Butch West, Kennedy Wilson Brokerage Group
Despite headwinds from the oil and energy industries’ latest moves, cities throughout Texas continue to boom. Austin and San Antonio have, in recent years, led the charge. However, one city situated along Interstate 35 between those powerhouses is emerging out of its sleepy college town roots and drawing attention from local and national investors.
Once the primary destination for weeklong vacation shopping excursions to the country’s fourth largest outlet mall, San Marcos is quickly moving up the ranks. Recently named the fastest growing city in the U.S. by the Census Bureau for the third year in a row, it’s clear that one of Texas’ best kept secrets is out. Spec properties dot the landscape, fueled by the increasing demand for housing, hotels and industrial space, and are often leased before construction has completed.
The economic forces driving the city’s growth are many. It is located on the I-35 Regional Growth Corridor between Austin and San Antonio with nearby access to I-10, toll road SH 130, as well as two international airports.It’s home to Texas State University, with more than 36,000 students, and rapidly gaining a reputation for its engineering, materials science and biotech programs. It is home to Tanger’s outlet malls, with over 350 stores totaling more than 1 million square feet.
The beauty of the area and the quality of life also play a significant role in drawing people and companies to the area. San Marcos offers an affordable cost of living, great tax incentives, quality schools, easy access to healthcare, an abundance of land, good infrastructure, proximity to Austin and San Antonio and a highly educated, young workforce.
One significant factor that has influenced the emergence of San Marcos from a sleepy college town and outlet shopping destination to the fastest growing city in the nation was the hiring of Adriana Cruz as the president of the Greater San Marcos Partnership (GSMP). Her laser focus on attracting companies from the core industries of aerospace, clean energy and technology has proven successful.
A semiconductor company is in negotiations for approximately 90,000 square feet in a spec building; Corvac Composites, a global Tier 1 manufacturer in the automotive industry, recently leased a 100,000-square-foot manufacturing facility; and construction is underway on the 110 Loop which will enable the growth of more industrial development.
Filling the Gap
With the tremendous regional growth in Austin and San Antonio driving the need for all types of commercial property growth, developers are moving to fill the gap between the two cities.
Residential developments currently underway in San Marcos total approximately 4,500 homes to be delivered within the next few years. A portion of one of those properties, Paso Robles, is age-restricted, leading to the need for more healthcare and services for the baby boomer generation. Seton Medical Center Hays, located in San Marcos, is the largest medical campus in Hays County, and is spurring the development of medical office buildings in its vicinity.
Conventional retail is following the rooftops, leading to demand for more industrial/distribution space in addition to the flex space demand. RFIs submitted to the GSMP for industrial space range from requirements for 10,000 square feet to buildings exceeding 200,000 square feet, with the majority of requests being in the 15,000-to 40,000-square-foot range. All requests are for existing buildings.
Factors Affecting Growth
External factors influencing the growth include the relative ease of doing business in San Marcos, particularly when compared to the development restrictions and challenges found in Austin and San Antonio.
Adam Kohler, director of business development and marketing for Sabre Commercial explains that as Austin’s real estate market has remained hot for quite a while, many of the best property deals have already been made by people and businesses who have been there the longest.
San Marcos’ availability of land encourages outside businesses to invest in the construction of new facilities. Because of the growth in San Marcos, Sabre Commercial, a regional general contractor, decided to invest in the construction of a satellite base of operations and opened an office there. The company is currently working on six projects (office, flex, retail and industrial) totaling over 110,000 square feet, with more on the way.
What does all of this rapid growth mean for the evolution of the city’s economy?
San Marcos can look to Austin for guidance, as San Marcos’ current state is reflecting Austin’s growth from 30 years ago, according to Mark Ramseur, P.E., regional vice president of Pape-Dawson Engineers, a civil engineering firm doing a significant amount of work in the area.
San Marcos needs to keep up with infrastructure needs, focus on economic development of core industries, continue to improve the K-12 schools and the connections to Texas State and ACC, support quality housing, retail and other needed development, set high standards for these types of developments and encourage developers to come to town.
And, of course, the city needs to focus on growing jobs so the population can stay in San Marcos and make a living.
All of the drivers for commercial real estate are present in San Marcos: it’s the fastest growing city in the nation for three years running, has accessibility to IH-35, IH-10, SH 130 toll road and two international airports, is centrally located on the Regional Growth Corridor between Austin and San Antonio, is the home of Texas State University and Tanger Outlet Malls, has an abundance of land, a highly skilled and educated workforce and a high quality of life.
San Marcos, Texas, the secret’s out!
— By Charles “Butch” West, CCIM, managing director at Kennedy Wilson Brokerage Group. This article originally appeared in the July 2015 issue of Texas Real Estate Business.