The Southwest region does a stellar job of producing something that every state in the country wants desperately - job growth. Arizona, New Mexico, Oklahoma, and Texas have generated nearly 280,000 new jobs over the past 12 months. Texas is responsible for producing the lion's share of those new jobs. In fact, the state ranks number one in the country for its job creation. Texas alone added 237,100 new jobs between May 2011 and May 2012.
The sheer size of Texas and a diverse business base that spans key industries - ranging from oil and gas production and petroleum refining to aerospace and biotechnology - have helped the state muscle through the recession. In addition, the majority of Texas' communities escaped the housing crisis, which dealt neighboring states such as Arizona a tough blow.
Texas has dominated regional growth with a bevy of major economic development announcements. Apple announced it would expand its presence in Texas with a $304 million investment in a new campus in Austin, creating more than 3,600 jobs over the next decade. The project will more than double the size of Apple's work force in Texas. Also, GE Transportation is investing $96 million in a locomotive manufacturing facility in Fort Worth, which will result in 775 new, high-tech manufacturing jobs.
Texas certainly casts a long shadow. Neighboring states have had to work harder to capture business expansion that has been slow to rebound. Arizona in particular is pouring more resources into its economic development efforts. The state has completely overhauled its incentives over the last year. "Arizona has gone from one of the least aggressive in the region to one of the most aggressive in the region over a few months," says Michael McDermott, director of Global Corporate Services at Newmark Grubb Knight Frank in Chicago.
Arizona has introduced a variety of new programs and tax credits through its recently enacted Arizona Competitiveness Package. For example, its new Renewable Energy Tax Incentive Program provides tax incentives to companies in the solar, wind, geothermal, and other renewable energy industries that are expanding or locating in Arizona. "They have not been very competitive over the last few years, and I think they lost enough projects that it changed minds at the state level on the role incentives play in securing a deal," adds McDermott.
Energy Sector Fuels Growth
The growing energy and renewable energy sectors are key engines for growth across the Southwest. Texas is once again at the forefront as a major center for oil and gas production and petroleum refining. Texas leads the nation in its petroleum refining and chemical products production. The state is home to more than 400 chemical plants and refineries along the Gulf Coast that employ about 33,000 workers. Recent development announcements in that sector include BOSTCO's plan to construct a $400 million, state-of-the-art black oil terminal in La Porte. Halliburton also is constructing a $50 million, 400,000-square-foot facility in San Antonio to support its exploration and production efforts in the Eagle Ford Shale.
The Southwest region is also expanding its presence in the renewable energy sector. Arizona is emerging as a solar energy leader. The state's solar work force grew 26 percent from 2010 to 2011. Recent projects include a $95 million investment in a new facility for Rioglass Solar that will create 100 new jobs and a $25 million investment in a new facility for Gestamp Solar Steel that will create 300 new jobs. Additionally, the University of Arizona was selected in June to receive a $1.5 million federal grant to develop new solar power technologies.
"Even though activity within the sustainable energy market has cooled over the past two years, Arizona has positioned itself to attract solar energy firms," says McDermott. Arizona is an ideal location for manufacturing those solar components because of its close proximity to solar generation facilities, he adds. For example, The U.S. Department of Energy has offered a conditional commitment to loan $359 million to a solar-power project west of Phoenix that will sell power to a Northern California utility. If granted, it would be the third such loan guarantee from the DOE for major solar projects in Arizona. San Diego-based Sempra Generation will build the Mesquite Solar I plant near its existing natural-gas-fired plant 45 miles west of Phoenix.
Oklahoma has a long history in oil and gas production and currently ranks third in the country for natural gas production. In addition, Oklahoma is emerging as one of the country's top producers for wind energy. The state, which currently has more than 1,000 wind turbines, ranked fifth in the nation for total new capacity installed in 2011 and eighth for total capacity.
Stepping Up the Competition
Texas has a successful track record of deploying economic development programs such as the Texas Enterprise Fund (TEF) to land large corporate expansion projects. Since it was created in 2003, TEF has become one of the state's most competitive tools to recruit and bolster business. To date, the TEF has invested more than $467.7 million and closed the deal on projects generating 63,193 new jobs and more than $21.4 billion in capital investment in the state.
Texas and also Oklahoma have traditionally been the two most aggressive states in the region for pursuing new business with economic development incentives and programs. "Oklahoma has always been a steady-eddy where they don't see huge swings in growth," says John Lenio, a managing director in the Economic Incentives Group at CB Richard Ellis in Phoenix. "Oklahoma has been attracting a good array of aerospace and defense manufacturing, and financial and professional services."
In fact, aerospace is a key industry for Oklahoma. According to the Oklahoma Department of Commerce, the state employs nearly 150,000 workers with a total annual output for aerospace that exceeds $12.5 billion annually - including exports of $4.4 billion to 170 countries. Tulsa in particular is ranked eighth in the nation for the size of its aerospace engines manufacturing cluster and 20th for its defense-related cluster. In recent news, Boeing announced in the first quarter that it would add an additional 900 jobs to its suburban Oklahoma City facility.
New Mexico also continues to position itself as a place for aerospace and high-tech innovation. Recent success stories for the state include attracting a new headquarters for Bendix/King, a leader in flight navigation technologies. The company announced that it is locating its headquarters in Albuquerque, a move that will create 140 high-paying jobs. The company cited a growing talent base of aerospace professionals and compelling incentives for its decision.
New Mexico is working to enhance those incentives with new programs that were added in the last legislative session. For example, the legislature approved $7.2 million in Job Training Incentive funds - up from $1.2 million the previous year.
Another potential game-changer in New Mexico is a major announcement from Pegasus Global Holdings. The group plans to begin construction on a 30-square-mile mock city called the Center for Innovation, Testing, and Evaluation in Lea County, N.M. The project will generate some 3,350 direct and indirect jobs. Such projects align with New Mexico's strategy to draw on resources - such as its three federal laboratories, four military facilities, and a research university - as the state endeavors to become a leader in R&D and tech commercialization.