austin economic update · austin economic update william mellor february 7, 2018. today’s agenda...
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Austin Economic Update
William Mellor
February 7, 2018
TODAY’S AGENDA
o Texas Overview
o The Austin Economy
o Challenges to Overcome
o Austin Job Market
o Key Takeaways
2
TEXAS OVERVIEW
3
TEXAS OVERVIEW: AT-A-GLANCE
Population Growth
1.4%
Employment Growth
2.3%
Retail Growth5.9%
VC Funding10.4%
Number of Businesses
2.4%
Average Wage3.3%
Unemployment0.8%
Housing Starts8.2%
Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Austin Chamber of Commerce, Texas A&M Real Estate Center
4
TEXAS OVERVIEW: POPULATION
26.98
27.47
27.96
28.44
28.92
29.12
26
26
27
27
28
28
29
29
30
2014 2015 2016 2017 2018 2019
Mill
ion
sPopulation (millions)
(400,000)
(420,000)
5
TEXAS OVERVIEW: MIGRATION
Natural Growth:209,700
49%
2017 Net Population Growth: 399,300
Source: U.S. Census Bureau, Texas A&M Real Estate Center
Domestic Migration
79,20029%
International Migration:
110,40021%
6
TEXAS OVERVIEW: JOB GROWTH
(8,600)15,800
22,50022,900
28,600 29,400
34,700 36,200
46,700 50,700
INFORMATION
OTHER SERVICES
MANUFACTURING
FINANCIAL ACTIVITIES
TRADE, TRANSPORTATION, AND UTILITIES
MINING, LOGGING, AND CONSTRUCTION
GOVERNMENT
LEISURE AND HOSPITALITY
EDUCATION AND HEALTH SERVICES
PROFESSIONAL AND BUSINESSES SERVICES
Texas Job Growth by Sector, 2017
1.3%
2.5% 2.7% 2.7%3.1%
0%
1%
2%
3%
4%
Houston San
Antonio
El Paso Austin DFW
Austin vs. Other Major
MSAs, (Through Nov. 2017)
Source: Bureau of Labor Statistics, Dallas Fed
Total Nonfarm Employment
• 12,534,000
Nonfarm Change in Employment
• 278,900
7
TEXAS OVERVIEW: 2-YEAR FORECAST
800
16,500
11,500
24,000
23,000
26,600
37,000
44,500
60,000
58,000
-7,500
14,500
16,200
19,500
21,200
23,500
34,400
42,000
53,000
54,000
-20,000 -10,000 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000
Information
Other Services
Manufacturing
Construction
Financial Activities
Trade, Trans, and Utilities
Government
Leisure and Hospitality
Professional/Bus Services
Education and Health
Jobs Gained/Lost
2018 2019
Total Jobs
2018: 270,800 (2.2%)
2019: 301,900 (2.4%)
8
THE AUSTIN ECONOMY
9
THE AUSTIN ECONOMY: AT-A-GLANCE
Population Growth
2.7%
Employment Growth
2.7%
Retail Growth4.4%
VC Funding-16.2%
Business Growth
4.5%
Average Wage1.7%
Unemployment0.5%
Housing Starts13.3%
Source: Bureau of Economic Analysis, Bureau of Labor Statistics
10
THE AUSTIN ECONOMY: POPULATION
1.94
2.01
2.07
2.12
2.18
2.22
2
2
2
2
2
2
2
2
2
2
2014 2015 2016 2017 2018 2019
Mill
ion
sPopulation (millions)
(56,000)
(55,000)
11
THE AUSTIN ECONOMY: HOUSING
Source: Texas A&M Real Estate Center
12
33,900Sales
$307,500Median Price
$1.1 Billion
Dollar Volume
7,300Total Listings
2.6 months
Monthly Inventory
Y/Y
3.7%
5.5%
9.5%
14.0%
.2 months
CHALLENGES TO OVERCOME
13
CHALLENGES: HOUSING AFFORDABILITY
0
2
4
6
8
10
12
14
Housing Starts Issued per 1,000 residents
0
5
10
15
20
25
Sales per 1,000 residents
• Housing starts shortage in last 10
years
• Should be building 14,700 homes
per year
• 2.4 times more housing sales than
housing starts in 2017
Source: Texas A&M Real Estate Center
14
CHALLENGES: HOUSING AFFORDABILITY
-1.1%-2.7%
4.2%
1.8%
6.0%
7.8%
7.1%
7.8%
4.7%
5.50%4.8%
2.7%2.4%
1.3%1.7%
2.8%
3.8%
0.3%
2.80%
1.70%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Average Wage Growth vs. Average Home Price Growth
Average Price Average Wage
15
CHALLENGES: RENT AFFORDABILITY
11%
13%
14%
12%9%
7%
9%
25%
Cost of Rent as a Share of Income
<15%
15-20%
20-25%
25-30%
30-35%
35-40%
40-50%
>50%
• Austin has relatively high housing
costs as a percentage of income,
similar to that of San Francisco
• Rule of thumb: 25% of income
• 25% of Austinites spend more than
50% of their income on housing
• 50% of Austinites do not meet this
threshold
28.929.2
29.529.9 30 30.1
30.9
282829293030313132
Raleigh Houston Seattle Denver Austin San
Francisco
Chicago
Rent as a Percentage of Income
Source: Census Bureau
16
CHALLENGES: TRAFFIC CONGESTION• Austin has 7th worst traffic in U.S.
“A 30 minute trip during light traffic takes 43 minutes during peak periods”
• BUT: • Low annual congestion cost
per commuter(US Rank: 20th)• Austin: lower fuel costs
and shorter actual commutes
24 2010
8 54 3
0
500
1,000
1,500
2,000
Honolulu Austin Riverside San Jose Seattle SF Bay Area L.A.
Annual Congestion Cost per Commuter
1.30
1.40
1.50
1.60
1.70
L.A. SF Bay Area Honolulu Riverside San Jose Seattle Austin
Highest Traffic in U.S. by Commuter Stress
Index (CSI)
Source: Texas A&M Transportation Institute
17
AUSTIN JOB MARKET
18
AUSTIN JOB MARKET: TOTAL GROWTH
38,90040,000
36,900
27,30025,700 26,300
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2014 2015 2016 2017 2018 2019
New Jobs Percent Growth
19
AUSTIN JOB MARKET: JOB SECTOR GROWTH
(500)
900
1,700
1,900
2,600
3,400
3,400
3,500
4,900
5,500
-1,000 0 1,000 2,000 3,000 4,000 5,000 6,000
Information
Financial Activities
Other Services
Manufacturing
Professional/Bus Services
Construction
Trade, Trans, and Utilities
Government
Leisure and Hospitality
Education and Health
2017 Job Growth by Sector
Source: Bureau of Labor Statistics
0
50,000
100,000
150,000
200,000
Information Other Services Manufacturing Financial
Activities
Mining,
Logging, and
Construction
Education and
Health
Services
Leisure and
Hospitality
Professional
and Businesses
Services
Trade,
Transportation,
and Utilities
Government
2017 Total Employment High Tech Jobs
2016Growth
Computer Manufacturing
-0.8%
Semiconductor
Manufacturing-6.0%
Technical Services 2.3%
20
Total Employment
Change
YTD 2017: 27,300
AUSTIN JOB MARKET: TECH SECTOR
Source: Bureau of Labor Statistics
21
Tech Facts
113,200Tech Employment
0.9%Tech Industry Employment
Growth (’15-’16)
5,000
Tech Businesses
22.6 employees
Average Tech Firm Size
12.1%
Tech Industry Share of Total Workforce
113,200 114,500155,600
310,900
Austin Denver Atlanta San Jose
Tech Employment
5,0006,300
9,300
11,700
Austin San Jose Denver Atlanta
Tech Businesses
Share of Total MSA Output
20.7% 50.7% 11.9% 10.5%
Austin DenverSan Jose Atlanta
AUSTIN JOB MARKET: HEALTHCARE SECTOR
22
0
10,000
20,000
30,000
40,000
50,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
HealthCare Employment
Ambulatory/Outpatient Services
Social Assistance
Nursing & Care Facilities
Hospitals
Or 101,100 out of 1,016,800people employed in Austin, TX work in the healthcare industry.
1 OUT OF 10 10%
AUSTIN JOB MARKET: THE FESTIVAL ECONOMY
COTA SXSW ACL FEST
Annual
Economic
Impact
$1 billion $320 million $220 million
Attendance 486,200 140,000 194,000
Years Active 6 30 15
Source: AngelouEconomics, Greyhill Advisors
23
AUSTIN JOB MARKET: 2-YEAR FORECAST
0
1,000
1,200
1,200
1,800
3,400
3,400
3,900
5,000
5,400
-100
1,000
1,100
1,200
1,800
3,300
3,400
3,800
4,900
5,300
-1,000 0 1,000 2,000 3,000 4,000 5,000 6,000
Information
Financial Activities
Trade, Trans, and Utilities
Manufacturing
Other Services
Professional/Bus Services
Government
Construction
Leisure and Hospitality
Education and Health
Jobs Gained/Lost
2018 2019
Total Jobs
2017: 25,700 (2.5%)
2018: 26,300 (2.5%)
24
KEY TAKEAWAYS
25
KEY TAKE AWAYS
• The economy is cooling off – this is actually good!
• The Austin area is poised to be one of the fastest growing metros in the US until 2040
• The job sectors with the best growth prospects are:
• Education & Healthcare
• Construction
• Professional & Business Services
• Real Estate
• The job sectors with the least growth prospects are:
• Manufacturing
• Finance
• Information
26
Questions?
If you would like a copy of this presentation, please e-mail me at:
AngelouEconomics has been an industry leader in site location, strategic planning, and economic research for more than 20 years!
angeloueconomics.comTwitter: @angeloueconPhone: 512-225-9325
27
REAL ESTATE SECTOR
28
REAL ESTATE SECTOR: OFFICE
Source: CoStar
29
Existing Inventory
99.5 million ft2
Total Inventory
4.5 million ft2
Total Under Construction
8.1%
Vacancy
764,900 ft2
Net Absorption
Y/Y
$31.13
$33.67
$31.00
$34.00
2016 1Q
2016 2Q
2016 3Q
2016 4Q
2017 1Q
2017 Q2
2017 Q3
2017 Q4
RENTAL RATES$/SQ. FT.
REAL ESTATE SECTOR: RETAIL
Source: CoStar
30
Existing Inventory
109.7 million ft2
Total Inventory
978,500 ft2
Total Under Construction
3.8%
Vacancy
256,600 ft2
Net Absorption
Y/Y
$18.98
$21.86
$18.50
$22.50
2016 1Q
2016 2Q
2016 3Q
2016 4Q
2017 1Q
2017 Q2
2017 Q3
2017 Q4
RENTAL RATES$/SQ. FT.
REAL ESTATE SECTOR: INDUSTRIAL
Source: CoStar
31
Existing Inventory
101.7 million ft2
Total Inventory
1.8 million ft2
Total Under Construction
7.1%
Vacancy
587,100 ft2
Net Absorption
Y/Y
$8.84
$10.47
$8.50
$10.50
2016 Q1
2016 Q2
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
RENTAL RATES$/SQ. FT.