By Taylor Williams
When it comes to industrial supply growth in Central Texas, the usual suspects — land availability, interest rate movement, time-consuming permitting and approval processes — are all secondary to the need for more infrastructural development to support these projects.
Roadways, public transit systems, electrical capacity, sewerage and water services — these are the key ingredients in the recipe for successful industrial development in Central Texas that can sometimes be overlooked or understated in importance. As such, economic development corporations (EDCs) in the area are prioritizing infrastructure development in their work as they help developers add much-needed industrial space to support the area’s burgeoning population.
While underlying, efficient infrastructure is critical to all real estate developments and human occupation, it is especially crucial to industrial projects. Large-scale manufacturing facilities — think Tesla in East Austin and Samsung in its northern suburb of Taylor — employ thousands of people. Housing hasn’t caught up to population growth in many of the surrounding communities, necessitating alternate means of commuting.
In addition, manufacturing and e-commerce facilities tend to have above-average electrical capacity requirements. Financially, meeting that demand might be made somewhat easier in a state that has a deregulated power grid, but logistically, some utility providers simply don’t have the capacity to satisfy demand. The same applies to water and sewerage services, not to mention multi-modal forms of transit for shipping and receiving product.
The challenges, as well as monumental importance, of meeting these infrastructural requirements were widely discussed by local EDC professionals at the inaugural InterFace Austin Industrial conference in mid-January. InterFace Conference Group, a division of Atlanta-based France Media, hosted the event, which attracted industrial developers, investors and brokers from throughout one of the fastest-growing regions in the country.
What the Pros Say
Josh Schneuker, economic development director for the City of Seguin, a northeastern suburb of San Antonio, was the first panelist to address the fundamental need for more and better infrastructure in the region.
“In terms of challenges [to new development], we’re still seeing interest rates and construction costs impact deals at the macro-level,” said Schneuker. “But long term, the communities that will be most successful in winning new projects are those that are being proactive about investing in infrastructure. As some say, ‘water is the new gold in Texas.’”
Tom Long, vice president of the Temple Economic Development Corp., was quick to agree.
“The capital [markets] situation is still an issue, but going forward, it’s all about infrastructure, whether that’s electric, gas, water, wastewater or land,” he said. “That’s where we’re going to have to put our efforts to be ready for new projects, because these projects can’t wait — these developers need something now.”
Cameron Goodman, director of economic development for the City of Georgetown, located north of Austin, emphasized the importance of building and maintaining relationships with utility providers and infrastructural gatekeepers.
“It’s something we focus on every day to ensure we’re ready to meet future demand,” he said. “We meet regularly with PEC (Pedernales Electric Cooperative) and ONCOR and our city-owned electrical provider. We’re very focused on adding new substations, and a new wastewater treatment plant will double our capacity in the next year.”
With the ability to handle roughly 44 million gallons per day, the South Lake Water Treatment Plant will essentially double Georgetown’s capacity for wastewater treatment, facilitating more development opportunities along the I-35 corridor, Goodman said. Construction on the facility began in May 2022 and will be delivered in phases over 2025-2026.
Goodman also added that in his experience, these kinds of infrastructural projects are planned and executed over 10 or so years, whereas Georgetown is developing them within just a few years. His addendum speaks to the exceptional level of population growth that Central Texas has experienced and the pressure that said growth has put on local utility systems.
With the basics covered, panelist Scott Smith, assistant director of economic development for the City of Cedar Park, another northern suburb of Austin, echoed the importance of “never having too many roads.” He then pivoted to a new focal point: Austin-Bergstrom International Airport.
“We’ve been fortunate to have some direct foreign investment in our airport, but we still occasionally hear from prospects that they can’t get direct flights to Austin,” he said. “We think of Austin as a huge connector, but the reality is that if prospects don’t have a direct flight [to a given market], they’re probably not going to open a facility there.”
Each of the panelists’ analysis was rooted in their mutual observation that there simply aren’t a lot of vacant, move-in-ready industrial spaces in the greater Austin area. As such, most new industrial product in the area has been developed on a speculative basis. The EDCs consequently offer incentives to help industrial developers and end users get the physical requirements they need — extra docks, lab space — into their facilities. In a sense, that’s a form of infrastructure in and of itself.
Creating Synergies
The panelists gave examples of industrial developers and users that their organizations have partnered with to deliver both new and improved infrastructure and lay the foundations for future growth. In doing so, they’ve been able to create viable employment clusters and synergies among multiple users within the same industrial parks.
“We continue to build good relationships over multiple phases with our existing industries, particularly those in our target sectors,” said Smith. “Firefly Aerospace is a perfect example. The City of Cedar Park, two directors ago, started working with them when they were a very small organization. They’ve now developed multi-stage rockets and gotten to 16 times the capacity of what they could originally do.”
“To support them as they grew, we looked at the surrounding buildings and infrastructure, making sure the roads were good and that the opportunities for future growth were in place,” he continued. “So when we recruit new users for an aerospace and defense cluster, it’s not just a marketing line, but a real estate proposal and a local success story.”
Creating synergies among similar types of industrial users is a key charge of EDCs, Schneuker contended.
“An important part of our jobs is building those relationships among existing businesses and industries and understanding their needs,” he said. “We can then take that feedback and build it into strengthening the existing industry base and applying the design requirements of future industrial projects and users.”
“With new land we’re purchasing and industrial projects we’re looking at in Temple, we want to make sure that the existing businesses have the opportunity to continue to grow in our market,” said Long. “But we’re also looking at the universe of what’s already there as we plan and develop new industrial projects, because this helps us identify new targets for those parks.”
Goodman cited construction work in Georgetown by regional firm Titan Development that attracted two big tech users in CelLink Corp. and ZT Systems. The companies, which respectively support the electric vehicle and cloud computing businesses, account for about 3,500 jobs between them, according to Goodman.
“We wouldn’t have been able to land those companies without those spec development spaces being there to be move-in ready for them,” he said. “Having that public-private partnership in which we had roads constructed and utilities extended was also a key component in making these sites move-in ready. So finding a good development partner and developing that infrastructure is a really crucial strategy.”