Energy Corridor: No bursting bubble here, just flurry of new development

 

By Jenny Agee-Aldridge

In a city that is home to one of most robust real estate markets in the country, the Energy Corridor is among the submarkets leading the pack with low vacancy rates and increasing rental rates. Several projects recently broke ground or are under construction in the Energy Corridor.

Amid all this activity, I spoke with David Hightower, executive vice president and chief development officer of Houston-based Wolff Cos. He has been developing projects in the area since the 1970s and has seen the Energy Corridor evolve from a low-density area, home to a few energy companies, to the thriving submarket it is today. As the number of vacant lots begins to dwindle, developers are beginning to repurpose property to stay ahead of the game in this thriving market.

What’s next for the Energy Corridor?

The ’90s and 2000s saw the Corridor start to become more densely developed and attractive to non-energy companies, multifamily and other commercial uses. Now, we are seeing higher-density redevelopment on the major campuses and higher-density mixed-uses transforming the Corridor into a more urban environment.

What new projects are you currently working on?

At Wolff Cos., we are continuing to work on Central Park and Ten Oaks, our two development projects in the Energy Corridor. The growth in the Corridor has been remarkable. And we see no sign of it letting up. (The University of Texas) M.D. Anderson Cancer Center is in the middle of a major master-planning effort that includes its 35-acre campus in Central Park, and Worthing is making excellent progress on their multifamily project there. And we have a number of interested parties looking at our remaining two Central Park sites.

In Ten Oaks, Western International should be breaking ground on their two hotels in September, and Hunington is expected to break ground on their apartment home community in October. Our two remaining tracts, a 3.3-acre retail tract at Park Row and Barker/Cypress and a 6.6-acre tract immediately west of Hunington, are available and attracting a lot of interest.

How much land is left for development in the Energy Corridor?

If you mean vacant parcels, very few are available. I can count them on my fingers. That is a major reason for the robust health of this market, and it’s one reason we are seeing redevelopment occurring already. There have been several properties acquired and redeveloped with different uses.

Is there a threat that developers are overbuilding office projects?

There is a possibility of overbuilding, but I think the probability is fairly low. Even though there is more capital looking for a home in real estate than ever before, our development community is, so far, demonstrating a respectable degree of discipline.

Of course Houston is a very large and dispersed office market, and you have to look at new construction in context. If one too many high-rise towers are built downtown, it will have much less impact on the Corridor (and even less on the Katy market) than say the Uptown or Greenway Plaza markets.

Is the bubble going to burst?

No doubt there may be a building or two coming up in the metropolitan area that probably shouldn’t be built, but I don’t see a bubble at this time.

The real question is the amount of existing space becoming available as the deck chairs get moved. Much of the new space is being absorbed with job growth. But much of it is local relocation, like Exxon Mobil’s move from Brookhollow to their new campus in north Harris County. That property coming on the market will naturally influence the ability to push rents up in that submarket and consequently dampen any support for new construction.

On the other hand, some buildings being vacated will be demolished due to obsolescence and their sites redeveloped for other uses. Or the buildings may be converted to non-office uses. In either situation, the office market does not experience an increase in supply.

For the complete article, please go to:
http://www.bizjournals.com/houston/blog/breaking-ground/2014/08/energy-corridor-no-bursting-bubble-here-just.html