Vacancy rate down as businesses flood in

The Katy Area Economic Development Council has seen the rate drop steadily until it reached 3.5 percent at the end of 2012, down from 12 percent in 2010. Transwestern's Houston Metro Outlook for the first quarter of 2013 listed the vacancy rate for the I-10/Energy Corridor submarket as 5.8 percent.

"The ideal vacancy rate is in the range it has been because it indicates a healthy economy and job growth," said Lance LaCour, president and CEO of the EDC.

A low vacancy rate can be a catalyst for the development and construction of new buildings, he said. Construction is underway on multiple developments in Katy, including a 12,000-square-foot professional and retail space near the Katy Mills mall and a 47-acre development at I-10 and Westgreen Boulevard.

While a low vacancy rate is a result of a strong business environment, LaCour noted the importance of keeping building projects moving forward as more businesses look to Katy for office space.

"A low vacancy rate, without new speculative facilities, limits opportunities a community has to recruit office users," he said. "Companies may locate in another area where office space is available."

New construction

Officials with the Energy Corridor Management District project an additional nine million square feet of office development in the Energy Corridor by 2025.

LaCour said building new offices is crucial to meet demand moving forward. He said the types of buildings most in demand are Class A and Class B office buildings between 10,000 and 50,000 square feet.

"Including parts of the Energy Corridor that are located in Katy ISD, we have more than 2.5 million square feet of spec office buildings under construction," he said.

Challenges presented by limited space can be addressed by encouraging developers to create quality offices, LaCour said.

"Part of the EDC's strategic plan is to encourage developers to design, construct and develop office space and provide technical assistance and due diligence to identify suitable office sites for development," he said. "A successful example of this is the Mason Creek Office Center. We worked with Mason Creek over several years to assist them with site selection, provide technical assistance and are helping them market the building."

Energy foundation

Recent groundbreakings for energy manufacturing companies such as Dyna-Drill—which relocated from Houston to an office at Colonial Parkway and Grand Parkway, just north of I-10—are serving as foundations for energy clusters. Once rooted, they make the area more attractive to other companies that provide services to the energy industry, such as Peloton and TISA Software, two computer companies that have also chosen Katy for their headquarters.

The Katy area economy includes more than 9,000 companies, more than 200 of which are headquartered there, including BP North America, Mustang Engineering, WoodGroup, Diamond Offshore and Academy Sports and Outdoors.

"Katy's economy has always been focused on energy," LaCour said. "A lower vacancy rate means companies are expanding and consolidating to move into available space. In most cases, new jobs will be created."

Commercial growth

The impacts of the relocating energy companies can be seen in the Katy area's increasing commercial developments.

Vincent Giammalva, president of Giammalva Properties, said the Energy Corridor makes Katy a hot spot for developers looking to build different projects, increasing the competition over vacancies. Giammalva Properties currently has a major development underway along I-10 between Westgreen and Fry roads.

Giammalva said many developments coming in now are not within the energy industry, but companies looking to service it in a variety of ways, like pipeline companies or engineering firms.

"It's all about the energy corridor," he said. "If you're looking for the explanation behind this growth, that's it in a heartbeat."

By Shawn Arrajj
Shawn Arrajj serves as the editor of the Cy-Fair edition of Community Impact Newspaper where he covers the Cy-Fair and Jersey Village communities. He mainly writes about development, transportation and issues in Harris County.


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