Galveston County and Houston’s Bay Area are seeing major growth with investments in NASA’s Exploration Park, the Port of Galveston and the island’s lone skyscraper. 

Developers hope stars will align to help the area reach its full economic potential, but they say that will require local municipal leaders to participate.

“If your door is open in your communities, we will come. We will deliver capital. We will be an asset. We just need to know what you want,” MOS R. E. CEO Johnny Vassallo said at Bisnow’s Future Of Galveston and Bay Area event at the South Shore Harbour Resort & Conference Center on Thursday. 

The corridor between Houston and Galveston and the island itself are experiencing an upsurge in investment. But capitalizing on this will require creating a welcoming environment for those who will build the housing, restaurants, retail and other facilities needed to attract and retain a talented workforce, especially as high construction costs and interest rates make development challenging, panelists said.

Either way, the growth is evident. NASA’s Johnson Space Center location was originally chosen for its distance from the cities’ populations in case it became a rocket launch facility, Associate Center Director Donna Shafer said. Now, it’s embracing the area’s growing population and inviting development. 

Johnson Space Center in January opened a second request for lease proposals for Exploration Park, the 240-acre area adjacent to its facilities. The first RFP resulted in ACMI Properties and Griffin Partners’ 1.5M SF purpose-built commercial space innovation hub and Texas A&M University’s Space Institute. The latter is anticipated to open in November, Shafer said. 

There are 183 remaining undeveloped acres for which Johnson Space Center is accepting RFPs, though Shafer declined to comment specifically on whether the tenants will be government-related or purely commercial.

“It is a full open competition this time,” she said. “We're just in the process enough to where I can't tell you more than that.” 

Meanwhile, Galveston Port Authority CEO Rodger Rees said that as the fourth-busiest cruise port in North America, the port is barely expanding fast enough to keep pace with demand. 

Galveston’s fourth cruise terminal opened in November, just 25 years after the first cruise ship sailed from the island.

“We just finished our fourth cruise terminal, which was slated for 2031,” Rees said. “So we got ahead of ourselves, which I think is a good thing.” 

Galveston Port Authority last year redid its 20-year strategic master plan, which predicts $2.4B of investment, and has already set its sights on a fifth cruise terminal. Port officials are actively negotiating with Royal Caribbean for what would be the cruise line’s second terminal in Galveston, and they hope to see more development surrounding it, Rees said.

“The master plan called for hotels there. It called for increased retail, some restaurants there, even some multifamily housing in that whole area,” he said. “What we're working towards is also a community area there, which bridges the gap between the downtown of Galveston and the port.”

Meanwhile, Davie Defense-Gulf Copper broke ground in June on a $1B modernization of its Coast Guard icebreaker production facilities in Galveston and Port Arthur. These plans will be a catalyst for further developing Pelican Island, a largely undeveloped island north of Galveston where the port owns 357 acres of waterfront property.

A liquefied natural gas developer is pursuing a marine LNG fueling solution for the port, and some operations would be on Pelican Island.

“There's going to be more and more opportunities,” Rees said. “I truly believe what you're seeing is just the beginning of a renaissance on Pelican Island.” 

Developers also have plans for Galveston’s underutilized office space. MOS's Vassallo purchased One Moody Plaza, a 23-story building that is the tallest in Galveston and served as American National Insurance Co.’s headquarters, in an online auction. 

Vassallo had the winning bid of $3.8M, well below the appraised value of $36.4M, and plans to convert the tower into a hotel or apartment building, the Houston Business Journal reported. 

“We've been blessed to be able to reposition office buildings in different areas of the country, and work with city, state, federal partnerships to take buildings that may end up unused, and then move them into a more modern or more useful purpose,” Vassallo said at the Bisnow event.

His team plans to utilize state and federal tax credits and work with the local community to make sure they deliver a top-class product that will be a draw for the community.

“The people that should reside there will provide a lot of economic benefit to the local area and to the tax base,” he said.

But given high interest rates, construction costs and competition for development opportunities, it’s important for local officials to work with developers and for each to understand what the other wants and is trying to achieve, Vassallo said.

Municipalities’ fees can hinder development, said JRH Engineering President Jennifer Henrichs, citing a recent experience with a small growing city east of Houston. 

A Memorial Hermann medical building project started with a roadway impact fee of $12K, but the city council passed a new roadway impact fee that pushed the total over $1M, she said.

“Even if you're Memorial Hermann, you're not going to do that,” Henrichs said. “So, a lot of mom-and-pop business owners cannot; they will not. And I don’t know how that community is going to have growth.”

Despite challenges, some communities are growing because their leaders welcome developers, build relationships, make it easy to get a permit and really look at their costs, Vassallo said.

“[They’re] doing the math to really understand if it's a benefit for a developer to go there and risk capital,” he said.

Galveston County and the Bay Area need new housing to support new jobs being created, and developers have their choice of about 10 area municipalities to build in, Vassallo said.

“If you get crystal-clear direction from the local communities, it will attract capital,” he said.