recession has weakened current development prospects in Texas’s largest metropolitan areas, long-term infrastructure improvements are underway.

The Texas economy “remains in a mild but prolonged recession,” according to a recent report by the Federal Reserve Bank of Dallas. Texas, along with the nation, entered a recession in April 2001, suffering its sharpest job losses in the final three quarters of that year, followed by what experts believe was a slight additional job loss in 2002. High-tech manufacturing, an important sector in the Austin and Dallas areas, lost more than 45,000 jobs, an 11 percent decline, between April 2001 and late 2002, the Dallas Fed reported. “The national recession and the Texas recession were telecom recessions,” says Mine Yucel, vice president and senior economist at the Dallas Fed. Travel cutbacks since 9/11 hurt air transportation hubs in Dallas/Fort Worth and Houston, high energy prices have hurt the economy, and oil and gas employment in Texas fell by more than 3 percent in 2002. Office vacancies are in the mid-20 percent range in Austin and Dallas, up from about 3 percent in Austin in 2000, and are expected to reach that level in Houston within a year, according to the Fed. Yet the state enjoys robust long-term population growth, with each of the largest metropolitan areas growing at double the national average or more in the 1990s. And there are signs that the economy is improving, “Either we are out of [the recession] or at the tip,” says Yucel.

Austin

The Austin metropolitan area experienced an economic boom in the 1990s, which was abruptly halted by the technology recession of the past two years. Austin was the fastest-growing metropolitan area in Texas in the 1990s and the fifth fastest-growing nationally, adding more than 400,000 residents in the decade, a 47.7 percent increase. Recent forecasts are for growth to continue at more than 2 percent per year.

In the past 20 years, the area transformed itself from a university and state government town, though both remain major economic sectors, to a rapidly growing technology center. Key industries include semiconductor and computer manufacturing and software development, anchored by such well-known companies as Motorola; Round Rock–based Dell Computer Corporation, founded in Austin and employing more than 18,000 today; and Sematech, a consortium of microchip manufacturers whose arrival in 1988 helped spark the boom. Culture and entertainment, led by Austin’s live music scene, constitute another major industry.

An estimated 25 to 30 percent of the workforce is tied to high tech. Unemployment rates increased from 2 percent in 2000—when the concern was shortages of trained workers—to around 5.5 percent for most of 2002, still below the national average and below many other technology-oriented cities.

The area’s many strengths include population growth, a highly educated workforce, and a distinct cultural presence. This past November, the city embarked on an economic development assessment to identify actions that could its prospects. Three task forces are to produce a report after studying traditional business recruitment and retention strategies, small business and entrepreneurship, and the creative economy. The Greater Austin Chamber of Commerce is planning a regionally focused economic development study starting this summer.

Downtown, Austin-based Whole Foods Market Inc. is consolidating its headquarters in 170,000 square feet of a new 200,000-square-foot office tower and is building an 80,000-square-foot landmark store across the street from its existing downtown store location. The project is part of a planned larger retail and entertainment development called Market District, which will include more than 700,000 square feet of retail space.

Last year, $2.2 billion in bonds were sold, to be repaid by tolls, funding the first phase of the Central Texas Turnpike System, which eventually will provide an alternative to Interstate 35, linking the Austin and San Antonio areas. Phase I includes three segments totaling 65 miles, the longest being a 49-mile segment of State Highway 130 running east of I-35 from north of Austin to U.S. 183 on the south. Construction is expected to begin this year, and all three segments are expected to be open to traffic by December 2007.

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