Experts forecast future of Austin's innovation economy

Chamber event includes outlook for 2015

Austin's economic future may rest on how much the city is willing to innovate, various experts revealed Dec. 4 during the Greater Austin Chamber of Commerce's annual Economic Outlook event.

The event spotlighted how much Austin is counting on a marriage between the city's technology and health care industries to spur complementary development near the future Dell Medical School, which is expected to be complete by 2017.

If Lady Bird Lake is Austin's front porch and The University of Texas campus is its backyard, then downtown is the city's living room, said state Sen. Kirk Watson, D-Austin.

"We are still improving our living room," said Watson, reminding the crowd that downtown Austin had only two places to live when he first ran for mayor in 1997.

The proposed innovation zone would be bounded roughly by Martin Luther King Jr. Boulevard to the north, Lady Bird Lake to the south, I-35 to the east and Trinity Street or San Jacinto Street to the west, said Watson, who will chair an innovation zone working group first led by outgoing Mayor Lee Leffingwell.

"But let's not get too hung up on lines on a map," Watson said, suggesting the innovation zone could spur economic activity beyond those downtown boundaries.

Watson said the heart of the innovation zone will be Central Health's five-block campus adjacent to UT's future Dell Medical School where University Medical Center Brackenridge is located. Central Health is Travis County's health district. Watson anticipates a public process to help maximize the best use of the land, which will be redeveloped during the next 15–20 years, with the hope of having a campus plan in place by 2017.

City Council during its Dec. 11 meeting—the final meeting for most council members before new elected leaders take over early next year—will consider a measure that would exempt the Central Health campus from any height limitations and create a minimum floor-area ratio of five to one—meaning the floor area for the development would need to be at least five times larger than the lot on which any building is constructed.

"In my opinion we need to think about the rest of the [innovation] zone that way—in terms of minimums and not maximums," Watson said, also suggesting public officials concentrate on incentivizing development that adds value to all of downtown. "Because we can't squander this opportunity."

The future Dell Medical School could create innovations that help streamline the health care system in much the same way as a private business seeks efficiencies to cut costs, said Clay Johnston, the medical school's inaugural dean.

"[The health care industry] tends to think of innovation as research only and puts a giant wall between research and care," said Johnston, who would like to reverse that mindset at the Dell Medical School.

Austin has an opportunity to set itself apart from other U.S. cities by using the proposed innovation zone as a regional competitive advantage that retains and adds talent to the Austin area, said Thomas G. Osha, managing director of innovation and economic development at Wexford Science and Technology LLC, a Baltimore-based consulting firm that works with universities and health care systems.

"Everything follows talent, including the money," Osha said. "You have a wonderful workforce, but you're doubling down on life sciences, a workforce you currently don't have."

But Austin can leverage its creativity and tendency to be inclusive to separate itself from other markets, Osha said, including Silicon Valley.

"Be a better Austin," he said, suggesting the city highlight the proposed innovation zone as a city icon.

The last time Austin's economy weighed so heavily on the technology industry was during the late 1990s, followed shortly by the dot-com bubble burst that caused 30 straight months of job loss in the early 2000s, said Jack McDonald, chamber board chairman and founder/CEO of Upland Software.

"We cannot become complacent," he said.

Watson recommended hiring someone full time to oversee the development of the proposed innovation zone.

"History proves we can get things done, so let's do it," he said.

Austin's outlook is bright, according to one analyst

Brian Kelsey, principal of Austin-based Civic Analytics, a data analysis firm that seeks to track economic development trends, spoke during the Dec. 4 Economic Outlook event hosted by the Greater Austin Chamber of Commerce.

Kelsey said Austin is excelling in such a way that we set higher expectations here than the rest of the country.

"We are punching way above our weight class in terms of how fast we're growing," Kelsey said, explaining how Austin has grown to become the country's 11th largest city despite being only the 35th largest metropolitan area.

Year over year, Austin's average annual growth is approximately 5.7 percent, Kelsey said, much better than the 3 percent benchmark aimed for by most other U.S. cities. However, in 2013 that growth dipped to 3.8 percent.

"Things in Austin are starting to moderately dip," he said. "Fortunately, a moderate dip in Austin is an extreme boom in other markets."

And Austin is likely to remain afloat thanks to its new educated population, Kelsey said, with approximately 250,000 people with bachelor's degrees or better relocating to Austin since 2000. That is good for fourth most nationally behind Charlotte, North Carolina; Grand Rapids, Michigan; and Las Vegas, he said.

He predicts the Austin area's population growth will continue to increase, but only between 2.1 percent to 3 percent—still more than double the U.S. average.

Austin rankings nationally since 2000

Population growth: No. 2

GDP growth (gross value added): No. 3

Educated new residents: No. 4

By Joe Lanane
Joe Lanane’s career is rooted in community journalism, having worked for a variety of Midwest-area publications before landing south of the Mason-Dixon line in 2011 as the Stillwater News-Press news editor. He arrived at Community Impact Newspaper in 2012, gaining experience as editor of the company’s second-oldest publication in Leander/Cedar Park. He eventually became Central Austin editor, covering City Hall and the urban core of the city. Lanane leveraged that experience to become Austin managing editor in 2016. He managed eight Central Texas editions from Georgetown to San Marcos. Working from company headquarters, Lanane also became heavily involved in enacting corporate-wide editorial improvements. In 2017, Lanane was promoted to executive editor, overseeing editorial operations throughout the company. The Illinois native received his bachelor’s degree from Western Illinois University and his journalism master’s degree from Ball State University.


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