Austin’s Texas glow Is fading

Oracle Corp. is moving its headquarters out of the city. Tesla Inc. is pulling back after a rapid expansion. Almost a quarter of commercial office space is vacant, and nowhere in the country have residential real estate prices fallen further from their pandemic peak.

Austin, the cosmic cowboy paradise that became a Covid-era economic superstar as it lured Elon Musk and a host of California refugees with its low taxes and sunny weather, had become accustomed to a steady drumbeat of good news. But lately that’s changed. And on Tuesday, Larry Ellison announced that his software company will shift its headquarters from the Texas capital to Nashville, Tennessee. It was a brief marriage — Oracle only arrived in Austin in 2020 — but getting jilted is never easy.

“City Hall was as surprised as everyone else,” Mayor Kirk Watson said in a statement.

Bound to turn

But maybe he shouldn’t have been so shocked. Austin has been going so strong for so long that the tide was bound to turn.

After a 12-year streak as the fastest growing large metro area in the US, Austin lost that slot in 2023. An office glut has pushed the vacancy rate 5 percentage points higher than the US average, according to data from Colliers. Home prices have dropped 18% from the pandemic highs seen in May 2022, the most among the 50 largest US metro areas, Redfin data show. Even so, the city ranks as one of the least affordable housing markets.

That Oracle went to archrival Nashville is particularly painful for Austinites. The two cities compete over which has the more vibrant live music scene and who plays the better host to bachelor and bachelorette parties. There are heated debates over where to find the best custom-made cowboy boots. But until recently, there really wasn’t much controversy over which was doing better economically. As of the end of 2022, Austin’s $222 billion economy was almost 20% bigger than Nashville’s.

To be sure, even a slowing Austin economy is still hot enough to be the envy of a lot of other places. The 3.5% unemployment rate trails the national average, and the downtown skyline is full of construction cranes. Samsung Electronics Co. is opening a $17 billion plant in suburban Taylor, and plans to invest $40 billion in the area as it ramps up chip production. The city is also home to major operations for Meta, Apple and Google. Henley & Partners forecasts that over the next decade Austin will be the top US city for growth in the number of centi-millionaires, or people with a net worth of $100 million or more.

Just this week, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon declared that Austin has become a competitor to New York City.

But, he also mentioned Nashville.

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