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Economic Indicators for South Texas Show Steady Growth for 2020

Feature Photo (above): View of the new harbor bridge under construction in Corpus Christi (Spring 2019), as seen from North Beach looking south. Image: Google Streets.

Posted: 1-2-2020

by Adolfo Pesquera

South Texas can expect steady growth in its largest markets–Greater San Antonio and the Lower Rio Grande Valley–but there are a few problem areas that may be a drag on the region’s economy.

Virtual Builders Exchange defines that South Texas region as the 45 counties that cover the lower region of the Hill Country, the lower Coastal Bend from Port Lavaca to Brownsville, and the Rio Grande Valley as far west as Eagle Pass.

The largest and most active economic engine in South Texas is San Antonio and the state of the city is strong. In 2019, the U.S. Census Bureau ranked San Antonio the second fastest growing city in the nation, behind only Phoenix, Arizona. The Alamo City’s population increase of 20,824 compares to third-ranked Fort Worth (19,552 net new residents); and sixth-ranked Austin (12,504 net new residents).

The two Collin County cities of Frisco, ranked 10th, and McKinney at 13th, were the only other fast-growth Texas cities to make the nation’s Top 15.

San Antonio’s city sales and use tax revenue is also in healthy territory. The city reported more than $370 million in tax revenue Year-to-Date, according to the Texas Comptroller’s December 2019 report. That is an increase of 4.04 percent over the city’s Year-to-Date December 2019 statement. At about $699 million, only Houston showed higher tax revenues.

2019 sales and user tax revenues from select cities in South Texas. Source: Texas Comptroller.

San Antonio has not had as robust a building boom in the sectors of office buildings, and luxury apartments and condominiums as Austin or Dallas, but the city has been experiencing steady construction in market rate and affordable multifamily housing, hotels and schools. Then there is this spate of new manufacturing facilities:

  • Aisin AW Company began construction in November in San Antonio suburb of Cibolo of a 500,000-square-foot, $400 million automatic transmission production plant.
  • Continental Automotive Systems Inc. reached agreement with New Braunfels and Comal County officials in December to construct a 205,000-square-foot, $110 million factory to produce sensors for the automated vehicle market.
  • In September, the San Antonio Economic Development Foundation announced that Navistar International Corporation would break ground before year’s end on a $250 million plant on 426 acres in south Bexar County. Navistar is the fourth largest producer of trucks in the United States.
  • Also in September, Toyota announced plans to invest another $391 million for major renovations to its truck assembly plant in south Bexar County.

Commercial construction has been popping up all around the city. Downtown and the surrounding neighborhoods receive most of the attention. There continues to be new multifamily, office and hotel construction up the Broadway corridor in or near the Pearl Brewery district; east into Dignowity Hill from St. Paul Square and around the Alamodome; and south into Southtown from the Blue Star complex to Highway 90.

Construction activity in downtown San Antonio–a new apartment complex (left) and HEB corporate parking garage (right), along East Cesar Chavez Street. Both projects were completed summer 2019. Image: March 2019 Google Streets.

There has also been strong activity all across the north from the tri-county cities where Bexar, Comal and Guadalupe counties converge to as far west as Boerne, Fair Oaks Ranch, Leon Springs and all around Helotes.

Brooks (formerly Brooks City Base) has been the match lighting mixed-use development to the southeast. And with the recent transfer of development rights to the lands north of the Texas A&M University-San Antonio campus to a New Braunfels company–along with the pending opening of the Navistar plant–prospects are very strong for a major South Side revival far beyond what Brooks started.

While the relatively nascent Texas A&M campus has struggled to land a private sector development partner, the University of Texas-San Antonio, founded in 1969, has had no such problem. On Nov. 13, the UT System Board of Regents approved an updated campus master plan.

Master plan concept for future improvements to the UTSA Main Campus and new Park West campus. Courtesy: UT System.

The plan calls for nearly 5.3 million gross square feet of new space to support the university’s vision of becoming a model for student success, a great research enterprise and an exemplar for strategic growth and innovative excellence.

The UTSA Downtown Campus is already changing from the small internally-focused campus west of Interstate 35 to one that will have a much larger footprint on downtown’s west end. The Downtown Campus’ transformation into an urban campus will go east beyond San Pedro Creek, but it will also go west.

“To leverage its proximity to the vibrant West Side neighborhood, the campus will physically and programmatically connect to the west. A new pedestrian bridge alongside the existing Buena Vista Street bridge will cross over the railroad tracks into the West Side neighborhood, and a plaza at the level of the bridge will provide a welcoming entry to the campus,” according to the master plan summary. “Shared community facilities, possibly including a recreation and wellness center, will be located near this point of entrance to facilitate shared usage by the community. As the City of San Antonio-owned blocks west of South Frio Street become available, they will be integrated into the campus and house a variety of academic and research buildings, housing, and parking. A promenade will run north-south through this area, connecting to VIA Centro to the north through a pedestrian-only extension of South Medina Street.”

Much of the new expansion, however, is being planned for the main campus, which is projected to require 3.3 million square feet of space to support student growth. The current total assignable space at the main campus is a little over 1.8 million square feet. This expansion includes creation of a third campus–Park West Campus will be west of the main campus.

On the Rio Grande

For the past several decades, the economy of the Lower Rio Grande Valley was dependent on agriculture and international trade with Mexico. Most of the trade with Mexico came in the form a goods moving to and from maquiladora, and from Mexicans crossing the border to shop, purchase homes and send their children to South Texas schools.

The Port of Brownsville has been positioning itself to become much more influential in the Valley’s future development. Three planned LNG terminals are well on their way to becoming a reality. Texas LNG Brownsville LLC, Annova LNG Brownsville, and Rio Grande LNG LLC have had their proposals approved by the Federal Energy Regulatory Commission.

The three terminals, combined with the Rio Bravo Pipeline Company LLC transmission line that will supply them, represent an investment of $38.75 billion. Their construction and operation will bring thousands of good-paying jobs and transform Brownsville as no other event has in the city’s 172-year history. All of the terminals are projected to be operational by 2024.

Rocket assembly activity October 2019 at the SpaceX launch pad on Boca Chica east of Brownsville. Courtesy: Twitter/@austinbarnard45.

By mid-summer 2019, Keppel AmFELS has a new public vessel assembly and erection pad to work with. Keppel is now constructing Jones Act vessels (ships operated by U.S. citizens or residents moving goods between U.S. ports). The shipyard will create 700 new skilled jobs.

There have been delays since this was first announced in early 2018, but as recently as October 5 of this year Big River Steel claims it is still interested in construction a $1.6 billion steel mill at the Port of Brownsville. Based in Osceola, Arkansas, Big River would be opening its second mill in Brownsville if the deal goes through. A spokesperson for the company told the Brownsville Herald “Big River Steel remains keenly interested in the Port of Brownsville, and our early design and feasibility efforts continue unchanged.”

The steel mill would support another 500 new fulltime jobs.

SpaceX, located several miles southeast of the port and in no way affiliated with it, is fast becoming another economic engine for Brownsville. The private company has been active on Boca Chica, a wetland area next to the mouth of the Rio Grande, for about six years. Owned by Elon Musk, the company is heavily invested in the research and development of ships that are intended to be used for the establishment of off-planet colonies.

Since September, the company has been trying to buy out its neighbors in order to better secure its operations; the rockets it launches are very disruptive to residents.

What is coming to Brownsville promises a shot in the arm for a region that has otherwise been challenged by some negative factors. The LRGV more than doubles in population from 1980 to 2016, growing from almost 600,000 to nearly 1.4 million. But the growth rate has flattened out. The percent of increase from 2017-2018 was less than 1 percent in Cameron, Hidalgo and Cameron counties, and it declined in Willacy.

The causes, according the the Census Bureau, are a combination of declining birth rate and in-migration. Another complication is how the population breaks out into age groups. The largest segments are children under 18 and adults over 65, with the fewest people being those in their prime work years.

In 2019, the Dallas Fed Business Cycle Indices reported a payroll expansion in McAllen of 1.7 percent, the only achieved a 0.4 percent growth at the seasonally adjusted annualized rate (SAAR), and Laredo fell 2.5 percent. The inland port of Laredo is the nation’s number one exporter of automotive parts, which had to assembly plants in Mexico; the General Motors strike slowed down the auto supply chain activity and there were substantial employee layoffs in Juarez and Chihuahua.

School building construction trended down in Laredo, according to a TAMU Real Estate Center report on the first three quarters of 2019. Rio Grande Valley values trended upward on the strength of two-family building construction. McAllen’s apartment sector outpaced 2018 in the third quarter for the first time in 2019.

Laredo’s emphasis on the import-export sector has required development over the decades of a huge warehousing/distribution infrastructure. In 2018, warehousing added over 1 million square feet of new construction. Through the first five months of 2019, Laredo was tracking that same amount of square footage, with a construction permit value over $55 million.

The Coastal Bend

The South Texas region, with its economic hubs highlighted in yellow.

The South Texas Economic Development Center of Texas A&M University-Corpus Christi, noted in a 2019 report that the population in the Coastal Bend has been declining.

According to Census date released in April, all three counties of the Corpus Christi metro area–Nueces, San Patricio and Aransas–experienced population declines between July 2017 and July 2018. Factors cited included the decline in the region’s oil production, Hurricane Harvey and out-migration of the labor force.

This is not a one-time event. The Corpus Christi metro area saw population declines in 2001 and in 2007. The metro area also experienced declines in the 1980s and 1990s, two decades affected by a local recession.

The Corpus Christi metro experience runs counter to the state as a whole, which has experienced steady–even dramatic–population growth. But that growth occurs in the Houston, Dallas-Forth Worth, Austin-San Antonio, Midland-Odessa and El Paso regions. Corpus Christi lacks the diverse economy needed to sustain steady economic activity and is therefore more prone to cyclical ups and downs.

Construction, however, is the second largest private industry in the region, behind only healthcare.

“The size of construction employment in Corpus Christi is more than twice its size in a typical metro area,” the university’s report stated.

“In the midst of a construction boom near the Port of Corpus Christi, it is difficult to imagine that the local construction industry faces the highest unemployment rate of 15 percent, compared with the below 5 percent overall unemployment rate. The unemployed in construction occupations, currently exceeding 3,400, account for more than one in three (34%) of all unemployed persons in the metro area.”

Although the region has been too dependent on the energy sector and tourism, there are events unfolding that can change that. In July, Steel Dynamics Inc. named Sinton in San Patricio its site for a new state-of-the-art electric-arc-furnace (EAT) flat roll steel mill. Construction of the factory is expected to begin 1st Quarter 2020 and operations will begin mid-2021. The factory is expected to employ about 600 workers.

In addition, ExxonMobil and SABIC are nearing completion on a $10 billion, 1,300-acre plastics manufacturing complex, also in San Patricio County. When plans to build the plant were announced April 2017, ExxonMobil said it would generate 6,000 jobs during the peak construction phase and 600 permanent jobs once the plant is in operation.

These new plants will also benefit the growing Port of Corpus Christi, which will become their distribution point for outbound products.

The City of Corpus Christi has been planning to take advantage of another major change closer to home. The Texas Department of Transportation is funding construction of a new harbor bridge that will connect downtown across the port’s main turning basin to North Beach. The dismantling of the old Harbor Bridge is forcing the city to reassess the future of North Beach and the downtown real estate that will become available when the old bridge is removed.

A tax increment reinvestment zone was created by City Council in November to begin the process of bringing much needed infrastructure to North Beach. Developers are waiting in the wings to revitalize both North Beach and the north end of downtown.


adolfo@virtualbx.com

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By |2020-01-06T08:45:25-06:00January 6th, 2020|Feature Story, Industry News|

About the Author:

Adolfo Pesquera (Reporter/Editor) is a veteran news journalist. He has worked for Hearst Corp., American Lawyer Media, News Corp and Freedom Communications. His work has been published in newspapers and magazines across the USA. He is a journalism graduate of UT-RGV. He writes, edits and creates digital pages for VBX.

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