Economy Stirs : In Battered Houston, Signs of Life

HOUSTON — Poor old Houston, beaten and battered and left for dead, is showing signs of a pulse.

Not a strong one, mind you. But in this city, where the oil bust ruined lives, where 250,000 people lost their jobs, any sign of life is cause for crowing.

The economic gurus are proclaiming that the worst of Houston’s ills are behind it. Further, an odd thing has happened: Houston, the energy capital that fizzled, is once more being seen as an attractive place to live and is beginning to draw companies and their employees from other parts of the nation.

Office Space Is Cheap

True enough, Houston is not attractive from every angle. Its sultry summers--not to mention the staggering air-conditioning bills that accompany them--bring to mind New Delhi rather than Malibu. But Houston is also a place where homes are available for a pittance by California or East Coast standards, where office space is cheap and plentiful and where the cost of living is significantly less than in any other city near its size.

“Where else can you buy a four-bedroom, three-bathroom home in a major city for $80,000?” asked Barton Smith, the chairman of the economics department at the University of Houston. “You can buy brand new office space in Houston today for what it would cost to lease it in another city.”

Not everyone is convinced. When it decided to move out of New York, the American Cancer Society recently chose Atlanta instead of Houston, even though Houston, with the world’s largest medical center, would seem a natural choice. The city even offered free land, to no avail.

One of the deciding factors was that almost all of the New Yorkers who would be asked to transfer flatly refused even to consider Houston, while about 40% of those polled said they would move to Georgia.

On Brink of Rebound

Even so, Bob Lanier, a Houston businessman and former chairman of the state highway commission, thinks the city is on the brink of a rebound that will be an entrepreneur’s delight.

“Houston today is the opportunity of a lifetime for a younger man,” the 62-year-old Lanier said.

That is a change in perspective here; since the early ‘80s, the only way Houston looked was down. As the price of oil sagged, so did the city’s economic underpinnings. Houston came to symbolize the depth of the oil industry’s suffering.

To make matters worse, high-rises and other office buildings that had been years in the planning and building were still going up even as the economy took a tumble. Today, Houston has almost 50 million square feet of empty office space.

So why do people here think a turnaround is under way?

“There’s an upbeat feeling about the city,” said economist Smith. “Things are kind of coming together.”

Last week, Smith delivered that message to about 400 business leaders who gathered to hear his yearly economic prognostication.

“We feel we are embarked on the road to recovery,” he said, predicting a 2% increase in employment and growth over the next two quarters. But he was careful to add that recovery was not a sure bet, that either a national recession or a downturn in oil prices could undo all the good news in a hurry. Jared Hazelton, of the Austin-based Texas Research League, agreed.

“The only fly in the ointment is that recovery is dependent on a whale of an oil boom or the growth of the U.S. and international economies,” he said.

Barometers Look Positive

For now, however, the economic barometers look positive for the first time in years. The price of oil seems to have stabilized at close to $20 a barrel, unemployment is decreasing both in Houston and throughout Texas, new businesses are moving in and the help-wanted ads have been steadily increasing. Even the city’s record-setting home foreclosure rate is slowing down.

Another good indicator is that Houstonians are throwing more parties than they did in the bad old days.

“My schedule of parties is very strong,” said corporate caterer Jackson Hicks. “I think that indicates the mood of Houstonians.”

And as the gloom seems to be fading, the emphasis now is on luring more industry to the city. In an odd kind of turnaround, the bait is Houston’s own hard times and what that has done to the real estate sector.

“Houston is one of the best real estate buys in the world,” said David Cook, executive vice president of the Horne Co.

Land at 1968 Prices

Certainly that is the case for now. Office space is renting for less than half of what it would cost in New York. Industrial buildings can be purchased for 60% of what it would cost to build them now. Raw land is at 1968 prices and apartment complexes are selling at half of today’s construction cost.

Single-family homes are some of the cheapest in the country. The September median sales price for a single-family home in Houston was $62,246. The comparable figure for Los Angeles was $146,852.

Houston boosters also like to point out that the cost of living is 40% less than in New York City and that the per-capita state tax burden is, for instance, almost $500 a year less than California’s.

Although all that is true, Houston unquestionably suffers from an image problem. That image has been one of a cultural wasteland where the freeways are paralyzed by gridlock.

“Houston is a great deal more sophisticated and has a better quality of life than people give it credit for,” said Gary Dunning, executive director of the Houston Ballet. “It has gotten a bum rap in the past.”

Strong in the Arts

The Houston Economic Development Council, formed to boost the city’s image, points out that Houston is the only city outside New York to maintain permanent companies in the four major performing arts--drama, symphony music, opera and ballet.

This year alone, the $76-million Wortham Theater and the $21-million museum that houses the Menil art collection opened. A further source of civic pride is the completion of the $105-million George R. Brown Convention Center.

“In many ways, the quality of life is better,” said John Privett, president of the Tax Research Assn. of Houston and Harris County.

Privett’s contention is that the Houston economy was so overheated in the late ‘70s and early ‘80s that it took a major economic recession for the city’s services to catch up with the demand.

So, to some extent, Houston is a more livable city as a result both of its accomplishments and its failures. For example, its once-notorious highways are less crowded now partly because new road construction has been completed and partly because there are fewer workers traveling them.

Calls for Steady Growth

Lee Hogan, the new director of the economic development council, said he does not want or expect a return of the super boom of times past, and that Houston would be prudent to seek solid, steady growth in the coming years.

“In my opinion, (boom times are) not a desirable phenomenon to have again,” he said.

While those seeking to improve Houston’s image gloss over it, one area in drastic need of reform is the city’s school system. While some school districts, primarily in the middle-class suburbs, maintain high standards, those in the inner city remain woefully inadequate.

In a recent state-mandated test, given to all schools in Texas, almost 70% of those in the Houston district ranked in the bottom quarter.

“It would be a stretch to say we excel,” said Privett of the Tax Research Assn.

Public Works Projects

But progress is being made in other areas. Houston voters approved $626.5 million worth of public works projects in the Nov. 3 elections, a portion of which will be used for roads and parks.

With all the positive talk and money, it is still anyone’s guess about what will happen to the city. NPA Data Services Inc., a Washington-based research firm, is predicting that Houston will rank behind only Los Angeles and Orange counties among U.S. metropolitan areas in the number of new jobs created by the turn of the century. Smith said he believes that Houston will be a real estate bargain hunter’s heaven for at least another five years.

But if things are better in Houston, the sense is that it is only because the city has hit bottom and there is no place to go but up.

As Hazelton of the Texas Research League put it: “I think Houston has taken its hits.”