According to new data from the US Census Bureau, Austin’s population grew by 18,000 new residents between July 2006 and July 2007. This makes Austin the eighth fastest growing city in the US during this year. Houston led the pack with 39,000 new residents.
In July 2007, Austin’s population stood at 743,074, a growth of 2.4 from 2006. Many of the neighborhoods immediately surrounding the city of Austin showed significant growth between 6 percent and 25 percent, many in the 11 percent to 25 percent range. This increase in population offers opportunities as well as posing challenges for managing and controlling the growth.
Within Texas, four suburbs around Austin made showed significant growth during the year between July 2006 and 2007, and were numbered among the 25 fastest growing cities in the state. Cedar Park ranked 11th, Round Rock was 16th, Georgetown came in at 19th and Pflugerville was 22nd.
The growth has slowed, due in part to the real estate meltdown that, while hasn’t been as significant as the rest of the country, still has had a small impact on the Austin area economy, and the state as a whole. Even so, Betty Voights, executive director of the Capital Area Council of Governments (CAPCOG) declares that, “while fewer people may be moving here now compared to the last few years, we’ve seen five cities in the region double in population size over the last five years regardless of the housing downturn.”
Despite the rise in office and apartment vacancies in the city of Austin, the retail sector is staying strong. About two and a half million square feet of retail space was added in the first half of 2008 and the occupancy rate rose slightly from 92 percent to 92.5 percent. This makes Austin number one in occupancy rate among the large Texas cities. San Antonio boasts an occupancy rate of 91 percent, while the Dallas/Fort Worth area checks in with an occupancy rate of 89.3 and Houston is at 88 percent.
The good retail news can be attributed to the influx of a throng of retail concerns – REI, Staples, Office Depot, among others – into the Austin area and filling the new space. Existing space, abandoned by big box stores such as Albertsons, is being subdivided and backfilled by a number of smaller stores.
The high occupancy rate can also be attributed to the fact that developers and construction companies have slowed new construction in response to the slower economy. Austin continues to grow in population and add jobs, though at a slower rate than previously. Experts predict a slow down in new construction in 2009.
Meanwhile, a few big projects are slated to open this year: Stone Hill Town Center in Pflugerville, Stone Creek Crossing in San Marcos, and Gateway in Leander. All these large developments are anchored by big box stores such as Home Depot, JC Penney, Best Buy, Target, Lowes and Kohls, with smaller stores filling in.
McCoy’s Building Supply is building a brand new building for their headquarters and it is going to be huge. The new building will be three stories high, and encompass 73,400 square feet. About 30 percent of this area will be reserved for future growth. McCoy’s has enjoyed a growth in revenue in the approximately 30 years its headquarters has been located in San Marcos. Annual revenue has gone from $14 million to over $565 million in that time.
McCoy’s has 84 stores and 2 plants scattered over five states in the south central area of the country: Texas, New Mexico, Mississippi, Arkansas and Oklahoma. The family owned building supply company has been in business since 1923, when Frank McCoy began his contract roofing business in Houston. Soon after, he became tired of big city life and moved everything to Galveston. His son, Emmett, became interested in the business in the 1940s and began offering building materials to the public consumer. In 1984, the roofing company was discontinued and McCoy’s gave itself completely over to the building supply business.
Lumber plays a big role in most construction projects and McCoy’s prides itself on its support of environmentally friendly business practices. They have a list of preferred companies with whom they do business – companies committed to sustainable building and forestry practices. They also partner with recycling programs such as the Rechargeable Battery Recycling Corporation and offer a service for the proper disposal and recycling of cell phones and several types of rechargeable batteries such as nickel cadmium, nickel metal hydride, lithium ion and those lead rechargeable batteries used in portable electronics such as laptop computers and cordless telephones.
The new headquarter building is expected to be completed and occupied by January 2009.
Plans are in the works to develop a 1,000 acre area northeast of Round Rock near the new Seton Medical Center and the Higher Education Center. The land is owned by the Avery family and they have partnered with the Waterstone Development company to begin a mix use development project in the area.
The project, named the Avery Center, calls for as many as 1,200 single family homes and 5,500 rental units. Townhouses, student housing, and higher end homes are planned, along with a 132 acre retail area which will include stores, restaurants and professional office space. Open space is planned, with a lake, trails and park areas, with 100 acres being set aside for this purpose. The plans also include a church, school, and a child care center.
The developer is working with Round Rock city officials on a plan for bus service for residents of the development to Seton, Austin Community College, the State University, and other places of study and employment.
The project is expected to take 10 to 15 years to complete and add $1.6 billion to the tax rolls. This area of Round Rock is one that is doing well developmentally, in spite of financial troubles that have slowed or halted other projects. The national real estate and credit crisis that has affected so much of the markets hasn’t had the same impact in the central Texas area.
Robert Wunsch, chief executive officer of Waterstone, is being picky about who he chooses to build the homes and rental units. He wishes to stay close to the vision that the Avery family has for their land and intends to maintain a high set of standards for construction and design. The houses will range in price from $180,000 to over $1 million.
Complaints about late payment, partial payment or no payment at all are starting to grow louder and more insistent as the California based developers face foreclosure and lien action on many of their projects in the central Texas area.
Just three years ago, Pacific Summit Partners entered the Austin development arena with a $100 million investment in land from southwest of Austin to Liberty Hill. They planned ambitious projects consisting of thousands of homes in four development sites: Highland Meadows, Lakeline Station, Fairways at Steiner Ranch, and Aviara. Now, Lakeline Station is headed for foreclosure, the 230 acre Liberty Hill land has been foreclosed and is back on the market, and construction seems to have stopped at both Aviara and the Fairways.
The theory is that Pacific Summit is taking its spectacular nose-dive in the wake of major real estate woes on the west coast, rather than any development slow down in the central Texas market. The Austin region remains fairly sheltered from the troubles affecting the rest of the nation. Still, financial problems with large development companies who do business in central Texas translates into trouble for local companies who supply building materials and local developers who partner with them.
Pacific Summit owes dozens of local contractors and suppliers for just about every aspect of home building, from major sewer, drainage and water systems and concrete for foundations and driveways to the small details and finishing touches such as carpeting, marble counter tops, and light fixtures.
Pacific Summit Partners is a group formed especially to develop properties in the Austin area. Formed of Pacific Century Group and Summit Partners, the partnership now looks toward a bleak future as it faces numerous liens and lawsuits for breach of contract and lack of payment.
First, the bad news. New home construction in the Austin area in 2008 is still far below where it was this time last year. Housing starts had been sliding since the third quarter of 2006, possibly a delayed reaction to the national house construction slump. The 2,814 new homes started in the second quarter of 2008 is 19 percent when compared with second quarter home starts in 2007.
Buyers are still skeptical and reluctant to make an investment in real estate while conditions remain so uncertain. In the second quarter of 2008, 2,728 new homes were sold, compared with 3,110 in the first quarter. This is down 19 percent from the same period last year.
It’s not only the buyers who are wary in the midst of this housing slump, either. Builders are concerned that prospective buyers can qualify for and obtain mortgages. Lenders, too, are cautious and have raised their standards. After the fiasco of sub-prime lending practices and loose requirements resulted in the current credit crunch, state governments and government mortgage guarantors have cracked down on lending practices.
Now, the good news. Housing starts in the second quarter, though lower than last year at the same time, are up from the first quarter housing starts of 2,303. This is actually a smart move on the part of home builders, who are want to keep their inventory low. There were 11 percent fewer vacant homes on the market at the end of the second quarter than the previous quarter.
And, for those who qualify, lending rates remain low and builders are willing to negotiate for bargain prices.
The United States Department of Commerce reports that overall construction spending has declined in May of 2008 by four tenths of a percent. Residential construction rates went down 1.6 percent in May, the same decline as in April. Non-residential construction rose slightly at three tenths of a percent, slightly less than the eight tenths rise in April.
Private construction rates fell seven tenths of a percent in May while public construction rose slightly at four tenths of a percent. This is after an unchanged rate in private construction and a slight fall of three tenths of a percent for public construction for April.
Home builders are understandably reluctant to start new construction while the market for new homes remains so soft. Also, the incidence of foreclosures continues to rise, putting more inventory on the market and making it that much harder to sell current houses.
Construction firms are putting their money into building hotels, motels and office space rather than the residential area. The home construction rate hit a 17 year low in May, with a seasonally adjusted rate of 975,000, compared with April’s start of a little over 1 million. Single family home starts came in at 674,000. Building permit applications came in at 969,000 in May, which is actually a little better than the 950,000 economists had been predicting.
The Dallas based Trammell Crow Co. is heading a partnership to redevelop the five block area between Second Street and the Seaholm Power Plant and includes the Green Water Treatment Plant, right smack in the center of downtown Austin. Joining the partnership is Constructive Ventures Inc., based in Austin, and USAA Real Estate Company, from San Antonio.
This all-Texas team is looking at an ambitious project that will include 2.6 million square feet of office and retail space, for sale and for rent residential units, hotel and public spaces, as well as parking garage areas that will offer spaces for Austin Car Share and electric car recharge stations.
The partnership proposes major community improvements such as $500,000 toward improvements to Shoal Creek and a grant of public easement for completion of the trail running between Fourth and Fifth Streets. A pedestrian bridge is planned over Shoal Creek to connect the site with the Second Street District. Twenty-five percent of the rental residential units will be made affordable to lower income families. In addition, the group plans to fund public art and music programs and will create an endowment to fund a lunch time music series.
The project includes plans for local retail making up a bulk of the space in the Green Water Treatment Plant and Austin Energy sites. And the icing on this cake is that the firms are aiming for a sky high LEED Gold status for all the buildings, with designs that will reduce energy use up to 50 percent.
Construction is expected to begin in 2009.
