For Wolff Companies’ David Wolff, Even Covid-19 Can’t Quell Optimism for Energy Corridor

 

By Jeff Jeffrey

HOUSTON – There’s no question Houston’s Energy Corridor has struggled in recent years. After losing several large office tenants from the industry that gave the area its name, the Energy Corridor has struggled to fill the millions of square feet of office space left behind.

But at least one Houston real estate expert thinks the area along Interstate 10 between Sam Houston Tollway and Barker Cypress Road in west Houston is ripe for a comeback — even amid the ongoing Covid-19 coronavirus pandemic.

In fact, David Wolff, chairman and president of Houston-based Wolff Cos., said it’s possible Covid-19 will open up new opportunities for the Energy Corridor that might not have existed otherwise.

The Houston Business Journal spoke with Wolff about why he remains optimistic about the Energy Corridor’s prospects, his thoughts on the area’s struggling office market and why he thinks Covid-19 might help to address vacancy concerns.

Why are you so bullish on the Energy Corridor?

If you look at the growth of Houston over the past several years — the past several decades, really — the city is continuing to move to the west. There is a center of gravity at the interchange of Interstate 10 and the Sam Houston Tollway. It’s an area where you have the opportunity to find really nice houses, great schools and great opportunities for real estate out there. There’s a reason Shell (moved) 3,400 employees out of downtown.There’s a reason Marathon Oil moved west.

At the same, the Energy Corridor has some of the highest office vacancy rates in Houston. CBRE recently reported office vacancies in the area stood at 24.1% during the second quarter of 2020.

There is no question the office market in the Energy Corridor has faced some challenges. Losing Exxon Mobil and ConocoPhillips (moving to the ConocoPhillips Center on the other side of I-10) left a huge amount of space on the market. But the Energy Corridor has so much going for it, even outside of the energy industry. You have great retail options in Midway’s CityCentre and MetroNational’s Memorial City. They’ve done some remarkable things out there. You’re not far from the Texas Medical Center (West Campus). There’s world-class health care in Houston Methodist Continuing Care Hospital and Texas Children’s Hospital (West Campus).

Yes, if you want to see a play or go to a museum, you’ve got to go downtown. But the accessibility and the school districts there are the kinds of things any company is looking for. I see the Energy Corridor as the downtown of west Houston.

But with this being a tenant’s market, many companies are looking for newer, better buildings. Is that a challenge for an area that has so much vacant space?

There are still major open areas along the Addicks Reservoir that could be used for development. There are some beautiful parks and trails right there. But there are a lot of great buildings there that could be made to a tenants’ specifications.

Of course, the biggest office vacancy on the market is the former ConocoPhillips campus. What do you see becoming of that campus?

That is a beautiful campus. It’s been vacant for a while. But ConocoPhillips really took care of it and gave it some thought. They have great amenity spaces for fitness centers and child care and open spaces for soccer fields and trails. Pretty much anything a company could want.

I think (Occidental Petroleum Corp.) made a mistake by not moving into the campus after buying (Anadarko Petroleum Corp.). They said the campus wasn’t big enough, despite it being 1.3 million square feet.

But I don’t see how it’s better for them to split their employees between Greenway Plaza and The Woodlands.

I’m not sure what Howard Hughes (Corp.) is going to do with it. They might find a company looking for a headquarters that is ready to move into. Or they may try to subdivide it, split it in half for one company to move in and the rest for a mixed-use development, something like that.

I was part of the group that pitched the campus to Tesla when they were looking for a place to move. I don’t know if it’s going to be a Tesla moving in or something else. But it is a really nice campus.

How has the Covid-19 coronavirus pandemic affected the demand for real estate in the Energy Corridor, and how does this downturn compare to past downturns?

Before the present downturn, we had a really strong economy, so I think we’ll bounce back much faster after all of this than we have in past downturns. In the 1980s, that downturn lasted nearly 10 years. I don’t see that happening this time.

There are individual properties that are positioned to bounce back much faster. I expect multifamily to be much denser in the Energy Corridor going forward, multifamily developments closer together and going taller. MetroNational is continuing to build high-rises (in the area).

How do you see Covid-19 affecting the office market in the Energy Corridor?

One of the biggest complaints I heard from Shell employees before they moved to the Energy Corridor was the elevators. They were looking for larger floor plates, so people wouldn’t get stuck waiting on an elevator and showing up to meetings late. Larger floor plates allow for easier travel within the office.

I don’t know what the downtown office buildings — the 50- to 70-story towers — are going to do once people start going back to the office. How do you social distance in an elevator? You can’t add elevator space.

I think people are going to be rethinking their floor plates after all of this. If you’re looking for larger floor plates, the ConocoPhillips campus certainly has that.

This interview has been edited for length and clarity.

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https://www.bizjournals.com/houston/news/2020/08/14/wolff-companies-david-wolff-energy-corridor-covid.html