Relocations, new construction lead to few vacancies
Towering above tree lines and the modern architecture of The Woodlands Town Center are icons of a recovering economy. With demand for office space at a peak, the yellow cranes on the eastern edge of The Woodlands are busy erecting the latest in a succession of high-end commercial properties that are in high demand.
According to the CoStar Group, a firm that specializes in real estate market data reporting, 2 percent of all Class A office space in The Woodlands is vacant, and 7 percent of all classes of commercial space is on the market.
Two new buildings under construction, 3 Waterway and the Anadarko tower, are the latest in a fast-moving line of commercial developments making The Woodlands the hottest market for commercial real estate in the Houston area. When they are completed, 3 Wateway will be 98 percent leased, according to The Woodlands Development Company, and the new Anadarko tower will house 400 new employees with room to add 1,300 more workers.
With its robust economic climate and housing market, as well as strong retail outlets and popular entertainment opportunities, The Woodlands is a draw to those seeking a home for their business.
“Texas is a good spot to be in the commercial real estate market,” said Jeff Beard, president of J. Beard Realty. “Houston is the best place to be in Texas. And Montgomery County is the best place to be in Houston. There are a lot of great places in Texas, a lot in Houston, but The Woodlands has something really unique in offering the complete package.”
The story of 3 Waterway, under construction in the heart of Town Center amid several similar Class A facilities, is representative of the demand for office space. In November, The Woodlands Development Company announced its construction, which at the time was planned to be an eight-story facility.
Before ground was broken or the concrete foundation poured, Sacramento, Calif.-based Waste Connections and Dublin, Ohio-based Nexeo Solutions signed leases to occupy the building. Other tenants have yet to be announced and the building is scheduled to be completed by early 2013, according to the Development Company.
Ron Mittelstaedt, CEO of Waste Connections, said his company considered sites in Denver, St. Louis, Chicago, Dallas and Houston before deciding on The Woodlands as the spot for the company’s new headquarters.
“We really didn’t see anything like The Woodlands,” Mittelstaedt said. “We didn’t see anything like it in Denver, certainly not in Dallas or St. Louis. It was important to maintain a suburban feel to our environment, and The Woodlands was the only place where you could accomplish an urban setting in a suburban environment.”
Anadarko’s 550,000-square-foot tower and 3 Waterway are only a few of the projects either under construction or under development. Blackforest Technology Park will consist of a pair of 30,000-square-foot facilities on Technology Forest Boulevard and open in the first quarter of 2013. Research Forest Lakeside, which currently includes two buildings occupied by Aon Hewitt, has one building currently under construction and will eventually see nine more buildings that will amount to more than 1.9 million square feet of commercial and mixed use space when completed.
Talisman Energy has leased 200,000 square feet of office space at Research Forest Lakeside and plans to construct an additional 68,000-square-foot facility and a 300,000-square-foot building. Talisman already occupies office space at 4 Waterway.
In the fall, Howard Hughes Corp., owner of The Woodlands Development Company, announced plans to construct three additional office buildings totaling 1 million square feet in Town Center near the McKesson building on Woodloch Forest Drive. Gil Staley, president of the South Montgomery County Economic Development Partnership, said Salt Lake City-based Huntsman Corporation is conducting a feasibility study to expand its footprint with another building in The Woodlands, where it already occupies space in One Waterway, as well as four other buildings on 17 acres.
“We’ve seen a ton of leasing in the last few months,” Beard said. “A lot of it is the Houston economy and good corporate growth and The Woodlands gets more than their fair share. The Woodlands is very attractive for CEOs and when CEOs want to live there, their companies follow.”
Amenities a draw
Staley said the EDP keeps tabs on the South County job market and the influx of new businesses are giving a strong boost to that market. He said between January 2011 and January 2012, approximately 1,000 jobs were created in The Woodlands. Staley credits the job growth numbers to an increase in oil and gas exploration, as well as to the announcement that ExxonMobil would construct a new campus just south of The Woodlands.
“When you get a company like ExxonMobil make a commitment to The Woodlands area, that pretty much gave us the seal of approval that this a great place to operate a business and raise your family,” Staley said. “In my opinion, that’s what spurred this growth.”
Market analysts have pointed to The Woodlands proximity to major transportation and mobility hubs, such as the Hardy Toll Road and Bush Intercontinental Airport, as well as its retail and entertainment amenities as key components to corporate relocations.
“We really needed to be in a central time zone near a major hub airport, and The Woodlands’ was a natural choice,” Mittelstaedt said. “We were looking for what I would call a new progressive environment that had [amenities within] walking distance—retail, restaurants, bars, entertainment—and a Class A office space. Waterway Plaza really offered all of that. You can virtually walk to anything.”
The downside to the lack of supply and an increase in demand is accommodating all of the businesses that want to either move to The Woodlands or grow their existing offices.
“As an economic development [entity], we are very pleased with the job growth and the number of companies that have relocated and have announced they are relocating,” Staley said. “On the other hand, it’s hard to recruit companies or for companies to expand.”