5 Comment

• Tired of flooding July 18, 2017 at 1:57 pm

  You should link to the KHOU article on the homes flooding twice since last September. That would get some comments.
• TheNiche July 19, 2017 at 6:56 am

  The local economists that like to tout how Houston’s economy has diversified in recent decades need to look at those office absorption stats. Dallas has always been somewhat less sensitive to energy prices than Houston, but it certainly took part in the see-through skyscraper phenomenon of the late 80s. If at present Dallas is the best in the nation and Houston is the worst, that ought to illuminate what real economic diversification looks like.
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  Hint: They don’t need to pretend that growth in their professional business services and finance/insurance sectors aren’t energy-related; some of it is, but most of it isn’t. It’s the same with manufacturing, distribution, construction, and quite a lot of other sectors. The price of energy touches very nearly everything in Houston and to say otherwise is to bury one’s head in the sand.
• Local Planner July 19, 2017 at 10:17 am

  @Niche: Agreed, though I’d add a little nuance. Houston is somewhat more diversified in terms of total jobs than it used to be – that’s why the region never went negative on job growth during this downturn. Granted, a lot of those jobs are admittedly “non-basic” service economy jobs, but still, one could make a claim for diversification based on this.
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  That said, as far as users of large-scale office space go, there’s no question that diversification is sorely lacking. The energy industry and its service providers are still extremely dominant and drive the major swings in the market. This is a huge contrast to the Dallas side of the North Texas region (Fort Worth has a more energy-dependent office market). Look at the major relocations to the north suburban market there – huge deals – none of them are energy companies. It’s hard not to be envious of Dallas and Collin counties right now. Around here, when an oil and gas boom is on, it seems to suck up all the oxygen, and growth in other sectors is squeezed out. When the inevitable downturn happens, there’s no rush by other economic sectors to fill the vacuum, despite the availability of high quality space and housing (and labor).
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  I believe the Austin’ office market’s level of dependency on its tech sector is akin to Houston’s energy sector dependence, so a tech bust would be a disaster for them.
• TheNiche July 20, 2017 at 11:16 am

  I would argue that Houston didn’t go net negative (overall) because: 1) oil prices bounced and stabilized at just the right moment, averting a snowballing of insolvency; 2) cost controls yielded better than expected savings, enabling E&P activities to become feasible sooner than anticipated; 3) downstream construction activity remained quite strong throughout the crisis; and 4) lagging indicators, especially education and healthcare, remained well-funded due to the timeline of Texas’ budgeting cycle. Finally; 5) if there had been a double-dip, say problems with global financial institutions resulting from a European currency crisis — which was very plausible at the time — then the energy sector would have faced both lower demand for petrochemical products and also constraints in how they could structure their corporate finances. That would’ve been a disaster.
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  Austin’s tech exposure is pretty big, but it still would be buoyed in a tech bust by a totally legitimate state government, higher education, and a tourism-driven portfolio of economic activity. Plus…people want to live there and can afford to, with or without especially good economic opportunities. Austin compares well with Seattle, Portland, and Raleigh. By contrast, Houston has the Texas Medical Center and between the UH System & Rice it has some significant institutional employment, but…in the context of a city its size, that’s not really very much of a buoy at all. I think that Silicon Valley is the better comparison to Houston. Both cities are famous for their number of engineers per capita, and despite so many differences, I think that that metric and that they are the undisputed global hub for commerce in their respective specialities really defines them. There aren’t a lot of other cities that fit so well as analogues…except possibly for Detroit twenty years ago.
• Local Planner July 20, 2017 at 1:29 pm

  Niche, your points are well made, but I do want to clarify a couple of my statements: when I use overall employment to indicate some proof of diversification, I tried to point out that a significant share of such diversification was the education and health care sectors that are, mostly, “non-basic.” Same with construction. Also, I personally consider the downstream activities of petrochemical refining to be non-energy manufacturing, even if conducted by otherwise energy-centric companies such as Chevron and ExxonMobil, and also despite the fact that their key inputs are the results of energy exploration.
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  Regarding Austin, while it does have a core of government and institutional elements in its overall economy, its recent growth in white collar office-using employers has been mostly due to tech industries and the associated service providers, maybe with a relatively small dash of “creative” industries like advertising.. Austin would do well to examine Silicon Valley and how dependent its office market is on tech, (newsflash: very very dependent). When past tech downturns have occurred in the San Jose area, the office market has taken brutal beatings. Please note that I’m talking specifically about the San Jose end of the Bay Area, not SF/Oakland.