Katy Area EDC drafts new plan amid office, industrial downturn

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The Katy Area Economic Development Council is creating a new strategic plan that will detail the Katy area’s economic priorities for the next five years. The new strategic plan—expected to be completed by the end of the year—comes in the midst of an office and industrial real estate downturn in the Katy area. Vacancy rates for both office and industrial space have increased by roughly 10 percent since 2012, said Lance LaCour, the president and CEO of the KAEDC.

The organization also started a program in September with support from a state grant to offer training courses to local business professionals.

Katy Area EDC drafts new plan amid office, industrial downturn“It’s all about trying to make sure we have primary jobs,” LaCour said. “Manufacturing, logistics and distribution, office operations [and]energy services; all of those things create jobs that bring wealth from outside of the community into the community.”

Although the new strategic plan will incorporate a variety of priorities, LaCour said the KAEDC will continue to emphasize bringing businesses to the Katy area. Some of the businesses the KAEDC helped bring into the local community include Geico, Igloo and the University of Houston System, he said.

Bob Cromwell, the managing director of commercial real estate brokerage firm Moody Rambin, said the KAEDC’s new plan and its commitment to recruiting businesses are timely endeavors. He correlated the office and industrial decline with the energy downturn, making it so several new construction projects are sitting vacant.

Cromwell said Moody Rambin’s three-story, roughly 128,000-square-foot Phase 2 building at Mason Creek Office Park in eastern Katy has been finished for roughly nine months and is still without a tenant. Similar trends are occurring throughout the area and even west of Katy, he said.

Katy Area EDC drafts new plan amid office, industrial downturn“The main reason you’re seeing the vacancy increase is new construction,” Cromwell said. “You can just see the stuff that’s being built west of Katy, and a couple of those projects are finished and empty. And these are projects that started [two or three]years ago that are now delivering into a tough market due to the correction in energy. Overall demand for large pieces of space have decreased, I’d say city-wide.”

Cromwell said rising land prices and harsh traffic conditions on the outskirts of Houston are making the city and its surrounding areas  less desireable for business owners. In addition, numerous employees already live in suburban areas such as Katy. Thus, Katy—namely the western part of the area—is poised to be a destination location for many employers, he said.

“You’re not going to see any new construction of office or industrial [space]in Katy going forward,” Cromwell said. “For the [Katy Area] EDC, [lowering vacancy rates is]obviously [about]doing what they do, which is getting the decision-makers that live in Katy to office in Katy.”

Strategic plan

Katy Area EDC drafts new plan amid office, industrial downturnLaCour said the KAEDC typically creates a new plan every five years. In September, the organization hired Allison Larsen, a certified economic developer and the principal of the consulting firm TadZo, to help with the planning and drafting process of Katy Area 2020.

Larsen said a three-to-five year period is the ideal time frame for an EDC to update its plan. Since the KAEDC’s last plan in 2011, the population in Katy has grown by roughly 40,000 people.

“It’s time to do an update because [economic]conditions have changed,” Larsen said. “When it comes to this type of tangible work in economic development, the conditions change pretty quickly.”

The Katy Area 2020 plan will span the years 2016-20. Both Larsen and LaCour said official priorities will be decided after results are examined from community and KAEDC member input surveys and focus groups. An online public survey closed Oct. 3.

LaCour said initial points of emphasis are transportation, flood control and diversity.

“Those are three issues that we definitely need to address,” LaCour said. “But we still need to keep in mind the major focus that we’ve always had, and that’s to recruit new businesses to come here.”

Both LaCour and Larsen said community involvement will be important in crafting Katy Area 2020.

“The way I like to work with communities is that they are really shaping this,” Larsen said. “All of this input, especially from the focus groups, is all being driven to help the [KAEDC] board of directors make decisions about priorities for the strategy. Everyone has their fingerprints on it.”

Office and industrial downturn

Although the retail market is thriving in the Katy area, the office and industrial space sectors are struggling, LaCour said.

“The office market is probably the softest market in terms of all of the real estate markets that we have,” LaCour said.

LaCour attributed the high vacancy rates to the oil and gas downturn, which has made it difficult for local businesses to maintain their presence in the area.

“[In] the labor market, which is not just the Katy area but goes from Sealy to downtown Houston and up to [Hwy.] 290 and down to [Hwy.] 59, we’ve lost 38,000 jobs in the past two years,” LaCour said. “About 22,000 of those are in oil and gas.”

Cromwell—whose company leases space to Geico—agreed with LaCour’s assertion that the oil and gas downturn is a key factor in increased office and industrial vacancy rates. However, he said he believes the economy will stabilize within the next two years.

“While demand is down due to energy, I think it’ll take probably 24 months to stabilize; to get that [vacancy rate]from 13 [percent]to 10 [percent]to 8 [percent],” Cromwell said. “It’s just going to take a little time.”

Grant and training courses

Katy Area EDC drafts new plan amid office, industrial downturnIn September, the KAEDC created the Katy Area Manufacturing Industry Training Service Project. The program was established with a $10,000 grant from the Texas Governor’s Office of Small Business Assistance that has enabled the organization to offer training courses to local business professionals, LaCour said.

The KAEDC offers the workshops in primary partnership with the Texas A&M University Engineering Extension Service, or TEEX, and its regional Texas Manufacturing Assistance Center. The free classes cover a variety of topics, including manufacturing, supervisory training, environmental health and safety and applying for loans and grants, he said.

Monica Cortez, the business development manager at TMAC-TEEX, said her company—which focuses on manufacturers—is excited to partner with the KAEDC on the grant project and provide resources to Katy-area businesses. TMAC-TEEX is hosting 10 of the workshops in six different subject areas, she said.

“Our mission is to get out and reach out to as many companies as possible to assist them and increase their capability, their profitably and their bottom-line dollars,” Cortez said. “Our goal is to develop a close relationship [with the KAEDC]so that they can also provide a feedback loop to us on what their community and their businesses need from us.”

LaCour also said the KAEDC wants to emphasize historically underutilized businesses—those owned by minorities or women—in its workshops. The KAEDC has identified 60 certified HUBs in Katy, he said.

“We’ve sent the information to them, and we want to encourage them to take part in this,” LaCour said. “That’s part of something that we’re doing with regards to diversity. The more diversification you have in the economy, the better off you’re going to be.”

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COMMENT
  1. Using two of the graphics in the article I find it interesting that the approximate square footage of office and industrial space that is vacant is about the same as the square footage of new office space developed in Katy in 2015. Might be a good idea to stop building office and industrial space until we can fill up what we have.

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