FEELING THE PINCH
The Woodlands’ economy begins to show signs of a possible lull from falling oil prices
The Woodlands has tried to hedge against the impact of low oil prices, but signs of a potential slowdown have started to show.
A 23-story luxury condominium called the Treviso at Waterway Square was designed as a slick glass building with a waterfront view near walkable urban amenities, an embodiment of The Woodlands’ “live, work, play and stay” concept.
After unit pre-sales in 2015 and a redesign of the residential tower, The Woodlands Development Co. announced its decision to put plans on hold due to the uncertain economic climate.
“The Woodlands Development Co. is confident that Treviso, as planned and designed, is the appropriate iconic residential building for the premiere site it will occupy. The Woodlands Development Co. will restart the sales process
once the market shows signs of rebounding,” the developers said in a statement.
During preliminary reservations at a private event in May, 46 reservations were reported to have been made. Units started at $650,000, and the Treviso was expected to begin construction in time for a late2017 opening after half of the units presold.
But the property, which is featured on the company’s newly launched site, will remain undeveloped for the time being.
The Woodlands Development Co. declined to comment on whether customers who purchased units could opt for a refund. But the company remains optimistic about moving forward when markets rebound.
Treviso isn’t the only real estate indicator of The Woodlands’ slowdown. Single-family home sales in 2015 declined by about 8 percent year-over-year. Sales declined in December by about 20 percent in comparison to the same period in 2014, according to the Houston Association for Realtors’ Multiple Listing Service.
The Treviso’s pause comes just days after The Woodlands’ largest employer, Anadarko Petroleum Corp., announced its grim fourth quarter and annual reports.
The Woodlands-based Anadarko announced a net loss of $1.25 billion in the fourth quarter of 2015 and a $6.7 billion net loss for the year.
With oil floating around $30 a barrel on both the West Texas Intermediate and Brent crude oil benchmarks, Anadarko is aligning its budget to withstand a “lower for longer” market. It expects to slash its 2016 budget by 50 percent over last year. The proposed $2.8 billion budget for 2016 will go up for review by the board of directors in March.
“We recognize that being headquartered in The Woodlands is important to us. We don’t see that changing. At the same time, we also look at the financial health of our organization and feel very comfortable that this is a company that was built to sustain downturns,” said Anadarko CEO, president and chairman Al Walker.
With deep budget cuts comes the fear of job losses in the area, especially for a company like Anadarko, which employs 3,920 people at its Woodlands campus and 6,100 companywide, according to 2014 figures filed with The Woodlands Area Economic Partnership and the U.S. Securities and Exchange Commission.
The firm hasn’t announced any job cuts yet.
“As a company, as an industry, as we go through a protracted commodity crisis environment that we see in the coming years, that we, along with our peers, are highly likely to sync up our capital spending and activity level with related workforce needs. That’s somewhat to be expected given the challeng- ing financial environment we all find ourselves in,” Walker said.
Other major employers in The Woodlands that posted net losses for 2015 include Baker Hughes Inc. and Halliburton Co. The energy sector accounts for 31 percent of major employers — those with 100 or more employees — in The Woodlands, not including retail, according to The Woodlands Area Economic Development Partnership.
“We’ve never seen in this market, even in the depths of the recession, collectively job losses with those major employers,” said Gil Staley, CEO of the partnership. “There are winners and losers, but collectively, we didn’t see a job loss. … I anticipate something like that this year.”
Just a few miles south of The Woodlands, Southwestern Energy Co. is expected to cut 40 percent of its workforce. That includes 300 jobs at the company’s new headquarters, which opened in January 2015. The company has yet to post its fourth-quarter and annual reports.
With growing economic uncertainty, The Woodlands Township has started to feel the pressure. After experiencing a 5.7 percent year-over-year dip in sales-tax revenue from July through September — holiday figures have yet to be released — the town- ship’s board of directors could consider delaying some projects, including a $1.2 million renovation of Northshore Park and a $1.6 million irrigation project.
“As we’re looking at initiatives in 2016, we’re going to be very cautious not to take on any expensive projects that would be better deferred until we have a better idea about how 2016 is going to turn out,” said Township director Gordy Bunch.
Sales and use tax accounts for the largest portion of the budget, coming in at 42 percent of the 2016 budget. The township expects to collect $52.6 million in sales and use taxes, a slight uptick from last year’s $51.3 million.
The energy-industry downturn caused a drop of $256,000 in oil and gas and sales and use tax collection in the first half of 2015, according to the township’s 2016 budget.
Though there’s much to be pessimistic about, The Woodlands area expects to addt wo full-service hotels, two major hospitals in 2017, several new restaurants and retailers, and more residential development in Creekside to its tax base.
Next door in the Oak Ridge area, new schools are expected to be built over the next few years, bringing more jobs and people to the area.
“While we’re not going to go out and say we’re going to have the best year ever, we’ve got enough diversity in our economy that we’re going to be able to provide high-level services that our residents have come to expect,” Bunch said.