Oil rout stalls mixed-use project planned for the Energy Corridor

Exxon Chemical Americas campus on 35 acres at 13501 Katy Freeway helped establish west Houston's Energy Corridor in the 1980s. ( Brett Coomer / Houston Chronicle ) Exxon Chemical Americas campus on 35 acres at 13501 Katy Freeway helped establish west Houston's Energy Corridor in the 1980s. ( Brett Coomer / Houston Chronicle ) Photo: Brett Coomer, Staff Photo: Brett Coomer, Staff Image 1 of / 5 Caption Close Oil rout stalls mixed-use project planned for the Energy Corridor 1 / 5 Back to Gallery

A mixed-use development slated to break ground this year in the Energy Corridor has been put on hold amid the economic slump that has left millions of square feet of office space unoccupied in area buildings.

The project, announced about a year ago by Houston-based PM Realty Group, was set to be one of Houston's largest developments of its kind. The 35-acre development, named Republic Square, was designed by a slate of national consultants, architects and planners to include hundreds of upscale apartments, restaurants, hotels and high-rise office towers.

Since the price of oil dropped to a low of $26 earlier this year, the companies that dominate this part of west Houston have been piling gobs of space onto the sublease market and demand for new space is virtually nonexistent.

"Where the economy is right now, it doesn't make sense to build 2 million square feet of office space in west Houston," said Wade Bowlin, executive vice president and managing director of PM Realty's central division.

Some 10 million square feet of sublease space is on the market across the Houston area, though the largest blocks are concentrated in the Energy Corridor and downtown.

Oil volatility has sent "shockwaves" through the commercial property market, with, on average, 500,000 square feet of subleases coming online each month since early last year, according a report from JLL, a real estate firm. By 2017, sublease space availability could grow to more than 11 million square feet.

The latest example came earlier this month when ConocoPhillips said it was putting an entire building up for sublease. The company had never occupied the 22-story building on Interstate 10 at North Eldridge Parkway in the Energy Corridor.

The 15-year average for sublease space in Houston is 3.8 million square feet, according to CBRE, another commercial property firm.

Bowlin said the company, who owns the land with Atlas U.S.A. Holdings, still plans to develop this site after the price of oil stabilizes.

"We've done a ton. We're ready to go," he said. "We're just waiting for the market to come back to levels where we can move forward."

The project is slated for the former home of Exxon Mobil Corp.'s chemical operations between Interstate 10 and Memorial Drive, bordering the 500-acre Terry Hershey Park.

The design arranged buildings around a series of open spaces, paths and tree-lined streets.

National firms including Sasaki Associates, Elkus Manfredi Architects and Pickard Chilton were involved in the project's master plan.

When it was announced, the mixed-use project was expected to have as many as 800 residential units, five office buildings totaling 2.6 million square feet, two hotels and 100,000 square feet of retail space.

In the short term, Bowlin said the company will continue to look for tenants to occupy the space in the site's existing office building that Exxon occupied.

"We bough that property for the long term," He said. "We bought it to develop it."