The factors shaping the Woodlands economy today
Low oil prices continued to be a problem for economies throughout the
world in the first and second quarter of 2016.
Overall, the Woodlands’ growth in the second quarter slowed, but showed progress nonetheless. The good news is that growth is continuing thanks to its diverse industries.
This cool down is not unexpected – many economists had already predicted this near the end of 2015. The historic lows on oil and gas prices were expected to impact the Greater Houston Area economy as a whole.
Indeed, energy-related sectors have been forced to lay off tens of thousands of jobs since the beginning of the downturn. Several energy-industry-related sectors have been feeling the pinch as well.
In real estate:
- Houses priced upwards of $500,000 are taking longer to sell. The luxury real estate scene has been a buyer’s market since 2015.
- Mid-range homes ($300,000-$499,000) in the Woodlands are also taking longer to sell.
- BisNow reports that there were only 278 non-ExxonMobil-related jobs created in May of this year. Vacancy in the Woodland’s class A office space has reached 10%.
Major business expansions have slowed down in the Woodlands as well as businesses wait for more favorable market conditions. This is similar to Houston, which saw historic highs in office market vacancies – 10% overall and 14% in the Energy Corridor.
The silver lining
While it has not been immune, the Woodlands economy has stayed relatively insulated from the woes that are afflicting Houston.
Oil might have given the Woodlands its big break 15 years ago when Anadarko Petroleum Corp moved its headquarters here, but the area become much less reliant on the energy industry in recent years.
This census-designated place has grown into a diverse employment hub. The Woodlands is home to a mix of tech firms, energy companies, and high-end retailers.
The Woodlands even has a growing medical corridor along I-45. The construction of the Houston Methodist Hospital and Texas Children’s Hospital along Highway 242 and I-45 is expected to bring thousands of jobs to the area.
Other medical centers undergoing construction or renovations include Memorial Hermann Hospital and CHI Saint Luke’s Health in Spring.
Then there’s the completion of the Grand Parkway’s latest section near I-45, which is seen as a boom for the north Houston area.
And according to the Perryman Group, a Texas-based economic and financial analysis firm, “The Houston-The Woodlands-Sugar Land is forecast to generate 1.6 million jobs through 2040.”
Short-term challenges
Opinions and predictions are split on when oil prices will go back up. Recent and unfolding events including Brexit and the devaluation of the Chinese yuan is causing a lot of uncertainty in the market.
The most recent challenge to oil’s recovery is too much supply and not enough demand. U.S. oil and gas inventories are building up far beyond initial estimates by analysts.
The American Petroleum Institute data stated that crude supply was down to 800,000 barrels in the week leading up to July 22, 2016. However, the Strategic inventories at Cushing in Oklahoma indicated they had 1.4 million barrels.
Gasoline and distillate stocks were also high as of July.
As of August 15, 2016 Brent crude reached highs of $47.40 before going back to $47.30 while WTI went from $44.95 to $44.85 a barrel.
A recent article by Bloomberg outlines concerns that decline in production of U.S. oil won’t be enough to outpace a drop in demand, especially as the peak of the driving season nears its end.
Plans/actions to cap or freeze global oil production by OPEC nations are already underway.
