They say everything is bigger in Texas. At 268,581 square miles, the state has more territory than countries like France and Spain. Texas’ population of 29 million ranks No. 2 behind California. And the metro areas of Dallas-Fort Worth and Houston, which have a combined 14.5 million residents as of 2018, place among the top five in size for largest U.S. metros, according to Statista.
The Texas economy also is supersized. Major industries include energy, technology, cattle and farming. The aerospace and aviation industry directly employs about 135,000 workers, according to the Texas Economic Development Corp. Boeing, Lockheed Martin, L3 Technologies and Bell Helicopter operate aerospace and defense manufacturing facilities in Texas, and NASA’s Lyndon B. Johnson Space Center is a hub for space exploration. The state also is home to 15 military installations that employed more than 224,000 people and had an economic impact of $100 billion annually as of 2017, according to the Texas Comptroller of Public Accounts.
The Lone Star State is the nation’s leading producer of crude oil and natural gas. Auto manufacturing is another major industry. The state has more than 1,700 auto plants, including General Motors and Toyota. Texas also leads the nation with 248,000 farms and ranches, which cover 130.2 million acres, according to the Texas Department of Agriculture. One in seven jobs in Texas is related to agriculture.
According to the American Enterprise Institute, Texas produced nearly $1.8 trillion in economic output in 2018, making it the world’s 10th largest economy if it was a country. Its annual output last year was slightly higher than Canada’s.
Texas’ gross domestic product (GDP) grew 3.2% in 2018, which tied for ninth with Nevada for the largest annual growth among states, the U.S. Bureau of Economic Analysis reported. Texas had the fastest GDP growth rate (6.6%) of any state in fourth-quarter 2018, however. Other notable companies headquartered in Texas include AT&T and Southwest Airlines in Dallas, Whole Foods in Austin and Dell in Round Rock.
Texas placed only 38th, however, in the U.S. News & World Report Best States rankings for 2019. It ranked in the bottom half of states for health care, education, infrastructure, opportunity, crime and corrections, and natural environment. The publication ranked Texas highly for its economy and fiscal stability, however.
Additionally, poverty has been dropping in the Lone Star State. The U.S. Census Bureau reported that the state’s poverty rate was 14.7% in 2017, down from 18.5% in 2011.
Dallas-Fort Worth office market
The Dallas-Fort Worth office market has seen vacancy rates run higher on a year-over-year basis as companies have moved out of older buildings. The vacancy rate stood at 19% in the second quarter of this year, dropping by 20 basis points from the first quarter, Cushman & Wakefield reported. Year over year, the vacancy rate was up half a percentage point.
The submarket with the lowest vacancy rate was Southwest Dallas County at 6.4%, Cushman & Wakefield said. The office-market outlook remains strong as the Dallas-Fort Worth economy grew by 97,000 jobs during the 12-month period ending this past June, and 28,800 of those were office-related jobs, according to estimates from Moody’s Analytics.
Second-quarter 2019 included 652,600 square feet of new supply and another 1.6 million square feet in the pipeline, Cushman & Wakefield reported. Asking rents rose to $26.93 per square foot, up nearly 2% year over year.
The Lone Star State is in the midst of a new oil-production boom driven by record drilling in the West Texas Permian Basin. Last year, there were 187,401 onshore and offshore wells in Texas that produced roughly 1.57 billion barrels of crude oil and condensate, according to the Railroad Commission of Texas. Oil production rose by 24% year over year in 2018.
Texas oil wells shattered the previous production record set in 1973, according to the Texas Independent Producers Royalty Owners Association. If Texas was a country, it would trail only Russia, Saudi Arabia and Iraq in annual production, according to the U.S. Energy Information Administration. The state’s largest oil company by revenue is Irving-based ExxonMobil Corp., which earned $20.8 billion in 2018.
Texas’ unemployment rate has consistently run below the national average in recent years. This past June, the state’s unemployment rate was 3.4%, 30 basis points lower than the U.S. as a whole. Unemployment in Texas peaked at 8.3% for several months in 2009 and 2010, then fell below 4% in May 2018, according to the U.S. Bureau of Labor Statistics (BLS).
Houston’s Harris County was the state’s No. 1 employment center, accounting for 2.3 million jobs as of third-quarter 2018, followed by Dallas County at 1.7 million, BLS reported. The state’s 25 largest counties accounted for nearly 80% of all jobs in Texas.
The average hourly wage in the Dallas-Fort Worth area was $25.28 as of May 2018, or 30 cents higher than the national average, BLS reported. Texas also has several large, low-paying counties. Three of the four lowest-paying large counties — defined by BLS as having at least 75,000 jobs — in the nation were located along the Texas-Mexico border.
3 Cities to Watch
With more than 2.3 million people, Houston is the largest city in Texas and fourth largest in the country. It has a nine-county metro-area population in excess of 7 million. Forty-four Fortune 1000 companies are based in the Houston area, ranking it behind only New York City, Chicago and Dallas-Fort Worth. Houston has been dubbed the energy capital of the world, employing nearly one third of all U.S. jobs related to oil and gas extraction. More than 230,000 people are employed in fabricated metal, machinery and chemical manufacturing, and Houston also is the nation’s No. 1 port by foreign-exported tonnage.
The state capital, which lies on the edge of the Texas Hill Country region, has become a major technology hub. Facebook, eBay and Oracle, among several other companies, have major regional offices in the Greater Austin area. Apple Inc. announced this past December that it would invest an additional $1 billion for a 133-acre campus in North Austin, near another campus where it currently employs about 6,200 people, the Austin American-Statesman reported. The University of Texas at Austin, serving more than 51,000 students, is ranked by multiple publications as one of the best public universities in the country.
Midland, located in West Texas, is considered the capital of the oil-rich Permian Basin region. Midland added jobs at the fastest rate in the country from December 2017 to December 2018, with employment up 10% during that time. Its largest employment increase was in the natural resources and mining sector, which added 5,305 jobs during the year.
What the locals say
“Houston is doing well. The oil companies are profitable and they’re figuring out how to do things cheaper, but Houston would like to see the oil prices come up. One of the world’s largest medical centers is here, and there are so many medical-technology companies located in Houston. A lot of our clients are coming from California and opening a Houston office in medical-device technology, or just any kind of medical technology. Something that is important to talk about with the Houston market is that there has been a flight to quality. Several new office buildings have been built. They really call them Class AA buildings now. A lot of tenants are leaving the class B and A-minus buildings and going into these AA buildings.”
Commercial real estate broker,
Sources: American Enterprise Institute, Austin American-Statesman, Cushman & Wakefield, ExxonMobil, Greater Houston Partnership, Houston Chronicle, Moody’s Analytics, NationMaster, Office of the Texas Governor, Railroad Commission of Texas, Texas Economic Development Corp., Texas Independent Producers Royalty Owners Association, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics, U.S. Census Bureau, U.S. Department of Labor, U.S. Energy Administration, U.S. News & World Report, World Atlas, World Population Review