Texas Rides a Wave of Growth
Real Estate Texas is part of the Forum LOCAL series of features in Real Estate Forum magazine. This is an HTML version of an article that ran in the April 2014 issue of Real Estate Forum. To see the story in its original format, click here.
Unprecedented job and population growth is spurring all sectors within the Texas commercial real estate industry. Local experts say the market is healthy and constantly improving.
According to the latest reports from the US Census Bureau, Texas added 387,000 residents between July 1, 2012 and July 2, 2013, while the state’s population has grown by 1.3 million since of April of 2010. The largest areas of growth include Dallas, Houston, Austin, San Antonio, El Paso and the Rio Grande Valley.
Population growth is being spurred by job growth. The latest numbers from the state show the Texas unemployment rate at 5.7%, which is significantly below the national average of 6.7%. One of the first states to rebound after the 2007-2009 recession, Texas surpassed its pre-recession employment peak in late 2011. Many other states have yet to reach that level, let alone surpass it.
“Job growth of this magnitude is about much more than just attractive statistics on a printed page; it means more choices and better options for Texas job seekers, stronger families and communities, and brighter futures for our children,” Gov. Rick Perry said in a statement when the February unemployment numbers were released.
Today, Texas is leading the nation in the creation of jobs at all pay levels. According to a report from the Federal Reserve Bank of Dallas, “Texas has succeeded in producing broad-based job growth in the context of job and wage polarization nationally.”
This increase in both residents and jobs has lead to a number of new developments in the office, multifamily, retail and hotel sectors. And due to its job-friendly policies, many companies have been looking to locate in Texas, some even going so far as to move their headquarter facilities from other states.
“The culture here tends to be very business friendly and that attracts a lot of people who are interested in being in that kind of environment,” says John Turner, principal of Rockstreet Partners. “The industries that are a staple of our economy are very strong, but there is also a lot more competition between states from a regulatory viewpoint. You get a large amount of relocation by companies and individuals from states like California and Illinois to Texas.”
Over the past three years, nearly 1,900 companies have expanded in Texas, according to Sara Rutledge, director of research and analysis in Texas for CBRE. And that trend, thanks to population growth, will only continue to expand.
“We are on this wave that is really going to be sustained, and it’s going to be sustained by the type of jobs that are growing in Texas. Especially if you believe the metric that office space demand lags actual job growth by a couple years,” says Kevin Roberts, Southwest president for Transwestern. “We’re running on our fourth year of well-beyond-historic job growth.”
Industry leaders point toward companies like State Farm and ExxonMobil as prime examples of firms looking to take advantage of Texas’ business-friendly environment. Both companies are in the process of building massive corporate campuses, which are driving the entire surrounding real estate markets.
With more than two million square feet in leases, State Farm will anchor the 186-acre master-planned CityLine in Richardson, TX, which is being developed by KDC. As GlobeSt.com reported, this project will include six million square feet of office space, two hotels, 3,925 multifamily residential units, 300,000 square feet of grocery, restaurant, entertainment and retail space and three parks. The site will eventually house 8,000 State Farm employees in the more than two million square feet the company is leasing.
ExxonMobil is in the midst of a similar project. The Houston-based firm is building a 385-acre campus south of the Woodlands. The project, which is expected to open in 2015, will include 20 office buildings that will house more than 10,000 employees. Exxon has also signed leases for 478,000 square feet at Hughes Landing, a 66-acre mixed-use development at the Howard Hughes Corp.’s 200-acre Lake Woodlands.
The Exxon campus “is almost instantly creating another submarket for office, retail, multifamily, single family,” Roberts says. “The impact is tremendous and we’re only going to be able to measure it over time.”
Developers are taking advantage of these new corporate villages to step in with projects of their own. For instance, Woodbine Development Corp. has plans in place to build four hotels near the ExxonMobil campus. The first, a 128-key Residence Inn, is expected to open by next summer.