To Survive, Downtown Must Diversify
Cushman & Wakefield executive vice chairman Tim Relyea didn’t mince words: Houston is falling behind in attracting companies in critical industries. That's especially prevalent Downtown, as companies are moving to suburban areas where they can grow. To stay competitive, Downtown Houston still has some serious work to do.
The oil and gas firms that built Downtown into what it is today aren’t bringing in what Downtown needs to survive, especially with more and more major institutions moving out of the CBD, Tim says. Houston isn’t benefiting from tech like Austin and Dallas are. Houston is also falling behind on airlines, insurance and financial services. Energy firms still occupy 57% of the space Downtown with the rest being dominated by major international law firms. Tim (with the mic here at Bisnow's Future of Downtown event yesterday) thinks the law firms can be counted on to stay in the city, lest they be dubbed a dreaded “loop lawyer.”
PMRG EVP John Spafford (right) says Downtown’s issue became crystal clear after the 2004 Super Bowl. Since then, developers and city officials have made massive strides towards improving Downtown, culminating in the Downtown Living Initiative. The Initiative has boosted residents and has helped attract more visitors Downtown. There are now over 1 million visitors to Discovery Green every year.
The increase in people and activity exacerbate mobility issues Downtown. Central Houston president Bob Eury (left) says finishing the Hardy Toll Road is critical to both Downtown's and the Houston area's mobility. TXDOT's proposed major redesign of I-45 is also a major factor. The plan would remove the Pierce elevated section that runs south of Downtown and realign the freeway along US-59. It'll ease traffic flow around Downtown while also opening up the CBD to Midtown and Washington Avenue. Even with all of the traffic improvements, Houston is still headed towards being like the black hole of traffic known as LA unless serious work is done to improve mass public transit.
Though over 8,000 residential units and 6,000 hotel rooms have been added, John says that isn’t enough. Midway chairman Brad Freels (left, with CB&Y's Gregory Cokinos and Midway's Clayton Freels) added to John’s argument, pointing out that even with the new rooms (and despite it having the most workers in the region), Houston’s CBD is still the second-smallest hotel submarket in the city. Brad is a true believer in Downtown, especially the Convention Center District. The hospitality improvements like Hotel Alessandra and the Marriott Marquis in tandem with the George R. Brown Convention Center’s $175M worth of improvements will create a premier convention experience that will attract the largest national conventions, Brad says.
One crucial way to evolve Downtown is by adding co-working space. Brookfield EVP Paul Frazier (seen here with colleague Mandy Hixon) talked about how Allen Center is doing just that. With the continued rise of Millennials in the workforce, there's increasing demand for co-working space every day. WeWork is in one of Brookfield's buildings in Downtown LA, so Paul has seen firsthand the type of work that gets done in co-working spaces. He's excited to see that same entrepreneurial energy at Allen Center.
Transwestern's Paul Wittorf (right, with HFF's Robert Williamson and "retired" Joe McCluan) informed the crowd that by 2020, 20% of the workforce will be Millennials. To Paul, the perception that Millennials want work/life balance is a bit off. Millennials are looking for work/life integration, not balance, necessarily. To achieve that, Downtown Houston needs to continue to develop affordable housing and a more lively feel to attract residents living in Midtown or Upper Kirby/Greenway, Paul says.
To end the discussion, VTS regional director Rhett Miller (left, with PMRG managing director Wade Bowlin) asked each panelist where they see Downtown Houston in five to 10 years. The group of experts was bullish (even Tim). In the past 35 years, Downtown has only had six years of negative office absorption. Though Downtown Houston has plenty of challenges, it's faced down worse and always comes out on top.
