In early 2022, Rice University’s Kinder Institute for Urban Research published a review of U.S. Census data that showed that Harris County’s population center crossed the Interstate 610 Loop for the first time, after moving 2 miles to the northwest since 2000.
It’s indicative of a strong, continued growth on Houston’s north and west sides. While most of Houston’s suburban areas are gaining more residents, most new residential development is happening west of the Grand Parkway, many in Fort Bend and Waller counties.
That growth is helping commercial markets in west Houston, particularly along Interstate 10 and the segment known as the Energy Corridor.
As developers are building new master-planned communities and building out existing ones along the western side of the Grand Parkway, a rising number of employees commute east to work.
And while today those emerging population centers are in the Cypress and Katy areas, there is no reason to expect growth will stop there.
In fact, the West Houston Association — a nonprofit organization concerned with the improvement of the area — now covers an area stretching from Hempstead to Rosenberg and from the 610 Loop all the way to Sealy. When it was founded in 1979, Katy was its western boundary.
Back then, State Highway 6 was considered far away from the city, said Alan Steinberg, president and CEO of the West Houston Association.
“Now, people live in Katy and commute to Houston, like, it’s not even considered that far,” he said. “Now Fulshear and Brookshire is kind of far, but people still live there. Twenty years from now, Sealy will probably be what’s far west Houston.”
Not-so-wild west
By then, residents there may not even feel the need to ever go into central Houston for work or pleasure. Howard Hughes Holdings Inc. envisions its 11,500-acre master-planned community Bridgeland to become for west Houston what The Woodlands is for the north: a self-sustaining community that has everything a big city has to offer – jobs, homes, retail and entertainment.
Completion of the first phase of its 925-acre town center, Bridgeland Central, is expected next year.
“And there’s other developers that I think have a similar mindset further out west; they’re just another 10 or 20 years down the road,” Steinberg said. “Right now, we’re seeing a lot of residential growth in the Fulshear area. I think over time, we will see other growth as well.”
Numerous developers have scooped up land for new communities west of the Grand Parkway over the past couple of years.
Some examples include Concourse Development’s 1,730-acre The Grand Prairie in Hockley; Johnson Development Corp.’s Cross Creek West in Fulshear; and Rooted Development’s 1,160-acre estate-home community Lakeview south of Hempstead, to name just a few. Houston-based Gamal Enterprises has also set its eyes on the Katy Prairie area with three planned residential communities in that part of Waller County.
Half of Greater Houston’s 14 top-selling master-planned communities on RCLCO’s midyear list of the 50 communities with the most home sales this year are west of Beltway 8, including Bridgeland, Land Tejas and Starwood Land’s Sunterra in Katy and Marvida in Cypress and Johnson Development Corp.’s Jordan Ranch in Fulshear.
The old west
That growth didn’t just start in the past few years, however. In 1970, west Houston consisted mostly of rice farms, ranches and rural town with fewer than 180,000 residents and 18,000 jobs, according to the West Houston Association. By 1990, it had grown to more than 700,000 residents and 242,000 jobs. And today, the 1,000-square-mile area is home to 1.9 million people and more than 590,000 jobs.
According to research by commercial real estate firm JLL, Houston’s Energy Corridor submarkets – including Katy Freeway East, Katy Freeway West and Westchase – are the submarket cluster with the strongest office leasing momentum in the country over the past 12 months. Its total transaction volume increased by 42% year over year.
Only three other markets in the country have seen positive leasing activity during the same period: central suburban San Diego, northeast Phoenix and Atlanta’s central business district.
“You’ve got a flight to quality, where West Houston definitely checks that box based on the amount of high-quality space available,” said Tyler Garrett, head of agency leasing for JLL Houston. “And then you have the post-Covid world, where employers are trying to get closer to where their employees live.”
Together, those west Houston submarkets accounted for nearly half – 48% – of second-quarter leasing activity in Greater Houston, according to JLL.
The Energy Corridor, in particular, is benefiting from having about 10 million square-feet of high-quality office buildings that were built during the fracking boom. Some of the largest transactions recently include Fluor Corp.’s 308,186-square-foot new headquarters lease at Three Eldridge Place at 737 N. Eldridge Parkway, Kiewit Corp.’s 277,105-square-foot headquarters lease at Energy Center I at 585 N. Dairy Ashford Road, and Wood Group’s 226,287-square-foot lease at Westgate III at 17325 Park Row.
In Westchase, Apache Corp. signed a 332,494-square-foot lease renewal and expansion at One Briarlake Plaza, making the building at 2000 W. Sam Houston Parkway S. its new headquarters after three decades in Uptown; and Bechtel Corp. signed a 285,251-square-foot lease at City West Place 3 at 2105 Citywest Blvd.
The strong leasing momentum comes as the Energy Corridor submarkets continue to see high vacancy rates. Total vacancy has come down somewhat over the past few quarters and is below Houston’s overall, but it still sits at 23.3%, according to JLL’s second-quarter office report. In fact, Energy Corridor office vacancy has been above 20% in 2016 as a result of the oil downturn, after bottoming out at 4% in 2013, according to data from CoStar.
Leasing activity in west Houston
While Houston’s economy, including in west Houston, has been steadily diversifying, energy continues to be the driving industry. In late 2021, researchers with Dallas-based Goodwin Advisors found that 55% of Energy Corridor tenants are directly tied to the energy sector.
At the time, office absorption there had been negative for about the past 18 months. Goodwin Managing Partner Evan Stone and Senior Partner Walter Bialas predicted the corridor’s resurgence, and indeed, it didn’t take long for leasing activity to increase.
“A couple of years ago, you could see the stage set,” Stone said, pointing to the high-quality office buildings, work from home and population growth in west Houston. “We were theorizing that you’re going to see a lot of leasing activity take advantage of the opportunity for that space, and that’s exactly what has happened.”
And the high vacancy rate? With only three buildings totaling 742,000 square feet of office space under construction – none of which are in the Energy Corridor – Goodwin Senior Partner Jason Presley expects vacancy to continue to come down.
“I think that will give the city as a whole, and the Energy Corridor specifically, a chance to take a break, absorb some of the existing vacancies and get to a more stabilized, higher level of occupancy,” he said.
As the market gets tighter, the strong leasing activity in the Energy Corridor will eventually slow down, JLL’s Garrett said. However, there’s more potential for Houston’s west side.
While the office market in the northwest isn’t there yet, Stone and Presley think it will benefit from an Energy Corridor spillover in the near future.
“The (U.S. Highway) 290 corridor and the West Belt submarket, around Beltway 8 and Clay Road, have had to wait their turn while the higher-quality spaces in the Energy Corridor got filled,” Presley said. “But from a demographic standpoint, they’re very well positioned for the population trends that provide good office locations and favorable commutes.”
Those trends will likely continue and benefit the west Houston office market. And while population growth is poised to also accelerate in the northeast, now that the Grand Parkway segment on that side has been completed, the experts said it won’t have the same effect on the office sector there. Proximity to the Houston Ship Channel and refineries mean residents there are less likely to work in an office.
In the west, the job of the West Houston Association is to make sure the area is prepared for the population and commercial growth, Steinberg said.
“At the end of the day, everyone wants … that high quality of life for people that are there and recognizing that you’ve got to work together to make that happen,” he said. “I believe that the future is to the west.”