CRE's Uncensored Opinion Of Blackouts: 'Fire The Bozos' And Corporate Relocations Will Keep Coming
Texas is facing a reputational black eye after an unprecedented snowstorm pushed the state's power grid to full capacity last week, resulting in extended blackouts and deaths.
When asked for their unfettered opinion of the incident, commercial real estate executives expressed frustration but recommitted to their belief that Texas remains a top relocation hub despite facing national criticism in the wake of the storm.
"Anything that can hurt the Texas brand should be of critical concern and clearly, the whole country is watching how Texas handles this issue," ESRP Executive Managing Director of Site Selection Susan Arledge said.
A leader from one major North Texas brokerage who asked not to be named said the industry is not embarrassed by the storm, but rather frustrated by the Electric Reliability Council of Texas' handling of it.
"[We are] just angry that we have a bunch of incompetent bureaucrats from California, Michigan, Illinois and Europe managing our power grid," the brokerage leader said in a statement to Bisnow.
These comments came after news articles noted one-third of ERCOT's senior leadership lives outside of Texas.
The leader suggested the state legislature "get rid of ERCOT and put Texans in charge of the power grid."
A major North Texas mixed-use and office developer said he believes the state legislature will get more involved in the process of regulating the grid going forward, but he thinks — like with the droughts and fires in California — people will eventually forget, make the needed energy adjustments and move on.
He sees shutdowns from the coronavirus pandemic as a greater threat to CRE than the recent storm.
"The shutdown from the pandemic that lasted 11 months has caused hundreds of billions, if not trillions, in losses, so the blast pales in comparison to the COVID-19 wipeout," the DFW developer said.
University of Houston professor Brandon Rottinghaus sees the storm pushing Texas a little bit away from its pro-growth, no regulatory structure, but only within reason.
"We will certainly see additional regulations, but it isn’t likely enough to push for full-scale changes across government regulators," he said.
Coworking exec Flip Howard with WorkSuites said the big change he hopes for is an end to politics around the issue.
"I am no power grid expert, but it seems to me that whenever you hear the two political sides saying: 'It’s all because of the shift to renewables' and 'It has nothing to do with the shift to renewable' both are probably oversimplifications. I assume that the truth lies somewhere in between and that almost no one is blameless," Howard said.
As far as losing corporate relocation momentum from California and other places due to concerns over utilities and infrastructure, the general consensus among local CRE execs is that a once-in-a-decade situation like this is not likely to negatively impact Texas' many advantages over other regions in the country in the long term.
"No, California is way worse and the other Northeastern states are so mismanaged that their utilities cost at least 50% more than they cost in Texas," the brokerage exec said. "[It] was 70 degrees yesterday and even nicer today. As long as we fire the bozos at ERCOT, everyone will forget about this and we will be fine."
Arledge also remains confident in Texas' quick rebound from last week even though she said the eyes of Texas will be looking more closely upon the grid's management going forward.
"Electrical reliability is a critical factor in site selection, but probably not any more so than labor costs, quality of life and market affordability," Arledge said.
That means even if the power issues take center stage for now, making companies nervous, the factors will probably rebalance quickly.
"After Hurricanes Katrina and Harvey, both New Orleans and Houston suffered immediate concerns and many counted Houston out as a possible area for consideration," Arledge said. "However, relocation decisions are made for the long-term, not the short-term, as evidenced by Hewlett Packard Enterprise’s move of its corporate headquarters from San Jose, California, to Houston."
Howard also foresees some hit to corporate relocations, but not for long.
"I think it will for a very short time, but memories are short, and as long as concrete steps are taken to prevent future occurrences, there won’t be a lasting effect," he said.