Austin’s 2019 in business: More calm, some cooling

From a business and economics perspective, 2019 didn’t pack in as much drama for the Austin metro area as we saw back in 2018.

While Central Texas kept growing, kept adding jobs and kept pushing its unemployment rate to record lows, there weren’t as many stunning economic development announcements and attention-grabbing headlines.

Remember back in 2018, when Austin was courting Amazon, trying to lure in the retail giant’s $5 billion, 50,000-job second headquarters project? Or when Apple dropped the stunning news that it had chosen Austin for a huge expansion project, with plans to invest $1 billion in a new 133-acre Austin campus and add 5,000 jobs to its already significant presence here? Oh, and 2018 also saw Round Rock-based Dell Technologies make the switch from privately held back to being publicly traded.

In 2019, it has been quieter -- but that doesn’t mean important things haven’t happened for the Austin-area economy in the past year:

>The region’s economic engine showed a few signs of slowing a bit, but in general kept humming along in ways that most other cities would envy.

>The venture capital pipeline surged for area companies, with funding on pace to hit levels not seen since 2000.

>Growth and redevelopment continued to reshape the city, especially in iconic areas like South Congress Avenue.

>The area’s technology sector continued to score key wins. Apple Inc. returned production of its Mac Pro computer to Austin, which brought about a visit from President Donald Trump. And Dell Technologies completed its first year back as a publicly traded company, continuing its evolution into an end-to-end technology provider.

Here’s a more in-depth look at how the past year unfolded for each of those sectors:

Austin’s economic growth

By some measures, Austin’s long-sizzling economy cooled a bit in 2019. But even a cooling Austin economy is still pretty hot.

The metro area’s gross domestic product -- the total value of all goods and services produced in the region -- has shown signs of slowing from the 6% to 7% growth annual growth rate that it has produced in the past few years, Sarah House, a senior economist for Wells Fargo Securities, said during a recent forecast event in Austin. House predicts Austin’s GDP will rise by about 5% in 2020, saying slower job gains and the region’s tight labor market have weighed on the economy.

That tracks with what the Federal Reserve Bank of Dallas is seeing, as its main barometer for Austin -- called the Austin business-cycle index -- dipped to its lowest level in three years early in the fourth quarter.

But none of that is cause for panic, economists say -- because even if Austin’s growth has slowed a bit, it’s still well ahead of most other major U.S. metro areas. By comparison, while expecting Austin’s GDP to grow by 5%, House said she anticipates a 1.8% increase in U.S. gross domestic product next year, which is in line with predictions from some other economists.

Meanwhile, the unemployment rate in the Austin metro area dropped to 2.5% as of the end of November, down from 2.6% in October and 2.7% in November 2018, according to the Texas Workforce Commission. The 2.5% November rate is the lowest unemployment rate for the month of November since 1999.

“We’re continuing to make gains (in terms of adding jobs), but I think the gains are coming slower as we continue to push up against the capacity of the economy,” Michael Sury, a University of Texas economist and finance lecturer, told the American-Statesman earlier in December. “At 2.5% (unemployment), there’s just no slack in the labor economy at all.”

Venture capital dollars flowing

One sign of strength for the Austin economy in 2019 was a surge in venture capital money flowing into the area. Some of the biggest VC deals in the metro area's history went down in 2019, as the venture funding floodgates opened wide.

Venture capital activity is seen as a key measure of a region’s economic strength, as VC dollars allow area companies -- both startups and later-stage firms -- to invest, expand and add to their workforce.

The final numbers for the year aren’t yet available, but the Austin metro area spent most of 2019 on pace to hit a 20-year high in VC funding.

As of the end of the third quarter, Austin-area companies had raised $1.12 billion, according to a report by PricewaterhouseCoopers and CB Insights, which tracks venture capital deals nationally. That number was more than the full-year totals raised by Austin-area companies in eight out of the past 10 years, and has the metro is on track to bring in more VC funding than any year since 2000, around the time of the dot-com-era bust.

Among those raising major funding rounds in the first three quarters were: Endeavor Real Estate Group, which said in that June it had raised $160 million and had commitments for an additional $140 million; Siete Family Foods, a maker of grain-free tortillas and other products, raised $90 million in February; ScaleFactor, an accounting and payroll management software company, raised $60 million in August; and digital sports media company FloSports raised $47 million in June.

The area’s VC activity hasn’t slowed in the fourth quarter, as RigUp -- which operates an online platform for energy companies -- raised $300 million in October in one of the largest funding rounds in Austin’s history. Also in October, artificial intelligence company SparkCognition raised $100 million, while online insurance startup the Zebra raised $38.5 million in December.

Apple helps tech sector power ahead

Austin’s growth as a major technology hub continued in 2019, highlighted in part by the ongoing presence of technology giant Apple Inc.

In the past year, Apple started work on its new $1 billion corporate campus in North Austin -- which will employ up to 5,000 people initially and potentially 15,000 over time -- and also announced that it would reverse its plan to move production of its Mac Pro desktop computer out of Austin. That decision came after after U.S. trade officials approved exemptions that would allow Apple to import key Mac Pro parts from China without being subject to tariffs.

On Nov. 20, President Donald Trump and Apple CEO Tim Cook came to Austin to tour Apple’s Mac Pro assembly process, which is done at a facility operated by Flextronics America in Northwest Austin.

During the president’s visit, Cook showed off the assembly line, pointed out components of a partially built Mac Pro and drew attention to a sign that read: “Apple works with 9,000 companies across all 50 states. Mac Pro components come from companies in 19 states.”

The 244,000-square-foot Flextronics plant employs about 500 workers, and Apple said it has invested more than $200 million in the facility.

Dell’s return to markets

For Round Rock-based Dell Technologies, 2019 was a year of transition. On Dec. 28, the technology giant completed its first full year back in the markets as a publicly traded company. One year earlier, the company’s shares started trading on the New York Stock Exchange under the symbol DELL. That once again made Dell the area's largest publicly traded company -- a title founder and CEO Michael Dell had backed away from when he took the company private in 2013.

Dell Technologies’ return to trading completed a lengthy and complicated process, as the company's deal to go public wasn't done through a traditional initial public offering of stock but through an unusual avenue created by Dell's purchase of data storage giant EMC Corp. Dell decided to buy out shareholders of a tracking stock formed through its acquisition of EMC. The tracking stock, which traded under the tracker DVMT, mirrored Dell’s 81 percent ownership in VMware, the cloud computing subsidiary it controlled since taking over EMC. Shareholders voted in favor of the complex plan on Dec. 11, 2018, completing the reverse merger, which was valued at more than $23.7 billion.

Dell’s new shares opened trading last Dec. 28 at $46, and have risen about 12% since, trading in the $52 to $54 a share range.

In its most recent earnings report in November, Dell Technologies said it projects revenue of $91.5 billion to $92.2 billion for its current fiscal year. The company also continued growing through acquisitions, as it confirmed in November that it finalized its acquisition of Massachusetts-based cybersecurity firm Carbon Black. VMware had said in August that it had agreed to acquire both Carbon Black and California-based Pivotal Software. The combined price of the acquisitions had estimated to be about $4.8 billion.

Redevelopment on South Congress

Austin’s booming growth has spawned a wave of redevelopment. That wave continued unabated in 2019, and it brought significant change to some of Austin’s most iconic and best-loved areas.

Among the areas seeing the most change has been South Congress Avenue. South Congress continued gentrifying in 2019, with some of the biggest projects in the street’s history nearing completion.

The most prominent new project along South Congress is Music Lane, a $55 million mixed-use development that stretches from Academy Drive north to the former Twomey Auto Works site at 1009 S. Congress Ave. Music Lane will feature three buildings with retail, office and restaurant space, along with 500 underground parking spaces. The project is expected to be completed in the spring.

Nearby is the Muse at SoCo, a four-story project underway at 1007 S. Congress Ave. that will have three floors of office space atop ground-floor retail.

The changes on South Congress have also resulted in a number of the merchants that helped define the shopping district leaving, either due to rising rents or redevelopment. Some of those business owners are now reinventing themselves elsewhere. Among those are Don Twomey, who opened Twomey Auto Works at 1009 S. Congress Ave. in 1990. The shop was razed to make way for Music Lane.

Twomey relocated 4 miles south to 4930 S. Congress Ave., where the business now operates out of a 10,000-square-foot garage on a property that is seven times the size of his former one.

“We were fortunate to be able to swallow the expense and land here,” Twomey told the American-Statesman earlier this year. “We have parking and storage and a more comfortable space, and we can do at least twice as many vehicles in a week. Moving is never easy, but the one thing I can tell you is we’ll be stay here as long as we possibly can.”

This compilation references work from American-Statesman reporters Lori Hawkins, Shonda Novak, Bob Sechler, Kara Carlson, Hojun Choi and Nicole Cobler.