About 74,000 Houstonians lost oil production, oil services, wholesale trade and engineering jobs among others as a result of the oil price bust in 2015, according to one economic development expert who says he could have never anticipated the downturn.
Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston’s Bauer College of Business, presented his take on 2016 and a glimpse into what might be in store for 2017 with his report, “Recession to Recovery: Picking Up the Pieces in West Houston,” Friday, Feb. 10 at the Houston West Chamber of Commerce’s West Houston Economic Development Summit.
Since the oil and gas downturn, Houston has seen more than 35,000 jobs added in industries such as food service, health care, retail trade, public education, finance, accommodation and arts and entertainment, Gilmer said.
“We can really say most of those losses are behind us,” he said. “It’s going to take a little time to build that past momentum, but the worst is behind us.”
While this may be true, there is a long road ahead before Houston will see a full recovery in the oil industry, Gilmer said. Baker Hughes, for instance, reached its lowest rig count since inception with only 404 working rigs—down from the industry peak in 2014, when the company had 1,900.
Additionally, the recent petrochemical construction surge in East Houston brought thousands of jobs and compensated for some of the low oil prices. However, that boom has largely ended, and Gilmer said the city will soon see a hiring shift back to the west side.
Because the rebuilding process is a slow one, 2017 will be another slow year for Houston’s economy, Gilmer said. Service companies say producers need oil to land around $65 per barrel to keep everyone in business, and Houstonians likely will not see stable growth again until 2018 and 2019.
“In many ways, oil defines who we are,” Gilmer said. “[Oil] drives 40-50 percent of Houston’s economy.”
But oil is not the only industry that affects the economy. Several Houston industry leaders gave brief updates on the following areas:
Maria Moncada-Alaoui, dealer operator and general manager at BMW of West Houston, said new technology being introduced in products and the way business is done makes this a “transformative period” for retail.
Consumers are looking for new products that bring them the most accessibility and connectivity, and she said 56 percent of people are willing to trade the vehicles for upgraded models.
“In Houston we spend a lot of time on the road,” she said. “[People] want cars to be an extension of the office.”
Paul O’Sullivan, senior vice president and CEO at Memorial Hermann in Memorial City, said at least two million people in the Greater Houston area are not connected with a primary care provider.
Memorial Hermann’s strategy is to plant medical centers in surrounding communities so people do not have to drive into Houston for quality care. The company recently opened an urgent care facility in Fulshear, and a new 80-bed hospital in Cypress will open next month.
Along with population growth, health care providers are looking for new ways to accommodate an aging demographic. Much like the retail trade industry, O’Sullivan said new convenient and innovative tools such as virtual visits increase accessibility for patients.
As Houston’s population growth slows, so does the demand to fill the many vacancies in new apartment complexes across the city, Gilmer said. West Houston has added about 5,500 units in the last year.
Overly optimistic development in the office market has also led to high vacancy rates. Eli Gilbert, director of research at real estate firm JLL, said vacancies downtown and along the energy corridor are at around 20 percent.
Retail, on the other hand, is thriving in the midst of increased competition, he said. Along the Grand Parkway especially, there is plenty of room for growth.
“Retail land is selling at a pace [we] haven’t seen in decades,” Gilbert said.
For more information on Gilmer’s report, visit www.bauer.uh.edu.