United Commercial Realty
S.A. is named nation's top-performing city12.16.2011- Jennifer Hiller
We're No. 1! Not that we're bragging or anything, but this list has nothing to do with tacos, most-visited tourism spots or expansive waistlines.
The Milken Institute has ranked San Antonio as the nation's best-performing city for 2011 in its annual ranking of 200 metropolitan areas.
The city ranked 14th in 2010, and reasons for leaping to the top spot this year include military base realignment, drilling in the Eagle Ford Shale and the growth of health care.
The study noted that San Antonio was one of a handful to exceed prerecession employment levels.
Texas cities dominated the top of the Best-Performing Cities list, with El Paso, Austin-Round Rock and Killeen-Temple-Fort Hood also making the top 10.
But now comes the part where the economists bring umbrellas to the parade.
In large part, Texas cities look so good in the rankings because of the tough times in other areas.
Other parts of the country saw their core industries hurt, such as the Midwest with manufacturing, or saw an enormous housing bubble burst — or both, said James Gaines, research economist with the Real Estate Center at Texas A&M University. Major states such as California, Florida and Michigan still are struggling.
“Our growth rate and advancement isn't all that wonderful,” Gaines said. “We've managed to stay flat or have very small positives. But because everybody has so many negatives, we look so much better.”
And having the oil and gas industry also helped.
“Texas is still very heavily at a state and local level influenced by the energy industry — no doubt about it,” Gaines said. “And the energy industry did not sustain the hits that other industries did.”
Texas accounted for one in every five jobs created in the country between June 2010 and June 2011. Houston and Dallas alone were responsible for one in every 10 new jobs in the country.
San Antonio's Federal Reserve senior economist, Keith Phillips, said the same factors that have helped Texas rank ninth in average annual job growth since 1980 have helped the state during a time when other regions have struggled.
“We're a lower-cost place to do business. We tend to have lower regulations on businesses,” Phillips said. “Those things play a big role in long-term growth, but they can play a role in short-term growth as companies consolidate operations to lower-cost areas.”
The Best-Performing Cities index considers job, wage and technology performance, with employment growth weighted the most heavily. It doesn't consider quality-of-life issues such as commute times or home prices.
The report said, “Texas cities have benefited from a low reliance on durable goods manufacturing, low business costs, a favorable business climate, the consolidation of military bases, renewed trade with Mexico and South America, and ongoing energy exploration activities and alternative fuels research.”
The 2005 Defense Base Closure and Realignment Commission helped insulate San Antonio from the worst of the recession, bringing thousands of jobs and billions of dollars in construction work to the city.
The heart of the Eagle Ford Shale play lies under 24 South Texas counties. It's regarded as one of the top two or three plays in the nation. Drilling permits in the Eagle Ford have jumped from 26 in 2008 to 2,991 in early November, according to Texas Railroad Commission data.
Phillips said the challenge for San Antonio and Texas will be sustaining the growth and continuing to diversify the economy over the next decades.
“The best way to diversify your economy is to have really strong educational systems,” he said. “If you compare Chicago to Detroit, what's the difference? Chicago was less concentrated in any one industry like Detroit, but it also has really good universities. Those universities can spawn businesses.”
Economists expect Texas cities will continue outperforming the country in 2012, but that the gap may start to narrow as the nation's economy improves.
Steve Nivin, chief economist of SABER Institute, a collaboration between St. Mary's University and the San Antonio Hispanic Chamber of Commerce, said that San Antonio has benefitted from a relatively healthy economic environment — and a bit of good luck.
“We were somewhat fortunate that in San Antonio and throughout Texas, we felt the effects of the housing market collapse, but it was nothing like these other states,” he said.
“It's still good to be ranked No. 1,” Nivin said. “You can't take away anything from that.”