The company has stated it will continue to develop commercial and multifamily sites in The Woodlands while focusing on its master-planned communities around the country, including Bridgeland and The Woodlands Hills in the Greater Houston area.
“We are conservative in our development plans and carefully study the market demands prior to beginning any project,” said Jim Carman, president of the Howard Hughes Corp. Houston region. “We analyze the viability of the project based on that demand, while also considering how the project best fits ... within the overall master plan.”
Gordy Bunch, the chair of The Woodlands Township board of directors, said despite initial concerns about the deal, he feels the recent announcements represent an ongoing commitment to the community from Howard Hughes. After the company announced it would move its headquarters to The Woodlands, it also announced in 2019 it would explore selling its three hospitality properties in The Woodlands as part of a plan to sell noncore assets.
“It is a benefit to know Howard Hughes is committed to The Woodlands for the long term, and relocating their headquarters here solidifies that commitment,” Bunch said.
With the late 2019 acquisitions of the former Anadarko Petroleum Corp. towers most recently owned by Occidental Petroleum Corp.—renamed The Woodlands Towers at The Waterway—the company added 1.4 million square feet of office space to its portfolio in The Woodlands. It also acquired an additional 9.3 acres of developable land in the township’s Town Center district.
As its builds on its remaining properties in the township, development will continue at the pace Howard Hughes sets, township Vice Chair Bruce Rieser said.
Howard Hughes officials said they did not have a calculation for the total amount of property the company owns in The Woodlands.
“They have complete latitude basically, in terms of how they go forward in terms of developing,” Rieser said. “The township doesn’t really have any authority whatsoever over the development corp. It’s only the court of public opinion that really will shape their behavior from time to time.”
With its $565 million Occidental acquisitions, the company is poised to become the township’s top taxpayer. In 2018, the most recent year available, The Woodlands Township listed The Woodlands Land Development Co. as its fourth-highest taxpayer, with a taxable assessed valuation of $109.25 million. Anadarko—the Occidental towers’ former owner—was listed as the top assessed valuation at that time, at $215.13 million, according to township records.
While Occidental plans to fully occupy one of the towers, the new Howard Hughes headquarters will occupy the smaller tower—leaving nearly 600,000 square feet of office space up for lease, according to Howard Hughes. Additional tenants for The Woodlands Towers at The Waterway aside from Occidental and Howard Hughes have yet to be announced.
Howard Hughes officials said in January the date for the headquarters move had not yet been set, and the number of employees it expects to bring to The Woodlands from other locations had not yet been established.
As of a fall 2019 financial report, Howard Hughes controlled nearly 2.6 million square feet of office space in the Woodlands market with an additional 180,000 square feet of offices under development.
Howard Hughes officials have stated additional office space is needed because the company’s vacancy rates in The Woodlands were only about 6% in 2019. The vacancy rate in The Woodlands office space was estimated at 9.2% in a fourth quarter 2019 report from Colliers International, less than half of the estimated 19.3% across Greater Houston.
According to Robert Gilmer, the director of the University of Houston’s Bauer Institute for Regional Forecasting, The Woodlands’ relatively low office vacancy rates remain an outlier among the region’s markets.
“The market has not absorbed much of anything since 2015, and new construction has mostly been confined to niche and build-to-suit offices since then,” Gilmer said in an email.
The Woodlands has nearly reached residential build-out, with about 71 acres of developable land remaining for single-family development, said Heath Melton, the executive vice president of the master-planned communities residential division for Howard Hughes Corp. That represents about 500 new homes, he said.
“We expect [the homes] to be completed within the next two to three years, subject to the economy,” Melton said.
According to a recent company financial document, residential build-out in The Woodlands is expected to be completed by 2023.
Single-family residential development is ongoing in East Shore, Creekside Park and Indian Springs, and several opportunities remain in Sterling Ridge, Melton said.
However, Howard Hughes’ position in The Woodlands is near several other of its master-planned communities in the Greater Houston area. Woodlands Hills, north of Conroe, consists of about 2,000 acres and is in its second year of home sales, according to Howard Hughes Corp. Bridgeland, an 11,400-acre master-planned community located in Cypress, opened in 2006 and continues development, according to Howard Hughes.
The developer also has four multifamily developments planned or located in the township with a total of 1,389 units planned. Last year it announced 360 units in Creekside Park and 163 units in Town Center in addition to the planned opening of the 386-unit Two Lakes Edge complex in Hughes Landing this year.
Master-planned communities are desirable in the Greater Houston area for those that can afford to live in them because of the additional controls and protections in those areas, said Greater Houston-area Realtor Mark McNitt, who has sold homes in The Woodlands.
“Master-planned communities will always be popular as buyers see the big picture of an area that is zoned and restricted to protect their investment [versus] most of Houston with no zoning [or] deed restrictions,” McNitt said.
Hospitality sale possible
Despite its recent commitments in The Woodlands market, the company announced in November it was exploring selling its hospitality properties in The Woodlands: The Woodlands Resort & Conference Center, The Westin at The Woodlands and Embassy Suites by Hilton The Woodlands at Hughes Landing. The move is part of a corporate transformation plan to sell noncore assets, according to a company news release.
According to employment estimates from The Woodlands Area Economic Development Partnership, more than 550 people worked for Howard Hughes Hospitality as of January 2019.
Rieser, who is the chair of the Visit The Woodlands board, the township’s convention and visitors bureau, said he does not believe a change in ownership would affect the hospitality industry overall in The Woodlands.
“I don’t usually think about who the actual owners are of the hotel properties when I stay in them,” Rieser said.
Fred Domenick, the general manager of The Woodlands Waterway Marriott Hotel & Convention Center—a former Howard Hughes-owned property—said he believes Howard Hughes is likely to move forward with the sale of its local hospitality assets in the near future.
“I think it’s safe to say that Howard Hughes is getting out of the hotel business; they’ve made that very public, and I’m told that they’re very close to having a sale,” he said.
Howard Hughes officials declined to comment on whether they expected a sale to occur in the near future.
If a change in ownership does occur, Domenick said the arrival of a new, hospitality-driven owner for the three properties could create benefits for all of the area’s major hotels.
“It’s the old adage that the high tide lifts all the boats,” Domenick said.
As The Woodlands moves toward a possible vote on incorporation this year following the conclusion of its ongoing study, whether the Howard Hughes Corp. will weigh in on the matter remains to be seen, company officials said.
“We are continuing to monitor the decisions and recommendations of The Woodlands Township board of directors as well as listening to our tenants, stakeholders and neighbors’ perspectives,” Carman said.
The developer and the township currently work together on developing amenities such as parks and pathways because of the way contractual rights and duties were dispersed when Howard Hughes Corp. initially acquired the development company, Bunch said.
Bunch said developments he would like to see, whether The Woodlands remains a township or becomes a city, will depend on that continued collaboration between the company and government.
“I would like to see more affordable entry-level housing, more Class B office space, new family entertainment options, more trees retained and additional at-grade roadway improvements,” Bunch said.