While growth and development have been evident in most Texas areas during the last few years, Lubbock shines bright among cities in the Lone Star State. As Marci Russell, former chief economist with CNBC, said, “Lubbock’s got oil and gas, a strong agricultural presence, a great university and a health care system that is the envy of other communities.”
The year 2013 brought amazing growth, and the positive economic trends look to continue in 2014. Building permits climbed to a surprising 987 last year, up 143 percent, and retail sales and payroll employment are still growing. Employment increased by 4 percent in 2013, ranking Lubbock fourth in Texas in terms of growth in that metric. The unemployment rate declined sharply to 4.3 percent, the lowest since 2008, and Lubbock’s consumer price index was up 2.1 percent year-over-year in January.
Another sign of improvement in Lubbock is how the transportation system in the city has been enhanced with the completion of the Marsha Sharp Freeway and the Northwest Passage. Additionally, the Milwaukee Corridor continues to expand with development in retail, office, and small business on the West side.
Several large users of office and industrial space relocated and/or expanded to Lubbock in the past year, leading to excellent performance among those properties and a particularly low vacancy rate in the industrial sector (see chart). No fewer than nine businesses, including Convergys and Custom TeleConnect Inc., created more than 700 new jobs by moving into the city.
The retail sector might be even more active, however. For starters, two Dunkin’ Donuts are coming to Lubbock — the first is under construction near 79th and University, and the other will be in the Milwaukee area. Other recent newcomers include Blue Oasis Italian Ice, Polkadot Alley, Pure Water & Ice (the company’s second store in town), Alamo Drafthouse and La Madeleine.
Conn’s Electronics is going up along the Milwaukee Corridor, and a new Love’s Truck Stop is awaiting final approval to begin their facility near the airport. Also, Inland Truck Parts and Service, an employee-owned company, broke ground on a 31,000-square-foot facility. Unique about Inland is the employee ownership. Inland is now celebrating its 70th anniversary with 28 locations in Iowa, Kansas, Missouri, Montana, Nebraska, North Dakota, South Dakota, Oklahoma, Texas and Wyoming.
Hospitality sector-wise, at least three new hotels are under construction in Lubbock. Arbor Inn is building their second motel in the Milwaukee area. The Cobblestone Hotel will be built on land owned by the airport, with construction slated to start in June with hopes of occupancy by May 2015.
The third property, near University Avenue, is under construction. Occupancies are solid, as most hotels and motels are now booked solid a year in advance of Texas Tech’s events such as graduation and football games.
On the multifamily front, occupancy rates were only slightly affected despite the number of apartment building permits issued in 2013. Average apartment rents were 87 cents per square foot.
Finally, while not a commercial real estate sector, the activity in single-family properties speaks to Lubbock’s strength. Unit sales in the residential multiple listing service (MLS) in 2013 were the highest in 35 years, and total sales volume was in excess of $652 million, setting a new record.
Single-family building permits were up 33 percent, according to Charlie Hamilton of Lubbock Land Company. What’s more, James Arnold of the Lubbock National Bank’s Economic Index says new housing inventory has been absorbed and prices have risen.
A great asset to Lubbock since 2003 is Lubbock Economic Development Alliance (LEDA), which works to help the city grow and utilizes various resources to bring people and events into the city. In 2006, LEDA purchased 586 acres of farm land east of I-27 to develop the Lubbock Business Park, a place where businesses could locate or build new infrastructure close to the airport and major highways. A year later, LEDA obtained a 526 acre tract north of the airport known as the Lubbock Rail Port.
LEDA continues to seek out businesses that will not only diversify Lubbock’s industry composition, but those that will have a positive impact within the community through their products and services. Primary targets are manufacturing, research and alternative energy companies.
John Osborne, president and CEO of LEDA, notes that interest from businesses may not be the biggest hurdle to overcome, however. Hiring a full-time staff with employment figures as low as they are in Lubbock could be difficult.
“With nearly a fully employed workforce staffing may become difficult, but that could ultimately lead to more people moving into the city,” he says.
Of course, local companies are feeling pressure in competing with all the oilfield activity going on down in the Permian Basin. Wages paid in booming oil towns can be hard to contend with.
Tri-Gobal is planning to build the world’s largest wind farm in Hale County, just a few miles North of Lubbock. If all goes as planned, there will be more than 500 turbines when the project is completed in 2015.
First, several approvals will need to come through, from those regarding meteorological data to endangered species. The uniqueness of the new development is that it sits on the convergence point of two of the nation’s largest grids, Energy Reliability Council of Texas and Southwest Power Pool.
On the matter of water conservation, Lubbock (like many other cities) is taking steps forward, regardless of rainfall. The city being in Stage 1 drought conditions since 2006, save one short period, means no outdoor water usage in the heat of the day from 10 a.m. to 6 p.m. Additionally, residents and businesses are asked to apply mulch and to install drought resistant plants.
Nevertheless, the future looks good for Lubbock. The only negative point as this is written is lack of rainfall for the very important farm economy. The High Plains Underground Water Conservation District and organizations such as the Texas Water Smart Coalition are leading the way to educate families and businesses about ways to conserve water; workshops on rainwater harvesting and xeric landscaping also bring beneficial methods to practical usage.
— By Nita Kiesling, Partner and Agent, WestMark Commercial. This article first appeared in the May 2014 issue of Texas Real Estate Business magazine.