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November 26 , 2007


Houston's Game Plan for Development

Retailing has benefited from a diversified economy led by energy companies, as well as population growth.
November 26, 2007 - by Rusty Williamson | Women's Wear Daily.  HOUSTON - THE SECOND-FASTEST-GROWING METRO AREA IN THE U.S. and home to more than 5,000 energy-related companies, Houston is riding an economic wave that so far appears to defy challenging national trends - and retailing is a beneficiary.
The development and leasing landscape includes new mixed-use retail, business and residential centers; megamalls that opened in the Seventies, such as the 2.4 million-square-foot Houston Galleria, and freestanding specialty stores such as Tootsies, which is based here.
Developers will add almost 4.2 million square feet of retail space this year, up . 17 percent compared with 2006, including a mix of big-box mass chains, midtier . stores and designer boutiques. The city has about 140 million square feet of leasable retail space.
Record oil prices hovering near $100 a barrel are priming the economic pump in Houston, where two of every five residents work in energy-related jobs. The city has more petrochemical companies than anywhere in the world. It is a growing financial and health care center and is the home of NASXs Johnson Space Center, which employs more than 20,000 people.
Even as the U.S. economy endures fallout from the housing slump and subprime mortgage crisis, rising fuel prices and tight credit, Houston is on a growth trajectory, partly because of a diversified economy and resilient business climate. And the city has managed to keep a maverick mind-set - there are few zoning laws, for example - and an entrepreneurial spirit that encourages business start-ups.
Rather than a single central business district, multiple districts have grown throughout the city. In addition to downtown, they include Uptown, Greenway Plaza, Westchase, Greenspoint and Texas Medical Center, the largest medical complex in the world and Houston's biggest employer, with 63,500 workers.
Houston is ranked second in the number of Fortune 500 company headquarters22 to New York's 45 - and the economy, beyond retailing and energy segments, already includes shipping, technology, banking, film and media, insurance and education.
The Port of Houston is the largest in the U.S. in terms of international tonnage and is second overall to Los Angeles-Long Beach.
"Houston's growth... [is] a result of several factors, including our low cost of living, all the new jobs being created by the growing number of companies headquartered here and the amazing population migration to Houston," Mayor Bill White said in an interview.
The energy crisis of the early Nineties and the financial scandal that consumed Houston-based Enron in 2001 were painful, costly and haunted the city for years, reflecting the dangers of over reliance on a few giant industries and companies.
Mindful of the economic downturn after Enron's collapse and the 9/11 attacks, as well as the volatility of the energy sector, the Greater Houston Partnership, an organization of local businesses, last year started a $40 million program to help the area economy continue to diversify. The goal is to generate more than 500,000 new jobs in a range of industries over the next eight to 10 years, including retailing, health care, engineering and legal services.
"Houston is the U.S. financial center of the Gulf Coast and has truly diversified and dealt with the factors that contributed to some of their problems in earlier years," said Alan Shor, co-founder of The Retail Connection, a Dallas-based real estate, marketing and consulting firm for retailers that has opened a Houston office. "The city and corporate leaders have put into place a healthy and strong infrastructure....And the city is understored, and I think all the planned mixed-use developments are what's really been missing and is now being addressed."
Houston is second to the Phoenix metro area/Maricopa County, Ariz., in employment growth among the 10 most populous metro areas in the U.S., adding more than 100,000 jobs this year, according to the Texas Workforce Commission. In 2006, the Houston metro area ranked first in Texas and third in the U.S: within the category of "Best Places for Business and Careers" by Forbes magazine.
More than 150,000 people move to Houston each year,according to the U.S. Census Bureau.
With housing costs that are almost 30 percent below the U.S. average, a strong job market and robust real estate development, the metropolis of 5.5 million residents covering 600 square miles has become a retail hot spot The industry is growing across a range of neighborhoods and merchandising categories, from mass to designer.
The Texas Comptroller of Public Accounts said there were 5,929 retail clothing stores in the Houston metro area during first-quarter 2007, ringing up $894 million in sales, up 9.6 percent over first-quarter 2006 revenues of $816 million generated by 5,778 stores.
Houston is the U.S. financial center of the Gulf Coast and has truly diversified." - Alan Shor, The Retail Connection
Overall, Houston-area retail trade reached $18.2 billion in the first quarter of this year, up 9.9 percent compared with $16.6 billion for first-quarter 2006.
New retail and mixed-use developments show the spectrum of shoppers that merchants are courting, including new stores from Target Corp. and an upscale outlet mall to open in the spring from Simon Property Group's Chelsea Property Group. At least 10 high-density residential, retail, office and hotel developments are planned or under construction.
Among the most ambitious projects is BLVD Place, which is being developed by commercial real estate firm Wulfe &Co. at the intersection ofSan Felipe Street and Post Oak Boulevard near the ritzy River Oaks and Westheimer neighborhoods.
"The cost of all the new retail construction in Houston this year should exceed over $400 million and represents thousands of construction jobs and many thousands of new permanent retail jobs," said Ed Wulfe, principal at Wulfe & Co. "Expansion of superdiscount department stores will represent 17 percent of the projected growth for all 2007. Wal-Mart will open three new 200,000-square-foot- plus Supercenter stores and Target will open one. In addition...J.C. Penney, Kohl's, Home Depot, Lowe's, Best Buy, Ross and Academy will add two or more Houston stores in 2007."
Among other projects is Houston Pavilions, a $170 million mixed-use multitenant complex that includes retail, restaurant, club and office space scheduled for completion by early next year.
"We get continual and strong business from across the U.S. and the world there are so many foreign consulates and banks here and, of course, the important medical centers that draw patients on a global scale," said Penne Weidig, a buyer at Tootsies. ''And we get lots of business from Mexico and Central and South America. These women love to shop and follow fashion quite closely, and we keep them in mind when shopping the world fashion markets." '.
Rachel Clements, who owns a designer innerwear store called La Mode Lingerie in the River Oaks neighborhood, said Houston shoppers can't seem to get enough luxury.
"It may seem lavish to spend several thousand dollars a month on lingerie, but many of our customers do and we have become accustomed to their expectations," she said. "We know the luxury customer is out there, and it is our job to cater to them. We definitely think the economic expansion in Houston still has some legs."
Of course, with rapid growth come challenges.
In the aftermath of Hurricane Katrina in 2005, Houston absorbed at least 100,000 residents from New Orleans, leading to strains on services. Authorities have blamed an uptick in crime partly on that migration. The
city's homicide rate per 100,000 residents increased from 16.33 in 2005 to 17.24 last year Houston, like other cities, faces crime related to gang activities: In 2006, there were about 380 gangs with 8,000 members - 2,500 of them were juveniles, according to the Houston Police Department.
The city has among the youngest populations in the U.S. - the median age is 33 - partly because of an influx of immigrants. It also has the third-largest Hispanic and third-largest Mexican populations in the U.S., as well as an estimated 400,000 illegal immigrants.
Hispanics make up 37 percent of the population. Houston also has a substantial population of immigrants from Asia, including the largest Vietnamese- American population in Texas and third biggest in the U.S.
Some parts of the city have Chinese and Vietnamese street signs in addition to English ones. And Houston has two Chinatowns: The original is located downtown, and the more recent one, north of Bellaire Boulevard in the southwest area of the city.
Mayor White sees endless possibilities in this evolving commercial and cultural mix. "Houston is on a roll," he said.
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