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The East Houston Boom: The Explosive Bright Spot in a Lackluster Market

Robert Clay

Robert Clay

EAST HOUSTON (Realty News Report) – If you think Houston is only losing jobs, then take a ride to the city’s eastside.

Drive by the ChevronPhilips chemical facility under construction in Baytown. It employs thousands of construction workers and will need approximately 400 full-time employees to run the plant once completed.

“Unfortunately the upstream side — exploration and production — which is the westside of Houston — is losing jobs at a rate far greater than midstream and downstream which are on the eastside of Houston,” says C.A. Shields, marketing manager at the Bay Area Houston Economic Partnership. “Industrial facilities are being built on the eastside requiring thousands of construction workers and companies are hiring. Because so many workers are needed for so many projects, we’ve seen a shortage in certain areas of the workforce and are working with local school districts, colleges, and universities to remedy the issue.”

Thanks to a new technology boosted production from dense shale formations (a process known as fracking) – and the low-cost feedstock that fracking provides for petrochemical manufacturing – Houston’s eastside is booming.

“It’s been this way for a number of years,” explains Robert Clay, principal at Clay Development & Construction, Inc., a developer and design/builder of industrial build-to-suit facilities for sale or lease. “We have been active in the eastside since 2005 and have developed over 3 million square feet of industrial space.  I think people want to believe it’s hot right now because everything else is seemingly so bad . . . which I also don’t believe.  The southeast side of Houston is continuing to see deals because of the refining business and because of the perceived increase in port related tonnage due to the widening of the Panama Canal.”

Clay Development just began construction on a 1.5 million square feet spec project in the 15,000-acre Cedar Port industrial park, he notes, and several other developers have announced new projects in the region.

“The petrochem sector started a major expansion a couple of years ago and are two years into a 10 year process,” says Clay.

The region has been on the upswing since the fracking boom started a decade ago, providing low cost energy and low price feedstock for the area’s chemical manufacturing facilities. Many chemical manufacturing plants that were already located in the area began to expand and those companies not here and wanted to be, and began shopping around for sites. An estimated $35 billion worth of chemical facilities are being constructed or expanded in the region, although many cite construction numbers far higher than $35 billion.

Among the multibillion-dollar petrochemical plant projects under way on the Gulf Coast: Exxon Mobil Chemical with some $6 billion in projects in Baytown and Mont Belvieu; Chevron Phillips has the same amount of projects in Baytown and Old Ocean. In Freeport, Dow Chemical has $4 billion in projects and in Channelview, La Porte, and Corpus Christi, LyondellBasell has some $1.3 billion with additional ones pending.

The eastside of Houston along the Ship Channel and in the Bayport Industrial District has the infrastructure — pipeline network, truck, rail, port — to support some of the world’s largest manufacturing complexes, says Shields.

Marshall Clinkscales

Marshall Clinkscales

Marshall S. Clinkscales, Jr., director, Colliers International notes that contrary to the general belief, the Houston Ship Channel area is not all about oil.  “The east side also has a vigorous and healthy economy from refineries, chemicals, and related industries, he adds.

Earlier this month, Ridge Development — the industrial development arm of Transwestern Development Co. – announced its selection as the master developer for 56 acres of Port of Houston Authority land near the Bayport Container Terminal, in Pasadena.

According to the Greater Houston Partnership, the Port of Houston ranks as the largest port in the U.S. by foreign tonnage for the 19th consecutive year. In terms of container traffic, the Port of Houston is the nation’s sixth-busiest, handling 67 percent of the container traffic along the Gulf of Mexico.

Retail and industrial space in the region have tightened over the past two years. According to Lisa R. Bridges, director of market research in the Houston office of Colliers, the city’s eastside reported a retail vacancy rate of 6.3% percent last year, after delivery of about 600,000 square feet of retail space during those 12 months.

Bridges adds that Houston’s eastside had an industrial vacancy rate of a mere 3 percent in 2015 with absorption of more than 225,000 square feet during the year and delivery of about 200,000 square feet.

Shields of the Bay Area Houston Economic Partnership, notes the expansions are spurring related support service growth such as logistics, warehousing, distribution.

“Since the majority of the facilities are manufacturing the building blocks of consumer products, much depends on consistent industrialized nations’ consumption and emerging market growth,” Shields adds. “We expect to see continued downstream growth with many of the projects coming online in next few years beginning production and exporting. We also are looking at continued midstream growth with pipeline construction and new rail projects.”

Realty News Report is a Texas-based publication edited by Ralph Bivins.

 March 2, 2016

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