Houston Could Be ‘Most Consequential City In America’ As It Rapidly Diversifies, Raising Questions CRE Must Answer

As massive numbers of older, White baby boomers age out of the workforce, those following in their wake are both more racially diverse and more eager to approach the office in new ways. The face of the average American worker is changing quickly, fastest of all in Houston, with important implications for a commercial real estate industry already grappling with upheaval wrought by the coronavirus pandemic.

State and local shutdowns last year created shifts that brought into question how developers will go forward with creating and managing new office developments. At Bisnow’s Nov. 3 Houston Construction and Development event, panelists warned employers and commercial real estate professionals they should also factor in a rapidly changing workforce when planning office schemes, setting hiring strategies and planning for the future in a city that boasts racial demographics years beyond the rest of the country.

As of 2020, the Houston metro area was roughly 35% White, 17% Black, 8% Asian and 38% Latino, according to the latest U.S. census data.

Urban experts agreed that amid the coronavirus-fueled paradigm shift in hybrid and work-from-home, the real estate industry will also have to pivot to accommodate the needs and interests of its workers.

“We are at the forefront of what’s happening across all of America. What happens here matters. This is where the American future is going to be worked out,” said Stephen Klineberg, founding director of Rice University’s Kinder Institute for Urban Research.

“How we navigate this transition will have enormous significance, not only for the Houston future, but for the American future,” he added. “It makes this city maybe the most interesting and most consequential city in America.”

Michael Scheurich, CEO of Houston-based construction company Arch-Con, said younger, less-invested generations’ workplace independence means a disinterest in merely working for a company for 30 years and collecting a pension. To attract and keep workers, experts say, companies need to stay up to date with changing workplace expectations, namely greater flexibility in time and location, better pay and benefits, and, of course, responding to the fact the composition of the labor pool is changing.

The commercial real estate industry, in particular, should look inward, panelists said. Currently, the industry skews heavily White and male, disproportionally so when compared to general demographics. A 2020 Commercial Real Estate Women Network survey revealed women made up just a third of the commercial real estate workforce, and that compensation, especially among women of color, lagged behind men. Ongoing Bisnow analysis shows executives in the commercial real estate industry remain overwhelmingly male and White and the Urban Land Institute reported early this year senior CRE leadership positions held by people of color have been stuck at around 2% for years.

For progress to happen, that needs to change.

“The diversity of this city is its strength. But we’re talking about getting stronger. If you look in this room, we don’t represent that diversity. We just don’t,” said Rice Management Co. Managing Director of Direct Real Estate Ryan Levasseur.

“We can be a lot better than that. There’s a lot of latent talent in this city, we can take advantage of that and we can push this economy by taking advantage of that and growing that talent. But that takes a lot of work.”

A 2021 Future Forum report suggests there is currently a disconnect between how employers and employees of color view the office, with more than 80% of those workers indicating they prefer a flexible or hybrid work environment. The same study, conducted by Slack to study the future of work, found just 3% of Black professionals want to go back to the office full time as the nation emerges from the coronavirus pandemic.

Yet not all people of color, or even workers in general, benefit from working from home. Though Houston homes tend to sprawl more than other cities that face the hurdle of small apartment sizes, many workers struggle to maintain a productive home office.

“If you’re working at home … the environment that you’re in may not be equal for everyone," Scheurich said. "Someone might have a great home office, someone else might be working on the kitchen table with the dogs and the kids and what have you."

That means companies should create a better office experience than employees might find at home. And they should bear in mind for people of color, working from home came with fewer microaggressions and other unequal treatment than what can be found in an office.

According to the Future Forum report, there is a disconnect between how employers and employees view the return to office. While employers believe they are being transparent about the shift, they are often making decisions without the input of employees, especially employees of color, and employee satisfaction isn’t matching. 

“The office is not dead — but headquarters are now virtual,” the report said. “Executives should consider repurposing physical office space toward environments that intentionally foster collaboration and connection among co-located and remote colleagues, while retaining some space for solo, focused work.”

That is especially important in Texas suburbs, which are leading the national charge in growing populations of people of color. Statewide, about 50% of all population growth over the past decade has been driven by the Latino population, and nearly all of the state’s population growth has been driven by Texans of color, either through migration or natural increases. 

According to Klineberg, so many people of color have moved to the Houston area that the non-White population of Houston and Harris County would continue to be a majority even if migration ceased.

“After the oil bust of 1982, the Anglo population of Harris County stopped growing. All the growth … has been the influx of African Americans, Latinos and Asians,” Klineberg said. “This biracial, Southern city, dominated and controlled throughout all of its life by White men, has become the single most ethnically diverse major metropolitan area in the country.”