Thanks to the fracking boom that began a decade ago — providing low cost energy and low price feedstock for the area’s chemical manufacturing facilities — Houston’s Eastside has been on a roll. Numerous chemical manufacturing plants in the area have expanded while other firms began shopping around the Eastside for sites. An estimated $35 billion worth of chemical facilities are being constructed or expanded in the region. Clay Development & Construction, Inc., the Houston-based developer has been at the forefront of this expansion. Active in the Eastside since 2005, Clay has developed over 3 million square feet of industrial space. Robert Clay, principal at Clay Development & Construction, says 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 foot spec project in the 15,000-acre Cedar Port industrial park. He refers to the area as the “Petrochemical Corridor.” To learn more about the region as well as the company’s expansion plans, Realty News Report spoke to Mr. Clay.
Realty News Report: You recently coined the term the “Petrochemical Corridor.” Can you describe this emerging office market?
Robert Clay: It runs down Hwy 225 from Loop 610 to Hwy146; the epicenter is at Hwy 225 at the Beltway. Although I’m not sure it warrants a new term because we aren’t certain of the depth of the market. The emerging office market is just that, emerging. We do not believe there will ever be a Transco Tower there, but there is certainly a need for low-rise suburban office.
Realty News Report: Governmental safety regulators are encouraging chemical companies to locate their offices off-site, rather than on the premises of the chemical plants. Is that one of the reasons the Petrochemical Corridor office market is growing? What do you predict for the future? Will the corridor continue to expand?
Robert Clay: Correct. Regulators are trying to get the “non-essential” plant workers out of the plant. Again, we are not certain as to the depth of the market at this time. We are seeing smaller, neighborhood style office requests in the 5,000 to 60,000 square foot range, but I don’t think there will be anything like the “real” energy corridor in west Houston. But who knows?
Realty News Report: Your firm is in an expansion mode with a number of new projects under way. Can you tell us your strategy — acquisition and development — in today’s uncertain real estate market?
Robert Clay: We like to think we are more nimble than the national firms. When distribution is hot, we can work that side of the business; when manufacturing is hot, we can work that and the same with office. The key is not to be pigeon-holed into one specific type of product, which can be hard to do. We generally keep our ears to the ground on all three and work whatever is in growth mode.
Realty News Report: Will the fall out of the Brexit situation affect the chemical and/or real estate sectors?
Robert Clay: That’s a great question, but honestly, I have no clue. I don’t think anyone has at this point. I wouldn’t think so, but I’m not that smart!
Realty News Report: Do you have additional land purchases or acquisitions in the pipeline?
Robert Clay: We are pretty good with land right now. We have significant tracts in every submarket in the city except the southwest. We are, however, working on some new tracts in Cedar Port.
Realty News Report: What’s the latest on the 11,000-acre Cedar Port project in Baytown? You bought some property there. Is there a development you’ll be announcing soon? .
Robert Clay: We announced a 1.5 million square foot rail served distribution project a couple of months ago. It will fill up that land and we are in the process of looking at more land in this park.
Realty News Report: What is your assessment of the soon-to-be completed expansion of the Panama Canal? Will that have much impact on Houston?
Robert Clay: We think it will have a positive impact on the southeast side, and others in our business do too. There are several new projects that have been announced (in addition to ours) and Clay Development and Construction will probably have more coming.
Realty News Report: What’s your outlook for the rest of 2016 and 2017?
Robert Clay: Slow and steady. We believe we will see fewer, larger deals as opposed to many smaller deals.
Realty News Report: Any other comments?
Robert Clay: We are hearing the northwest section of Houston is being hit hard by manufacturing vacancies. That’s a market to watch in the short term.
July 6, 2016
Realty News Report is a Texas-based publication edited by Ralph Bivins.