With the announcement that the new Wyoming Springs Assisted Living and Memory Care center will be built in Round Rock, we decided to look at how the news impacts the local economy and have asked Mark Sprague, Director of Business Development at Mission Mortgage, to weigh in on the topic.
First, according to a story in the Austin American-Statesman, the new facility will be built near the Round Rock Medical Center, with plans in place for 90,000 square feet and 102 units, along with courtyards, bistro, salon, spa, and exercise room. The developers are hoping to create a community by designing with a neighborhood concept in mind. Understanding the scope of the project helps us to gauge the economic impact.
Mark Sprague, a noted analyst covering the real estate industry in Austin and throughout Texas, has often mentioned that the dollar bounce is greater in new home construction than it is with a residential resale transaction. We wondered if the same was true for commercial space.
QUESTION: You’ve said the dollar bounce for a newly built home is 7-9 times, while a resale only bounces once or twice. Is that the same for commercial? If a company builds a new facility is the dollar bounce also 7-9 times for the construction price while a lease on an existing structure would only bounce once or twice?
MARK SPRAGUE: Anytime you have new construction, you have a downstream effect of the dollar. Foundation guy has to hire local. Buy cement, sand, rebar, labor, etc. they spend the money locally, etc.. With a resale or a lease of an existing structure that dramatic ripple effect is not there.
QUESTION: The hiring impact must experience a similar effect. Not only will this new community employ 65 full-time employees once it is operational, the firms that are used to build the structures and develop the land will also be able to support local employment. Is this true?
MARK SPRAGUE: The downstream effect works for employment as well. Even if the companies who are building the structure do not hire specifically for this project, they still can use the work created to keep local residents employed. Hundreds of labor hours will go into a project of this size, including civil engineers, surveyors, structural engineers, architects, builders, plumbers, electricians, etc. Had they leased an existing space, most of that work would not be needed to open the new business.
QUESTION: What are the other positive impacts on the local economy? Are there any additional economic benefits to announcements of this type?
MARK SPRAGUE: Let’s not forget about the taxes that will be collected. The business will pay taxes on sales, the property will have taxes associated with it, the employees will pay federal taxes on their wages, and there will be additional fees for permitting and licensing. The employees of the construction and engineering firms will pay federal taxes on their wages as well. In addition, most businesses have secondary suppliers…equipment, office supplies, cleaning products, food, etc. Look at Dell, for example. Their supporting industries include everything from chip makers to shrink wrapping. And don’t forget about the nearby retail strip centers and restaurants who will gain more business, along with their secondary suppliers. The ripple is significant.
Understanding the impact of one new facility of this type helps us to gain perspective on how the economy benefits from new employers building new facilities. Mission Mortgage is encouraged by the announcement for Wyoming Springs and we wish them success. It is companies like this one that will help keep our local economy running strong!
To read the original story in the Austin American-Statesman, please click here.
If you have questions for Mark Sprague, please email us at email@example.com and we’ll get you an answer. If we love your question, we’ll post it on the blog!