A spate of new and proposed energy-related infrastructure projects along the Gulf Coast is expected to boost demand for office space in the Houston area over the next several years, experts say.
One report anticipates the projects will help drive “massive domestic and international corporate relocations to Houston.” It says recruiting from oil and gas companies will lead to an increase in demand for offices to the tune of 2.5 million square feet to as much as 12.5 million square feet by 2016.
The report, compiled by Dallas-based Stream Realty Partners, identifies up to $120 billion worth of investments in refineries, pipelines and export terminals along the Gulf Coast by 2016
“Office jobs like engineers and project managers overseeing these projects are going to take seats in office buildings,” said Paul Coonrod, managing director of the Houston office division of the real estate firm.
Others say demand related to the new energy infrastructure won’t be nearly as high.
More than half of the jobs generated during the building phase of these infrastructure projects are for construction work, economist Barton Smith said. He also said it’s unlikely that all the proposed projects will be built. For example, federal regulators must approve the bulk of pending proposals to export liquefied natural gas.
“It doesn’t mean I don’t think this is a very interesting phenomenon occurring in Houston right now,” said Smith, professor emeritus of economics at the University of Houston. “It’s going to create income and wealth.”
The projects, he said, would have a strong economic ripple effect in other parts of this area’s economy.
The port would be a major benefactor if products made from natural gas are shipped abroad in large quantities.
Stream’s predictions for office space requirements are based upon estimates from energy companies that for every 1 billion cubic feet of liquefied natural gas exported daily some 20,000 jobs are created.
Based on an assumption that 10 billion cubic feet could be exported, that would translate into 200,000 jobs, half of which could end up in Houston, the company said. Of those jobs, 10 to 50 percent would be in offices, Stream estimates.
Houston’s position as a hub for the energy industry has already led to the start of a new boom in the local commercial real estate market.
Through the third quarter of this year, companies occupied 4.1 million square feet of additional space in Houston-area office buildings, according to Washington, D.C.-based CoStar Group. That’s more than all the new space occupied in 2011.
Most of the top office leases signed during 2012 were to companies involved in the energy business.
Nearly 4 million square feet of new office space was under construction at the end of September, according to the CoStar report.
Those properties include a 550,000-square-foot building in The Woodlands being built for Anadarko Petroleum Corp. and a 450,000-square-foot tower, called Energy Tower III, on the Katy Freeway between Kirkwood and Dairy Ashford. The project was begun on a speculative basis, meaning it was started without any tenants.