In Jeopardy Of Losing Tenants: Conroe Needs More Office, Retail Development Quick

While holding the bragging rights as the as the fastest-growing city in America, the city of Conroe has one big development problem.

The North Houston suburb runs the risk of losing several corporate clients whose businesses have grown if the office real estate selection doesn't improve. The city needs Class-A office space, yesterday. 

"They need nicer space for their clients to come to, but there is nothing available here so they have to look in neighboring communities," Conroe Economic Development Council Executive President Danielle Scheiner said. 

Conroe has had several requests for office space over the last few years, Scheiner told a crowd of more than 300 attendees at Bisnow's Future of The Woodlands and Conroe event Tuesday. However, there isn't office product to satisfy the demand, which is halting expansion. 

Less than 3% of the office market is categorized as Class-A in Conroe, according to data compiled by NAI Partners. That is only two Class-A buildings, and of that space, only 18K SF is available for lease. 

Despite the lack of quality office product, the market remains tight with the overall vacancy at 8.6%, NAI reports. Two properties — a 13K SF medical and office building and an 18K SF office building — have delivered so far this year. There is no office product under construction. 

Service providers such as engineering and construction firms top the list of those looking for space, Scheiner said.

The ideal places for future office development include along Interstate 45 in Downtown Conroe or near the Deison Technology Park, a 248-acre industrial park off FM 1484, she said. 

Stoecker Corp.'s Michael Stoecker told the Bisnow crowd to call him in six months for an answer to the Class-A office shortage. The Conroe-based real estate developer is in site preparation to construct an office building on a 4-acre tract on 105 West in Conroe. 

"We are all very lucky to be in Montgomery County, Texas," Stoecker said. "There are a lot of places even in Texas you could be that don't have the growth [and] don't have the positive atmosphere." 

The Woodlands is also in need of more Class-A office product, The Howard Hughes Corp. Central Region President Paul Layne said. To meet the growing demand of office space, the company acquired two mid-rise office buildings, dubbed Lake Front North, in The Woodlands.

Layne announced the company secured a 90K SF lease with an unnamed tenant. Lake Front North is now 58% leased. 

The J. Beard Real Estate Co. Broker Sean Durkin noted that The Woodlands submarket remained healthy despite the downturn in other Houston submarkets. He said overall vacancy in the market stands at about 9% while overall vacancy in others markets doubled.

Conroe Needs Retail, Too 

"Here is another hint for developers," Scheiner said. "We could use some service-oriented businesses out there near the industrial park." 

Black Walnut Café is the only restaurant within a 3-mile radius of Conroe Park North, a 1,045-acre business park; Deison Technology Park and the Conroe North Houston Regional Airport. The Woodlands-based Black Forest Ventures constructed the Black Walnut Café on airport grounds.    

With over 3,000 employees in the industrial park, Scheiner noted a need for retailers like drugstores, coffee shops and dry cleaners. The retail demand is also driven by the residential market and population growth, which is served by stores along Interstate 35 and Highway 105. 

Expanding Its Benchmark Property Type

Two Houston-based development companies want in on the Conroe real estate action. 

"We have been hearing about the happenings in Conroe for a long time, and we thought we needed to make a play there," Insite Realty Partners Vice President Rives Nolen said. 

Insite Realty, along with design-build contractor Urban Cos., is constructing a 30K SF free-standing industrial building on a 41-acre property previously owned by NOV. The site is a quarter-mile south of Teas Road and a mile east of Interstate 45. Insite's unnamed client will own the facility.

The business park will be ideally suited for free-standing industrial buildings between 20K and 60K SF, Nolen said, although the company is willing to go smaller or bigger. 

Attracting employers in manufacturing, distribution and professional and technical services is a strong point for the council, which has developed the city's two industrial parks and has broken ground on more property. 

"Hopefully we are not competing head-to-head with [the CEDC] too often," Nolen said. "Hopefully, we will be a complement to the product that [it] is providing, and we help keep the whole thing moving forward." 

Don't Overlook The Airport

The Conroe-North Houston airport serves as a great asset to the companies in Conroe and The Woodlands, Scheiner said. 

"The ability for companies headquartered here to fly in and out and not have to deal with [George] Bush Intercontinental [Airport] is a huge plus," she said.

Montgomery County, with strong funding from federal grants, invested about $28M to modernize and maximize the capabilities of the airport, The Conroe-North Houston Regional Airport Director James Brown said. 

Since 2006, it has constructed a control tower, expanded the primary runway to 7,501 feet and added a U.S. Customs federal inspection station.

The airport is working to add a parallel taxiway to the primary runway to improve safety and the efficiency of the flights, Brown said. 

Airport activity is ticking up. The airport recorded its busiest month on record by completing 9,300 operations in September. It has cleared more than 200 private and charter international flights to date, which is a boost from 158 flights in 2017, he said.