BUSINESS:

The city that oil built gets a retrofit for the latest gusher

HOUSTON -- On the outskirts of this sprawling city's core, Royal Dutch Shell PLC is in the midst of a major expansion of its corporate offices.

About 672,000 square feet of new office space is being built just off Interstate 10 in west Houston for Shell's exploration and production arm, and more is rumored to be coming in the years ahead.

Shell will have plenty of neighbors in this area dubbed the Energy Corridor District, where projects under way or kicking off this year will add about 3 million new square feet of office space. Projects totaling 2 million more square feet are proposed and will likely win approval.

For comparison, the massive One World Trade Center tower being constructed in lower Manhattan will have 2.6 million square feet of office and retail space.

Clark Martinson, general manager of the Energy Corridor District, is encouraged by ongoing and proposed construction projects Shell is pursuing in the neighborhood he's selling as the place to be for the rapidly growing oil and gas industry.

"They've really grown. I was surprised to see the growth that they're doing," Martinson said of Shell's expansion. "They're more than tripling their campus right now."

The growth is being fueled by an expanding workforce of companies in Houston that are developing new shale oil and gas fields and the deep waters of the Gulf of Mexico.

Martinson and his team are working to capitalize on this boom while trying to steer future growth in ways that reduce the sprawl this city is known for.

Houston is one of the nation's fastest-growing cities, and the current energy boom is partly fueling and reshaping that growth. Metropolitan-area planners believe that by 2035 the Houston-Galveston region could add 3.5 million residents, and by that time Houston itself would likely replace Chicago as the nation's third-largest city.

That industry-fueled growth is visibly reshaping the urban landscape here.

Stagnant downtown is hoping to lure offices and residential development through a massive expansion of public transit. Up north, a once relatively sleepy, master-planned bedroom community called the Woodlands is fast becoming a popular destination for energy companies, with Anadarko Petroleum Corp. settling in while Exxon Mobil Corp. builds a huge new campus nearby to consolidate all of its scattered offices.

But nowhere is development moving ahead faster than in the Energy Corridor.

At a talk on the city's real estate market outlook last month hosted by area law firm BoyarMiller, experts named the Energy Corridor and neighboring Westchase "among the most active office submarkets" due to the growth of the oil and gas business. Analysts there say office vacancy rates in the Energy Corridor are in the single digits and lower than what the market is witnessing elsewhere in the city.

"As Houston expands, the trend for the growth in the north and west will continue," Robert Parsley, a principal at Colliers International, said in an overview.

But the Woodlands and downtown have advantages over the Energy Corridor that may lure some projects away. So the Energy Corridor is employing a marketing and planning effort to enhance the image of the corridor as the best place to work and live in Houston.

Efforts include an elaborate new website detailing plans, regular outreach with existing and potential new tenants, and the first "Energy Fest" event scheduled for April. With live music, entertainment and vendor booths, organizers hope it becomes an annual event for "bringing the residents and businesses in the ECD [Energy Corridor District] together."

"We're just starting to introduce transit, to provide transit service to these centers, but they're very suburban-oriented, car-centric, and our job is trying to make this area more compact, or at least encourage developers to make more compact development and a walkable place or bicycle-friendly," Martinson said. "We're retrofitting a 1980s suburban business district to be more competitive today."

Building a walkable, livable corridor

The Energy Corridor is already home to the largest concentration of energy-related companies in the city, with several major firms having either headquarters or major office centers within the district or in the larger neighborhood. They include Shell and BP PLC, which is building a larger information hub that will eventually house the world's largest corporate supercomputer. Also present are ConocoPhillips Co., KBR Inc. and Schlumberger Ltd., along with roughly 300 other engineering and consulting companies that do extensive business with the larger energy companies.

Established in 2001 by the Texas Legislature as "Harris County Improvement District No. 4," the corridor has experienced little to no growth since 2007. Before that, business office capacity grew from about 12 million square feet to 17 million.

That lull ended last year, prompting the new marketing campaign as development planners attempt to attract companies that may otherwise choose Houston's other top-tier economic hubs to locate in.

With the growth comes a challenge. Martinson and his team say they hope to steer the quickly accelerating development toward creating a more livable, walkable community, lined with miles of hiking and biking trails and connected by new public transit.

Getting oil and gas companies in line with this vision is a full-time job, said Les Lee, a principal at the information technology consulting firm eSiteful Corp., which helped the Energy Corridor redesign its website.

"One of the things I think is really unique about the Energy Corridor is its focus as a business district on a livable lifestyle," he said. "That is a goal, and to try to get more and more of these businesses around here to petition for annexation and join the district."

Several initiatives are under way to help accomplish the agency's goals.

The Energy Corridor's development office estimates that the area contains about 50 miles of jogging and bicycle trails. Much of those line a stretch of the Buffalo Bayou waterway that extends all the way into downtown Houston and eventually the port, running through Terry Hershey Park in the neighborhood.

But plans are in the works to extend this network to 100 miles of broken and disconnected trail systems scattered around west Houston. Huge swaths of open space at the Addicks Reservoir and George Bush Park, which are next to the corridor, are not easily accessible except by car. District planners hope the West Houston Trails Master Plan, which moves forward in fits and starts, will eventually change this.

Lee envisions marketing the corridor to new companies, particular energy-related businesses, by highlighting the Energy Corridor's proximity to open space, the new trail system, waterways and popular residential communities. Though far from downtown, the corridor could serve as a sort of separate downtown area of its own, he explained, centered between the upscale Memorial neighborhood, booming Cypress-Fairbanks in the northwest, and the suburb of Katy and its Cinco Ranch area.

And the state is spending billions of dollars to expand Highway 99 into a third major freeway ring around the city. The Grand Parkway project should be completed by the next decade, and the western and northwest segments will be finished first, possibly as early as the end of this year. All this together should particularly appeal to companies in the oil and gas space, he said.

"They want to be close to where the employees live so they have recruitment possibilities, and there are good residential areas that are real close by, so this is a real nice central area for that," Lee said.

Incorporating transit

Expanded public transportation is also planned but could prove the most challenging new feature to introduce.

The vast majority of workers here commute by car from all corners of the city. Bus service was only recently added.

Martinson said the expanded trail network should encourage more bicycle commuting. The city's park-and-ride system mainly delivers commuters by bus to downtown, but service could be introduced to allow for stops at the Energy Corridor during rush hour.

The corridor is also experimenting with the first corporate car-sharing program.

Houston's city government runs a similar car-share program for its employees. Energy Corridor planners are trying to model that one with a similar system, made available only to the area's private workforce. The idea is to make commuters feel more comfortable about leaving their cars at home to bike or bus in -- cars could be borrowed during work hours for any business-related travel needs within the corridor or for going out for lunch.

Energy industry employers and their employees aren't the only targets for this new rebranding and marketing effort.

Martinson noted that last month the University of Texas' MD Anderson Cancer Center announced it would build new facilities in his neighborhood. That development, coupled with the nearby Memorial Hermann-Texas Medical Center, Methodist West Houston Hospital and the Texas Children's Hospital, could help this district become an attractive center for the health care industry and its workforce, too.

"That will start to give us a little more diversity," Martinson said.

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