The Who's Who in Building & Construction

Destination Houston

Destination Houston

The following content is featured in the Houston Spring 2016 edition of The Who’s Who in Building & Construction.

Destination Houston

Three-year building boom transforms Houston into an international super city

The huge wave of commercial construction that took place in Houston and the surrounding metro area during the past three years has taken the city to the next level. In the city, proper residential and nonresidential building permits shot up from just below $5 billion in 2012 to reach a high of $8.7 billion in 2014, ending in a slight drop to $8.2 billion in 2015. (Figure 1)

houston figure 1

Figure 1

“As recently as 2012, our skyline consisted of 269 million sq. ft. of building space, it is now just under 300 million sq. ft. That is huge in just three years,” said Sandy Benak, Leasing Manager/ Corporate Marketing Manager for Granite Properties Inc., and member of the Certified Commercial Investment Member (CCIM) Institute and the Houston Chapter of Commercial Real Estate Women (CREW).

“Rental rates three years ago were at an overall market average of $24 per sq. ft. and we are now over $28 per sq. ft. That is an incredible jump in just three years,” added Benak.

Unfortunately, the phenomenal growth spurt began to slow down dramatically beginning in November 2014 when the price of oil began to decline rapidly. Commercial construction followed suit because oil and gas companies built the vast majority of buildings that went up in Houston during the boom. However, construction of medical, technology and multifamily buildings gained momentum that is expected to continue in the near term.

The Greater Houston Partnership’s 2016 Employment Forecast advises its readers to expect slower growth overall for the year, but notes that the construction industry is likely to continue growing. For example, much of the $63 billion in chemical plant construction announced since 2012 has yet to be completed, and is not expected to peak until late 2016 or early 2017.

In addition, the Houston area gained the most residents in the entire country between 2013 and 2014 with more than 156,000 people moving to town that year alone, according to the U.S. Census. The great influx of new Houstonians has created demand for continued commercial construction.

The 2016 Employment Forecast also notes that in 2015 Houston voters approved $5.8 billion in construction bonds, as well as $3.4 billion for municipal, county and school district facilities, and another $2.4 billion for water, sewer and road projects.

If nothing particularly out of the ordinary occurs, the Forecast says “The Partnership sees more positives than negatives in the overall construction outlook and forecasts the sector to add 7,000 jobs in 2016.”

SUPER CITY

While much of the construction work that was done during the recent boom was spread across the metro area, residents can readily see and experience the many ways in which it has transformed Houston into a “Super City.” In fact, it won’t be long until the whole world gets a chance to see the new skyline and experience the city’s reinvigorated look and feel when Houston hosts Super Bowl 51 in 2017.

houston downtown skyline

Downtown Skyline and Buffalo Bayou Sabine to Bagby Promenade

JUMP START

That transformation began in earnest when the price of oil jumped up significantly in 2012, according to Russell Hamley, President of Associated Builders & Contractors of Greater Houston.

“Basically, every energy company located in Houston built a new building,” said Hamley.

Some built even more than one. For example, ExxonMobil constructed a 385-acre, 3-million-sq.-ft. campus in The Woodlands on the north side of the city. The facility, comprised of more than 20 buildings, is designed to accommodate more than 10,000 employees, according to ExxonMobil. Commercial infrastructure such as hi-rise apartment buildings, hospitals, schools, churches and grocery stores were built to accommodate the sudden increase in population near the ExxonMobil campus and across the city, said Hamley.

houston downtown aquarium dancing fountains

Downtown aquarium dancing fountains

“All of that type of construction was being done at an unbelievable pace for the past three years,” said Hamley. “Our members have had record years dating back to 2011.”

Houston, which hadn’t seen any new major hi-rise office buildings since the 1980s, saw 12 new 40-story-plus office buildings go up since 2012, he added. “There were a lot of cranes in the air,” said Hamley.

One of the big drivers behind the construction of all that new office space was the desire to attract great talent to work at Houston’s energy companies and world-renowned medical facilities, added Pat Kiley, founding Principal of Kiley Advisors and past President of the Houston Chapter of Associated General Contractors.

For example, in 2014, Memorial Hermann-Texas Medical Center embarked on a $650 million renovation and expansion to “position the hospital to continue its leading role in driving the latest technology and procedures to bene t the growing healthcare needs in the Houston region,” according to Memorial Hermann. Texas Medical Center also has been connecting to many newly constructed and existing hospitals and medical facilities across the Houston Metro area, said Benak. The world-renowned medical center is in a compact location that is hard to get in and out of, so everyone involved is gratefully embracing the expanded access made possible through technology, she explained.

THE GOOD LIFE

Houston’s retail, restaurant and entertainment industries also continue to grow and benefit from the building boom.

“Retail will have another strong year,” added Kiley. “Houston is such an internationally diverse city that every kind of retail specialty needs to be here.”

houston downtown skyline at night

Downtown skyline at night

The Galleria, Houston’s largest and most prestigious mall, underwent significant remodeling which will be completed this year, according to Bill Wong, Principal of Orange Commercial LLC, a commercial real estate brokerage and member of the Houston Metropolitan Chamber of Commerce.

The addition of 40,000 new apartment units, including several luxury hi-rise condominiums, to Houston’s skyline opened up new living space, especially downtown and the Galleria area, said Wong. The building and population boom also have created a pronounced need for service-oriented small businesses, he added.

“Doctors, dentists, accountants and attorneys are growing strong,” said Wong.

Prior to the boom, much of the construction in Houston was taking place on the city’s outskirts, he added. Recent construction has brought people back into the heart of the city where they are enjoying the new super city’s revitalized museums, sporting facilities and entertainment venues.

No Super City would be complete without beautiful green spaces. In 2015, Houston approved a $200-million, long-range master plan to renovate Memorial Park. Another $58 million has already been spent on improvements to Buffalo Bayou Park, a 160-acre “green gateway” to downtown Houston. Completed in late 2015, the Buffalo Bayou renovation added 14,000 new trees as well as new artwork, bridges, visitor centers, a dog park, a skateboard park, bike and jogging trails and a sand-filled volleyball court.

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