Tale of two cities: Tortoise vs. hare ; This time, it’s developmental. San Antonio’s economy has remained stable, while Austin suffered boom and bust.
Roy Bragg
EXPRESS-NEWS Business Writer
1,542 words
15 February 2003
San Antonio Express-News
Metro
10H
English
© Copyright 2003 San Antonio Express-News. All Rights Reserved.
Put out a yard sign. Wait two days. Pick the best contract. Sign. Repeat.
Three years ago, when Austin was riding high, that’s how easy it was to sell real estate in the Capital City.
“It was so frantic,” said Carolyn Ney, an Austin real estate agent. “You could get multiple offers on a property in no time at all. It’d go under contract right away. People didn’t have time to rethink their purchases. It was out of control.”
But times have changed from then, when Austin was the city strapped to an economic Atlas rocket, and San Antonio was pedaling along on a unicycle far, far behind.
Austin was young, hip and, like a dot-com, always open. San Antonio was the stodgy old dodderer who went to bed at 8 after the early bird dinner at Luby’s.
Flash ahead to today.
Austin’s tech sector has tanked. Chip factories and offices lie dormant and dot-coms have gone belly-up.
San Antonio, meanwhile, has just scored a huge economic development coup with the announcement that Toyota will build a truck manufacturing plant here.
The city of Austin is, by no means, ready for a toe tag. But its Atlas is now more like a bottle rocket.
San Antonio, meanwhile, which missed out on the tech boom, also missed out on the tech meltdown. Officials here say the city’s stability has continued without much deviation in either direction.
“It’s a boom mentality versus the idea of slow, steady growth,” said Sam Barshop, who has business interests in both cities. “San Antonio doesn’t have really big peaks and valleys. We’ve had ups and downs, but it’s not that volatile.”
“If you think of the tortoise and the hare, Austin is more like the hare,” said Drake Leddy, a commercial real estate agent who handles properties in both cities. “San Antonio is more like the tortoise. But we both get to the same place eventually.”
The economic tale of two cities begins in the early 1980s when IBM put a typewriter factory in Austin, and the University of Texas began high-tech research.
Until then, Austin was a sleepy college town with an economy anchored in state government and university employment, Barshop said.
Using the university’s clout and reputation, Austin landed the Microelectronic and Computer Technology Corp, or MCC, the city’s first big chip-making operation.
A horde of other tech companies followed, as did Sematech, another chip-making consortium.
As the 1990s tech boom engulfed Austin, Barshop said, success became a self-fulfilling prophecy. The legacy of Michael Dell, the UT student whose dorm room computer shop became an industry leader, helped that image.
San Antonio, meanwhile, focused on biotech and biomedicine. Whenever a tech company went looking for a Central Texas location, Austin got it. San Antonio was left to fend for itself. Kelly AFB closed, and the Alamo City appeared to be on the ropes.
But while biotech didn’t grow as much as high tech, it had legs.
“Biotech and what I like to refer to as bio-sciences are industries that add value,” said Mario Hernandez of the San Antonio Economic Development Foundation. "It grows slowly. It adds people slowly, but doesn’t lay off a lot of people.
“Ultimately, industry is judged on whether it’s adding new jobs,” he said. “Admittedly, it’s a slow rate, but we’re not losing ground. We’re continuing to add jobs.”
The numbers tell the story of the two towns.
For 10 years, Austin’s annual unemployment rate never topped 3.6 percent, going as low as 2 percent in 2000. For the same time period, San Antonio’s rate topped out at 5.4 percent and never got lower than 3.1 percent.
But last month, and for the first time in decades, Austin had higher unemployment than San Antonio - their 4.8 percent to our 4.7 percent.
For the same decade, Austin recorded progressively higher retail sales, about $2 billion more annually, topping out at $35 billion in 2000. It fell to $31 billion the next year, and incomplete results for 2002 promise an even bleaker result.
San Antonio retail sales growth was slower than Austin, but when sales dropped from 2000 to 2001, it was by less than $1 billion.
The number of residential building permits in Austin fell 30 percent in 2000, according to reports, but grew by 9 percent here.
The median home price there: $155,000. The median home price here: $110,000
“San Antonio has a much more stable economy,” said Ray Perryman, an economist who has studied the Austin-San Antonio corridor for years. “It didn’t see as much of the real estate boom of the '80s. It’s suffered some, but not as much as Austin did in the late '90s.”
A report by Texas A&M University’s Real Estate Center puts Austin office occupancy at 79 percent. The same agency says occupancy is closer to 81 percent in San Antonio.
That’s a pretty consistent number for the Alamo City, says Leddy, who leases in both markets. But it represents a major decline in Austin, where occupancy hovered at 99 percent three years ago.
Austin office space that leased for $32 per square foot in 2000 now goes for $12, Leddy said. Furthermore, much of it subleases, meaning a company might lease 10,000 square feet but use only 5,000.
But in San Antonio, things have stayed largely the same or gotten better.
The city has become a more attractive industrial site, Hernandez said, because there’s a large labor pool, low-cost power, cheap housing and lots of undeveloped land.
Income has risen. Census figures showed 18 percent of the city’s families were living at poverty level in 1990. Now it’s 14 percent, and the spillover effects of the Toyota plant will affect the entire community.
“Those things are indicative of our economic success,” Hernandez said. “We’ve controlled our energy costs, maintained our infrastructure and diversified our economy.”
The story’s not that good up north.
Since the tech swoon, Austin has lost more than 30,000 high tech jobs. New York state is vying to take away the chip industry from Austin, with New York Gov. George Pataki signing a bill to pump millions of state dollars into efforts to build a chip center near Albany.
That’s prompted Austin leaders to respond with efforts to build up other tech niches.
“The effort here is to help industries retain business,” said John Brier, vice president for economic development at the Greater Austin Chamber of Commerce.
He said the city is hoping to capitalize on wireless technology, biomedical technical equipment and information technology geared to the life sciences sector.
Brier says Austin isn’t on the ropes. Far from it.
“The economy here, when you compare it to other cities like Austin, such as Seattle or the Silicon Valley area, is faring a lot better,” Brier said. “That doesn’t change the fact that we’ve lost a lot of manufacturing jobs.”
The rock-bottom unemployment figures of recent years, he said, actually made it difficult for industry and industrial recruitment because it meant the city had no labor pool.
Ney, the real estate agent, sees the same benefits to the downturn.
“It’s settled down,” she said. “It’s normal. It takes several months for a home to sell. And there’s lots of inventory. In certain markets, there’s competition and sellers will need to price their home lower and show it better to get a contract.”
Investors unwilling to venture back into the stock market are buying property as investments. That’s one of the reasons that rental property continues to show high occupancy rates.
Both cities have cushions to absorb economic blows.
“Austin has the base for technology, they’ve got UT, and they’ve got the state capital,” Barshop said.
San Antonio, Perryman said, always has military bases to fall back on.
While Austin waits for the next wave of high tech development, San Antonio will continue to expand its tourism and biotech - and now, with Toyota, the manufacturing sector will take off.
Perryman said the biggest benefit of Toyota may not be the jobs or immediate economic boost. Rather, it’s the light it will shed on San Antonio as a center for development under NAFTA.
“I think this will wake up other site consultants,” Perryman said, “and increase the synergy for San Antonio to build its manufacturing base.”
Raphael Lasar
Matawan, NJ