Big is a Texas thing.
Starting with the obvious, Texas is big land and big open spaces. It’s the second largest state behind behemoth Alaska. The Lone Star State is one of the fastest-growing in the country: more than 19 million bodies are expected to settle within its borders by 2040, according to the Texas State Data Center. That’s double the 2007 population of 23,904,380.
Texas is a big city place, too. Four top 10 U.S. cities for growth are located in Texas: Fort Worth, Houston, San Antonio and Austin. Three Texas cities are in the top 11 for largest growth percentage: McKinney, Denton and Forth Worth. That’s a big population surge, which means demand for services and infrastructure – good news for landscape design/build firms and hardscape contractors.
Aside from the big numbers, there’s a general attitude of bigness in Texas: big hair, big hats, big guns – at least in the cowboy days. Big and proud Texas has even more reason to be struttin’ its stuff, or at least doing a modest do-si-do, as one of few states that is not experiencing recession.
Big oil fields, big technology (Dell), big corporate headquarters and, in Houston, big medical institutions (Texas Medical Center, the world’s largest medical district) and NASA’s Johnson Space Center prop up the economy in good times and bad. A diverse economy is a stable economy, says Robert Taylor, president of BIO Landscape and Maintenance, a member of the Yellowstone Landscape Group in Houston, Texas.
“Almost all service sectors and industries are impacted by this recession, but we still have a heavy presence of petroleum, and the oil industry is doing fine,” Taylor says, pointing to a balance that didn’t exist in Texas during the 1980s, when oil was the state’s cash cow. “We went through a serious recession then because we were so oil-focused. Since then, we diversified and have all types of industry and service businesses.”
Houston is a port city, which is also an economic stabilizer, Taylor says. And though Hurricane Ike devastated Houston/Galveston, opportunities are born from disaster. In the design/build world, rebuilding infrastructure will keep BIO Landscape and Maintenance busy for quite some time, Taylor estimates.
“Right now we are in a lull because we’re still cleaning up after Ike, but there were many homes that were completely destroyed,” Taylor notes. “People will be rebuilding. I expect a large construction boom along the bay area over the next three to four years.”
This is good for the industry.
Meanwhile, companies like Maldonado Nursery & Landscaping that provide a “turn-key” solution to take on whole projects for clients have tipped the revenue scales the past couple of years. Maldonado grew by $8 million last year. This year, Jerry Maldonado, vice president of the San Antonio-based business expects the same growth. To keep business steady in 2009, the company will tweak its bidding structure to remain competitive, and continue marketing efforts in affluent neighborhoods that can afford luxury services.
Sure, the fiscal climate is uncertain and businesses are on guard as they plan for 2009, Maldonado says. But new home construction projects haven’t halted in the San Antonio area. “We have a lot of undeveloped area, and there is room for growth,” he points out.
Maldonado says Texas’ “insulated” economy is due in part to an affordable housing market. The median home price in San Antonio is $172,530 with an average 3.5-percent appreciation from 2007 to 2008. “Even now, you drive around and you see a lot of construction going on,” he says. Certainly, there was more building last year, but the region is not like some states where the crane is an endangered species.
Eddy Edmondson, president of the Texas Landscape and Nursery Association (TNLA), says, “we’re still punching a lot of holes in the ground,” referring to the strong oil industry in Texas.
Steve Jones, president of PAVE TECH in Prior Lake, Minn., supplies hardscape materials to contractors. “The rest of the country is getting whacked,” he says. Texas, not so much. “States whose economies have a large interest in oil are doing quite well,” he observes. “In Texas, you have a unique situation. Anywhere you see those pumps, you might find a decent economy.”
An attractive market could attract people currently living in states that are getting beat up by the economy. Why not move to Texas where the weather’s warm and the news is brighter? “If someone found a good job in San Antonio, where they might not have moved before, they might decide to move now out of necessity,” Taylor suggests.
With no personal or corporate state income tax, the business climate satisfies entrepreneurs and owners who settle in Texas. “There is a labor force here so businesses that move in are able to hire personnel,” Edmondson says.
It also helps that Texas is a Sun Belt state, favorable for the landscape industry because outdoor kitchens and living spaces are used year-round. “In past years when the economy slumped and gas prices increased, people stayed at home and worked in their yards,” Edmondson says, referring to the popular “staycation” that many homeowners took this year: vacation at home.
Edmondson says TNLA members have expressed promise in developing outdoor kitchens, even if these hardscape-intensive projects are luxuries. The “Dellionaires” of Austin, where the technology giant and comparable corporations like Samsung are based, have disposable income.
These large corporations also attract a second generation of businesses that huddle around to partner with goliath firms. “People who work in industries like technology or academia tend to have higher incomes, so the opportunities for design/build and hardscape work will be fueled by that,” says Judy Guido, executive vice president and chief marketing officer for Yellowstone Landscape Group, based in Plano, Texas, which is “ripe with commercial growth” spreading from Dallas-Fort Worth.
Meanwhile, cities like Georgetown, Texas, 26 miles south of Austin, were bedroom communities a few years ago and today boast active business communities. Georgetown has more than 2,300 businesses, some of which are headquartered in the city’s old Victorian homes. Meanwhile, in sultry San Antonio, 16,000 startups launched in the area last year, according to a report by Fortune Small Business.
Still, businesses that set up shop or plan to thrive can’t kick operations into cruise control, Guido says.
“Everyone sees Texas as a growth area, but people who are not efficient and leaders in their industries are probably very concerned,” Guido relates. “Consumers are more cost conscious and less likely to take risks. The businesses that are really going to see growth are those who have been around for a while and have a great track record. Companies that can’t prove themselves will have a difficult time.”