More Direct Flights, Ease of Doing Business Could Attract Companies to San Antonio

Cities around the world generally thrive economically if they exhibit the “five factors of awesome,” a CBRE economist said at a ULI San Antonio luncheon in January.

Spencer Levy, chairman of Americas research and senior economic adviser at commercial real estate services company CBRE, said he measures cities according to five factors:

• ease of doing business;
• development, attraction, and retention of talent;
• foreign investment;
• live/work/play environment; and
• infrastructure

“Any city that does well on all of these factors is going to ‘kill it,’” Levy said. “Now, you don’t have to kill it on all of them. You have to look at them together.” Levy discussed which factors San Antonio is doing well on, and on which factors it can improve.

For instance, Levy noted that a 2019 report from Arizona State University ranked San Francisco 77th among 115 North American cities in ease of doing business, but the city excels in other factors.

Delivering what he termed “tough love,” Levy said San Antonio faces hurdles in seizing on several of the five factors.

Regarding ease of doing business, San Antonio ranked 54th in the Arizona State report. Oklahoma City topped the list, and in Texas, Houston at seventh, Dallas at 36th, and Austin at 41st all fared better than San Antonio.

Levy said he is troubled by the juxtaposition of San Antonio and Austin in the Arizona State ranking. The two cities are about 80 miles (130 km) apart, yet Austin sits 13 rungs above San Antonio on the ease-of-doing-business ladder. “Talent and money can go anywhere they want. They look at things like this,” Levy said.

However, Levy noted that Nashville is “killing it from a growth perspective,” despite landing at number 45 on a CBRE scorecard for talent, only two spots above San Antonio. “So don’t fret if you may not have the same talent base as New York or San Francisco or Toronto,” Levy said. “Work on bringing it here if you can’t grow it here.”

A day after Levy addressed ULI San Antonio, the city received some good news related to its tech economy. Real estate website Zillow placed San Antonio sixth on its list of up-and-coming tech markets, two notches above Austin, largely because San Antonio has a lower cost of living.

In a panel discussion following Levy’s talk, Jenna Saucedo-Herrera, president and CEO of the San Antonio Economic Development Foundation, said the metro area has adopted a more regional, collaborative approach to deepening San Antonio’s talent pool.

“We’ve realized that talent is the number one priority, people are the number one priority,” Saucedo-Herrera said.

Another panelist, Randy Smith, president of San Antonio-based real estate developer Weston Urban LLC, said he thought San Antonio previously had been too isolated in its carrying out its economic development strategy. To truly compete with other cities, Smith said, San Antonio must address economic development from a regional standpoint, overlooking invisible city and county borders.

“Anyone who’s not thinking regional is losing,” Smith said. “Historically, it was closed kimono with regional partners. Today, we are now open kimono with regional partners.”

Turning to one of San Antonio’s strengths, Levy cited the city’s emergence as a magnet for foreign investment in real estate. From the second half of 2016 to the first half of 2019, San Antonio saw its cross-border investment volume soar 356 percent, far behind Austin (1,327 percent) but slightly ahead of San Jose (338 percent), the epicenter of Silicon Valley, according to CBRE data. During that period, San Antonio ranked ninth for growth in cross-border investment volume among U.S. real estate markets, data show.

“Foreign money is fickle,” Levy said. But if foreign investors “like your market,” he added, “they’re going to bring their friends, they’re going to bring construction, they’re going to bring diversity—they’re going to bring everything. So if foreign money starts showing up in your market, it’s a good thing.”

Average returns on commercial real estate in San Antonio surpass the average for large U.S. cities, Levy said, but the city trails a number of other real estate markets in terms of liquidity. To capitalize on the city’s momentum in cross-border investment activity, San Antonio business promoters should “take the show on the road” to visit real estate investors in places like Dubai, Germany, and South Korea, he said.

As it pertains to the live/work/play element, Levy noted the “weird” atmospheres of cities like Austin, Nashville, and Portland, Oregon—atmospheres that he labeled authentic. Such authenticity is a key attractor of talent, he said. “The world is becoming infected by generic hipsters. You need to maintain your local character,” he said.

In that vein, San Antonio should retain and highlight its unique flavor to help foster growth, Levy said. That flavor includes a history dating back to the early 1700s, a vibrant Mexican American culture, and a robust association with the military.

San Antonio also can foster growth by improving its infrastructure, particularly transportation, he said. He cited a 2018 University of Minnesota study that ranked San Antonio 26th among 49 U.S. metro areas for workers’ access to transit. New York City placed first, with Houston 17th, Dallas/Fort Worth 20th, and Austin 22nd.

However, in a business context, intracity transportation—the type of transportation covered in the University of Minnesota study—matters much less than interstate transportation, Levy maintained. He underscored the value of nonstop flights.

Levy urged San Antonio to ramp up nonstop service to a “doppelgänger” city like Washington, D.C., because both places have significant military and cybersecurity operations. United Airlines provides nonstop flights between San Antonio International Airport and Washington Dulles International Airport, which is about 27 miles (44 km) west of D.C. But no nonstop service is offered between San Antonio and Washington Reagan National Airport, which is four miles (6 km) south of downtown D.C. and easier to reach by public transit or taxi.

“The ability to get to a city on a direct flight is absolutely essential,” Levy said.