When it comes to both realized and projected population growth supported by a diverse economy, favorable lifestyle and geographic amenities, there are few US cities that rival Austin, Texas.  Between 2010-15, Austin was the 2nd fastest growing city (16%) and MSA (18.8%) in the nation.  Tax incentives instituted by then Gov. Rick Perry to lure CA companies to the business-friendly state of Texas, attracted Apple Computer.  Apple thus became Austin’s first big corporate fish building a 1.1 million square foot campus in north Austin to support it's 6,000 thousand employees.  Apple, along with Technology giants Dell (HQ in north Austin), Samsung , IBM, Google, and Oracle (constructing a 40-acre, 550,000 square foot campus on Austin's downtown riverfront), are among the litany of big tech employers employing over 10% of Austin’s work force of over one million people.  The University of Texas (“UT”) is another major economic driver with a total enrollment approaching 50,000, a staff of 20,000, and a new medical school complex. The University possesses the nation’s largest public school endowment, and accounts for over 2 billion in economic activity for the state and city.  Austin is also the Capitol seat for the Lone Star State, which accounts for another large segment of the city’s workforce and economic activity.

Though Austin’s affordability has lessened, and the city deals with infrastructure issues following its meteoric expansion, population and employment statistics continue to be favorable.  Austin added 22,000 net new jobs (2.2% gain) in the 12 months ending in October 2017, making Austin the 17th fastest growing major metro year-over-year.   Though Austin has fallen from the top spot of the country’s growth metrics, we remain bullish on its future, and long-term appreciation potential.  Austin is attracting a young and educated workforce.  It’s unique lifestyle, diverse culture and relative affordability will continue to attract businesses and positive population migration, thereby expanding household formations.  Austin is forecast to grow 55% by 2030, or to a population of nearly 2.8 million. As such, we will continue to seek quality and well-located multifamily investments in the Austin MSA.  


Metro Houston is also a target market for us. Despite sitting atop major U.S. metro's apartment vacancy rankings (6.8%) as of Q416, and also ranking in the bottom ten for national employment as complied by Marcus & Millichap in 2016, we are confident that Houston deserves our focus.  Conventional wisdom, moreover, forecast the energy price correction of 2014-15 to result in a cataclysmic effect on the Houston economy, which had been the case in prior energy-related corrections.  However, our contrarian view of Houston is supported by it adding 125,005 residents, (a 1.9% increase), in the 12 months ending July 1, 2016, according to recent estimates by the U.S. Census Bureau.  Additionally,  nonfarm employment in the Houston-The Woodlands-Sugar Land Metropolitan Statistical Area stood at 3,061,600 in October 2017, up 1.6 percent, from one year earlier, according to U.S. Bureau of Labor Statistics. During the same period, the national job count increased 1.4 percent.  The Houston-The Woodlands-Sugar Land metro area created 43,200 jobs in October, according to the Texas Workforce Commission. That’s the largest single-month job gain on record. The record-setting growth reflects the aftereffects of Hurricane Harvey, an expected post-summer improvement, and perhaps a bump in economic activity.  Notwithstanding Harvey’s effects, the Houston area’s October increase was its 14th consecutive month of over-the-year job gains.  

Prior to Harvey and in response to energy sector weakness, housing planning and development pipelines were curbed. Today, ACA seeks to capitalize on the ensuing supply constraints derived from this miscalculation  of  “today's Houston”.  Supporting our thesis is a growing diversification in Houston’s economy, and the MSA’s three industry supersectors each adding 10,000 jobs or more from October 2016 to October 2017. Professional and business services added the largest number of jobs, up 13,200 during the period. Local job gains in the sector came primarily from the employment services industry which had a 16.1-percent rate of job growth over the year. Houston’s professional and business services employment rose 2.8 percent since October 2016 compared to the national increase of 2.6 percent. Education and health services added 12,900 local jobs over the year, the second largest gain among Houston’s supersectors.  Ambulatory health care services added the most jobs in this sector, up 8,400. The local supersector’s 3.3-percent rate of job growth compared to a national increase of 2.0 percent. Manufacturing employment in Houston rose by 10,000 from October 2016 to October 2017, marking the seventh consecutive month of annual job growth, after 24 months of annual declines. All of the job growth was in the durable goods manufacturing industry, as the non-durable goods manufacturing industry lost jobs over the year. This was the first annual job loss for the non-durable goods manufacturing sector since June 2011. The local area’s rate of annual job growth for the manufacturing sector, at 4.6 percent, was nearly four times the 1.2-percent gain for the nation. Houston’s leisure and hospitality supersector added 8,900 jobs over the year. The 2.9-percent local rate of job growth compared to the 1.8-percent increase for the nation. The local job gains were concentrated in the sector’s largest industry, food services and drinking places, which added 7,900 jobs during the period.  Government employment rose by 8,700 in the Houston area from October 2016 to October 2017. Local government educational services accounted for the bulk of the increase with a gain of 6,300 jobs. Government employment rose 2.1 percent locally over the year compared to a 0.3-percent national gain.  Finally, both the financial activities and the mining and logging supersectors added 2,500 jobs each to the local economy.

Population-wise, Houston saw the second largest gain of any U.S metro via a combination of births and domestic as well as international migration during 2016.  The forecast growth of 1.9% for 2017 underscores a Houston maxim - the region finds a way to grow even when faced with low oil prices. Houston’s resiliency in the face of economic and natural disaster, as well as push towards economic diversification, are attractive characteristics to ACA.   Today, Houston is the nation's 4th most populous city, and also the 4th largest metropolitan area in the U.S. ranked by output, with the MSA accounting for 3% of total U.S. GDP.  As a result, metro Houston will require more than 200,000 new apartments by 2030 to meet forecast demand. Prior to hurricane Harvey, moreover, Houston  ranked as the nation's 3rd most undersupplied apartment market.


San Antonio is the center of economic activity and commerce in South Central Texas, located about 140 miles north of the Gulf of Mexico and 75 miles south of Austin. The Alamo City lies at the crossroads of several major interstate highways and railroads serving both coasts, as well as the NAFTA corridor. The Alamo City is also considered an international trade center due to its strong economic and cultural ties to Mexico, as more than half of the trade flow between Mexico and the United States travels through San Antonio. Its proximity to the Port of Houston and direct access to other major ports, such as Long Beach and Mexican port Lazaro Cardenas, further facilitates trade. Additionally, the logistical functionality of San Antonio is enhanced through Port San Antonio, a 1,900-acre multimodal logistics hub and business platform catering to Fortune 500 companies such as Boeing and Lockheed Martin.

Fueled by robust population and job growth, San Antonio’s economy has flourished over the last several years. The metro is an attractive market for job seekers as job creation remains strong and unemployment is at a historic low. San Antonio has continued to add jobs in 2017.  According to US BLS, its unemployment rate fell to 2.9% as of October 2017, compared to 3.8% a year earlier. San Antonio is among the five least expensive metros in the U.S. to do business, which has attracted startups and corporate relocations to the metro area. The strength of San Antonio’s economic structure is its diversified employment base. While the city’s economy has historically been anchored by three major industries – healthcare, tourism and military/defense – recent job growth in the market has spanned a diverse group of industries.

ACA views San Antonio as a relatively consistent performer, with solid long-term growth prospects.  The city has worked hard to broaden its industry portfolio that continues to expand. New business strengths have emerged in the past years, including biotechnology, financial services, manufacturing and information systems. Additionally, San Antonio is experiencing growth in the technology sector with local tech firms receiving $1.7B in investment capital last year.  In targeted submarkets, we view San Antonio to be an attractive metro due to its economic and population growth, low business and living costs, central geographic location and versatile transportation infrastructure.