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Raub Report January 2012

January 30, 2012

Happy New Year! This time last year I said that 2011 will be Year One of the Recovery.
Well, we started off well for the first six months and then things fizzled in the latter half of the year. So now what’s next? With the economic landscape still shaky and the political scenery unclear in this election year, I still see the metaphor of The Transformer action figure named “Uncertainty” scaring everyone i.e. we face the monster of Uncertainty, which is Risk unleashed from its cage.

If our national economy is all about JOBS, we got’em; Rackspace, San Antonio Military Medical Center, Eagle Ford Shale companies including Halliburton, Weatherford, Baker Hughes, Chesapeake, EOG, and many smaller service companies. However, remember that most new growth comes from existing companies. For every job these companies I just named create, there is another 2 to 3 jobs created to service them. Every new HEB or Wal-Mart adds over 200 new jobs. Every new apartment complex built adds 20 new jobs. And then all the companies that service them, like SAWS, CPS, the waste hauler, the pest control guy, each of these add new people to service new accounts. I care about new job growth because it is the engine that powers Commercial Real Estate.

San Antonio is on tract to attain at least 2% job growth this year, which means about 17,000 or more new jobs. The San Antonio Federal Reserve Bank’s economist projects an increase of 273,000 net jobs in our marketplace over the next ten years for an average of 27,000 per year.

Example #1 – RackSpace is on the grow. Now it has 3,000 employees at its Windcrest Campus, having located out of the old Datapoint building in the Medical Center. Hiring at the rate of 100 per day, it expects to hit 10,000 employees by the end of 2014. Couple that with the 14,000 new jobs at the San Antonio Military Medical Center at Ft. Sam, a lot is going on in Northeast San Antonio..

Then, there are 700 new residential units under construction on the Broadway Corridor. These projects include The Pearl Brewery Can Plant, 1221 Broadway, The 1800 and The Mosaic. Expect more growth as living in this neighborhood becomes “cool”, with the River, golf course, Zoo, Botanical Center, bike trails, Brackenridge Park, several museums, The Pearl shops and restaurants and three universities.

Homebuilding just had its worst year in the past 15 years, with home starts down to 6,850, a 9% drop from 2010. However, we should be back at the 2010 level of 7,500 this year; down from the record 19,000 starts in 2006. While weak, we are one of the top U.S. markets: “the least dirty shirt.”

Multifamily construction, however, is roaring back.. We could easily see 4,000 new apartment units started this year, in a sense taking up the slack in home building. Areas of activity include the IH-10 and Loop 1604 area, Stone Oak and NE Loop 1604. At one point this year, I counted 12 new projects planned in Westover Hills alone. Now, a number of those are being dropped while the early pioneers forge ahead. Being early to hit your stride in an upswing is crucial. No one is going to wait around for you to get up your courage and capital. Here’s wishing you a very prosperous year in 2012.