Houston’s Emerging Future: Q&A with Dan Bellow of JLL
Dan Bellow
HOUSTON – (Realty News Report) – Houston stands at a pivotal moment. The office market is still feeling the effects of the energy sector downturn, though that industry appears to be stabilizing after years of price volatility. At the same time, the Texas Medical Center (TMC), a cornerstone of the city’s economy, continues to expand. What does all this mean for Houston’s future? Realty News Report spoke with Dan Bellow, President of JLL Houston, who brings more than four decades of commercial real estate experience spanning headquarters assignments, workplace strategies, build-to-suit projects and dispositions of surplus office properties. A native Houstonian and graduate of the University of Houston, Bellow serves on the boards of the Texas Medical Center, the Greater Houston Partnership, the YMCA of Greater Houston, the Sam Houston Area Council of the Boy Scouts of America and the University of Houston Bauer College of Business.
Realty News Report: The office market is going through a tough patch. What will it take for recovery?
Dan Bellow: Recovery will depend on continued job growth, ongoing diversification of the local economy and successful efforts to attract corporate relocations — all of which are already underway. Over the past year, job growth has been strong; from July 2017 to July 2018 Houston added more than 100,000 jobs. While not all of those jobs are office-based, overall employment growth drives office-space absorption over time. Diversification is evident in projects like TMC3 and the rising commercial life sciences sector. We also must double down on our existing strengths: energy, healthcare, aerospace, Port Houston and manufacturing. Those industries will keep expanding, and targeting companies from these sectors while broadening our economic base will be key. Houston has always been a growing city, and increasingly it’s being recognized as a world-class place to live, work and play.
Realty News Report: The Uptown/Galleria area has experienced several cycles. What’s the current status of that submarket, and will mass transit improvements make a difference?
Dan Bellow: Uptown/Galleria remains one of Houston’s strongest office submarkets, thanks largely to its live-work-play environment. Most office buildings along Post Oak Boulevard are within walking distance of restaurants and shopping, and recent residential growth has kept the area active throughout the day. The mass transit project will likely be impactful. Nearly 40 percent of downtown workers use Park and Ride, and Uptown will be the first market outside the central business district to receive dedicated mass transit service. When the project is complete, workers in Uptown will have Park and Ride as an option — something they’ve lacked in the past. While it’s too early to know the full effect, the project should help reduce traffic congestion, which has long been a challenge for the submarket. Overall, I view the transit development as a positive for Uptown.
Realty News Report: New downtown buildings from Hines and Skanska are attracting tenants in a “flight-to-quality” trend. Older properties must upgrade to stay competitive. What comes next?
Dan Bellow: Major tenants across industries are shifting their workplace strategies to align with how space is truly used and to prioritize the employee experience. They want workplaces designed with people in mind and buildings with the infrastructure required for denser occupancy. New buildings will perform well under these expectations. Older buildings, meanwhile, will need to invest in upgrades to remain competitive, albeit often at lower rents. The focus will be on creating amenity-rich, efficient environments that enhance the human experience. I expect significant reinvestment in older Class A buildings and other projects. Because only a few new towers are under construction downtown, many tenants not located in those buildings will look to adopt modern workplace strategies, so owners should plan now to meet those demands.
Realty News Report: What is the likely fate of Class B-minus and Class C buildings downtown?
Dan Bellow: Some of those buildings will need to be repurposed for new uses — a common solution when structures become functionally obsolete and hard to lease. Potential conversions include hospitality, residential or other uses. Properties with strong locations may be redeveloped as land sites for new projects. We’ve seen this pattern in downtown over the years, and it’s typical when demand shifts toward newer, higher-quality buildings.
Realty News Report: You chaired the Greater Houston Partnership a decade ago. Missing the top 20 in Amazon’s HQ2 search was a wake-up call. What should Houston do to improve its economic development strategies?
Dan Bellow: Houston is actively preparing for the future. Many local organizations are working to build an ecosystem attractive to technology companies. The Greater Houston Partnership (GHP) and Houston Exponential have launched initiatives to recruit and retain tech firms, including an Anchor High Tech Firm committee focused on attracting a major tech company or research institution. Houston’s tech talent is substantial, though much of it is embedded in other industries like energy. Historically, major technology companies such as BMC and Compaq were founded in Houston, and Hewlett Packard Enterprise and other tech firms maintain a large presence here. Defining and promoting a cohesive tech ecosystem remains a priority. The GHP’s Innovation Corridor concept — a roughly four-mile stretch anchored by the Texas Medical Center and Rice University to the south and downtown to the north — is one step toward that goal. Over the next decade or two, I expect Houston to develop a robust technology ecosystem.
Realty News Report: The Texas Medical Center is the largest in the world, and the TMC3 biomedical research hub aims to raise its profile further. How did the Medical Center reach this level, and what does its future look like?
Dan Bellow: The TMC’s prominence stems from visionary leadership, collaboration among its member institutions and strong community philanthropy. What began as a cooperative focused on shared infrastructure has evolved into a globally recognized center for innovation and medical research. Houston’s philanthropic community has played a crucial role in funding growth and facility expansions. TMC3 will be transformational as an economic engine for Houston and for Texas, attracting life sciences companies and accelerating cutting-edge research already underway. Recent achievements, like Dr. Jim Allison’s 2018 Nobel Prize in Medicine, underscore the caliber of work taking place at TMC. TMC3 will help carry that momentum into the next generation, positioning life sciences as a major future economic driver for Houston and supporting continued diversification.
