The Road to Opportunity

By Florian Martin, Houston Business Journal

Going up U.S. Highway 290 from Houston, drivers pass plenty of development on the side of the road – commercial, residential, industrial. But the view changes once you pass Cypress and the Grand Parkway. Countryside replaces urban development. Grassy fields are only sporadically interrupted by a gas station, a church, and then there’s a Buc-ee’s once you reach Waller.

But real estate and economic development professionals say that will change pretty soon, as developers are building new residential communities further out in northwest Harris and Waller counties, which will inevitably lead to commercial development.

“We see many of the same things that we saw when we went out in the ‘70s into the Energy Corridor,” said David Wolff, chairman and president of Houston-based Wolff Cos.

He pointed to fast population growth in the area west and northwest of Houston and the development of master-planned communities such as Bridgeland in Cypress, which has now crossed the Grand Parkway.

“I think the growth curve will be more dramatic on 290, because so much of I-10 has already been developed,” Wolff said.

The 81-year-old Wolff’s opinion certainly carries weight. Wolff is sometimes called the “father of the Energy Corridor” because he recognized early on the potential of that stretch of the Katy Freeway west of Beltway 8 and started buying up land.

Soon, major energy companies, such as Shell, Exxon Mobil and ConocoPhilips moved there. The rest is history.

Almost half a century later, in 2018, Wolff Cos. purchased the original 521-acre property along Highway 290 for its Beacon Hill master-planned community from the Schild family for between $15 million and $20 million and later added 43 acres. In 2020, it sold 270 acres to Long Lake Ltd., which plans to build around 870 homes on the land, and earlier this year, Wolff Cos. sold 78 acres for industrial development to Houston-based Hines.

To Wolff, the growing interest of other developers is an indicator that it was the right investment and that the transformation of the 290 corridor is already underway.

“You’ve got the light industrial coming in with (Trammel) Crow and Hines and Avera and others,” he said. “And then you’re getting other uses such as the major site at Methodist Hospital bought near Barker-Cypress.”

There is also a 4.3 million square-foot Daikin manufacturing and distribution facility, which opened in 2017.

Piecemeal development

For now, new development along the highway is still slow. But there will likely be a point when residential development has created a critical mass that will open the floodgates for more commercial and residential projects, according to Adam Perdue, research economist at Texas A&M’s Texas Real Estate Research Center.

All you have to do is look at other major Houston area highways to see the same pattern over and over, he said. That includes Interstate Highways 45, 10 and 69.

“You look at this urban frontier,” he said. “And it just keeps pushing further and further up the freeway.”

For now, Perdue said, development along 290 past Cypress is coming in “piecemeal” because developers can’t get their hands on many parcels large enough to create municipal utility districts for water and sewer service for new master-planned, mixed-use communities.

“To some extent, it is a little bit insufficient to see the piecemeal development,” Perdue said. “But that’s just the way it’s got to go, since you can’t force every landowner to just sell.”

There are quite a few holdouts among landowners along 290, according to Wolff, who said he would like to acquire some more property here.

“You just have to be opportunistic right now,” Wolff said. “The market is very strong, and it makes it harder to find a deal that makes sense, but you just have to keep looking, because you never know when an opportunity will arise.”

The difference to I-10, he said, is that 290 runs diagonally, southeast to northwest, and slices many of the larger tracts, whereas I-10 runs in a straight east-west line. The large, rectangular Beacon Hill property in Waller that Wolff Cos. purchased is an exception, Wolff said.

Large tracts are especially important for industrial projects, said Gray Gilbert, partner in NAI Partners’ Industrial Services group.

“They are looking to build larger developments and they need 50 acres minimum, or even … 100-plus acres,” he said.

There is some movement, however, with at least five developers having industrial sites under contract, he said.

“So people are trying to figure out how to get utilities to the site,” Gilbert said, adding that creating a MUD takes about 18 months.

In Waller, a city of just over 3,000 residents on the edge of both Harris and Waller counties, economic development Director John Isom said the end of the widening of Highway 290 a couple of years ago was a game-changer for the city and for future development.

“That, along with the Grand Parkway openings, made us very well placed,” both for commuters and for companies shipping their product, he said.

Just since last summer, eight manufacturing companies have agreed to come to Waller, which will bring 700 jobs and $200 million in capital investment, he said. Based on activities like these and growing master-planned communities in Waller County, Isom expects the city of Waller’s population to triple over the next decade.

The Waller Independent School District has projected its student population to grow by 65% by 2027. A second high school is slated to open at the end of this summer.

And further west, Prairie View A&M University opened a new residential hall in 2020 and has a goal of increasing its enrollment numbers by about 2,000 students, or 24%, in the next five years.

Currently, according to Zonda, there are 13 residential subdivisions near U.S. 290 within Waller ISD, which encompasses an area north and south of 290 between the Grand Parkway and Pine Island.

Another 28 are planned or in development, to add an estimated 35,738 homes. That includes four future subdivisions within the Bridgeland master-planned community west of the Grand Parkway.

Back when the Energy Corridor took off, there was also residential development to its west, including Cinco Ranch, Kelliwood and Williamsburg.

But the corridor wasn’t as far out from downtown Houston as the stretch of 290 between Cypress and Waller. To Wolff, that says nothing about its potential for growth, however.

Back in the 1970s, the Houston area’s population was less than 2 million and development ended much further to the east. Today, the region has surpassed 7 million people and the Grand Parkway is for Houston what Beltway 8 used to be some decades ago.

“When we went out to the Energy Corridor, there was nothing west of Highway 6,” Wolff said. “On a Sunday night I remember coming back into the city and we passed the town of Katy, which was just a rice farming town, and for the next 10 miles to Highway 6 you did not see an electric light.”

While development along 290 seems to be inevitable, the question is when it will happen.

That’s why it’s a risky game for developers buying land today, hoping others will follow soon, Perdue said.

“You’re making a bet on how much you’re willing to pay today for the undeveloped land and undevelopable land. You’re making a bet on, ‘Is it going to be five years before the suburban fringe gets to you?’ Well, then you’re probably going to make a lot of money,” he said. “If it’s going to end up being 20 years for the suburban fringe to get to you, well, then you might have ended up losing money.”