Katy group eyes ‘proactive’ development

After oil industry crash devastated area, council creates plan to promote west Houston business

In 2014, Mike Baker thought he had the perfect plan.

As the owner of Freeway Properties, which has developed about 6 million square feet of retail and office space in the Houston area, he readied his next venture: the six-story Katy Ranch Crossing office building. Baker was eager to begin leasing spaces. Then the oil industry crashed. The downturn set off a whirlwind of trouble across Houston. Thousands of energy jobs were lost, and the crash infected other industries. The need for office space fell sharply.

Today, Katy Ranch Crossing is only one-third leased.

“When the oil crash hit, it’s like someone turned the lights out,” Baker said. “If the energy crunch hadn’t happened, (the office building) would have been full a year ago.”

West Houston has been affected uniquely when compared to areas such as east Houston, where petrochemical and liquefied natural gas plants have kept the economy stable. The downturn has mostly devastated upstream jobs such as those in drilling.

While Baker feels that he can’t do much more than wait out the downturn, the Katy Area Economic Development Council is doubling down on its efforts to help west Houston businesses.

“We don’t want to be patient,” council President and CEO Lance LaCour said. “We want to be more proactive.”

In a recently published 15page strategic plan, called Katy 2020, the council describes the need to recruit more small businesses and to diversify the area with non-energy jobs so that there’s less reliance on oil positions despite that west Houston houses the Energy Corridor. It discusses marketing strategies to better sell companies on moving to Houston’s western region, including promoting infrastructure funding.

It’s a timely endeavor. According to the council, the labor market from Sealy east to downtown lost about 38,000 jobs from 2014 to 2016, 22,000 of which were in

the energy industry.

On the real estate front, high-priced home sales have suffered and a oncelow inventory ballooned. Office space vacancy rates took the largest hit in response to the downturn. The greater Katy area’s office occupancy — the amount of office space filled with tenants — fell by 10 percent from 2014 to 2016 to approximately 86 percent, the council reports, with the most expensive office spaces being about 13 percent vacant.

‘Tenant’s market’

For Baker, whose Katy Ranch Crossing building is considered a high-end property, that meant needing to offer cheaper lease deals and other incentives to entice renters.

“It’s definitely a tenant’s market,” he said.

Luckily for the greater Katy area, a diversified market softened the blow some — success that Katy 2020 aims to build on, LaCour said.

Since 2010, the council reports that more than 8,000 jobs have been created in the Katy area, including many in health care. There’s also been about $1.5 billion in capital investment, and the council played a role in developments such as a new University of Houston System campus that will open in Katy in 2019.

In recent years, investors and corporations have poured cash into industries such as health care, where hospital expansions have occurred at facilities such as Memorial Hermann Katy, and in retail, which has seen new shopping centers and other businesses rise near I-10 as developers plan for more in the near future.

“As the energy industry rebounds, which it’s continuing to do, we will definitely see more projects,”

“While we are out there marketing Houston and trying to attract more projects, it’s very important to have regional allies in Katy setting their own direction. … It’s always a goal to continue to diversify while we level the strengths in energ y.” Bob Pertierra, chief economic development officer of the Greater Houston Partnership

LaCour said.

Katy 2020 will be shared with the council’s partners, which include Harris and Fort Bend Counties, the Greater Houston Partnership and several of the region’s other economic development organizations.

‘Level the strengths’

“While we are out there marketing Houston and trying to attract more projects, it’s very important to have regional allies in Katy setting their own direction,” said Bob Pertierra, the Partnership’s chief economic development officer. “There’s a number of industries they compete well in. It’s always a goal to continue to diversify while we level the strengths in energy.”

There’s confidence that corporations will continue to invest in what has become one of Houston’s hottest areas to live and work. Oil prices, while still not close to their strong numbers pre-downturn, have somewhat climbed back. Baker hopes to have Katy Ranch Crossing entirely leased by the end of 2018.

“I have no regrets,” he said. “I’ve been through this before. You just have to ride through that through — like being in an ocean.”