THE WOODLANDS, TX-In 1974, businessman and oilman George P. Mitchell presided over the grand opening of The Woodlands, a 2,800-acre master-planned community, located approximately 30 miles north of Houston. Mitchell's brainchild has always been a good representation of a quiet bedroom community. Yet seemingly overnight, The Woodlands has attracted the interest of commercial real estate investors, developers and office tenants.  

A good example of such an entity is Anadarko Petroleum Co., which built the first tall tower in The Woodlands and based its headquarters there. This year, the oil company plans an expansion of approximately 550,000 square feet to be added to the already existing headquarters facility.

US Oncology (bought by McKesson), Chevron Phillips and Waste Management also took space in The Woodlands throughout the late 1990s and 2000s. Then, when Exxon Mobil Corp. announced in 2011 it would develop a 385-acre corporate campus just south of The Woodlands near Interstate 45 and the Hardy Toll Road, "that truly put the world's focus on what was going on out there," says Robert S. Parsley, co-chairman and principal with Colliers International's Houston office.  

But why did it take so long for businesses to snap to this master-planned community? And why, now, is it a focus for a lot of businesses? Experts tell GlobeSt.com that the Exxon Mobil campus is the catalyst, but interest has been strong in The Woodlands for years.

"What happened, for years, is that The Woodlands was always that place that was way up north from Houston," Parsley explains. However, as the metro region continued its relentless march north along Interstate 45, things filled in. As a result, "that same drive doesn't seem quite as far as it used to be," observes Parsley, who handles leasing on behalf of The Woodlands Development Corp.  

But office space is not exactly plentiful in The Woodlands. Vacancy in this submarket is less than 2% -- it's not surprising for an office building to come online and to be immediately leased up. And, unlike in other Houston submarkets, office development is constrained in The Woodlands, to prevent overbuilding.  Even when Howard Hughes Corp. acquired ownership of The Woodlands in 2011,  development has been slowed, measured and steady. This is on purpose, according to Alex Sutton, co-president of The Woodlands Development Corp., which has oversight of the master-planned community. "The architectural requirements and restrictions have been a major piece in creating the value here," he adds.

As such, don't expect a plethora of developers to descend within the submarket. Development is tightly controlled by The Woodlands Development Corp., which remains true to the master plan. As a result, "The Woodlands never got overbuilt," explains Paul Coonrod, managing director with Stream Realty Partners. "It's the only submarket in Houston with a true barrier to entry."

Parsley notes that another driver of The Woodland's popularity is its zoned development along Interstate 45, a major thoroughfare. "The project was developed from the back, and started with residential areas," Parsley explains. "Over the years, they developed one- and two-story flex office spaces, then three-to-four story office buildings." Then came The Woodlands Town Center, complete with Waterway Square, a collection of office buildings, Market Street and The Woodlands Mall.

Development constraints don't mean, however, that absolutely nothing is being built on the commercial side. The next targeted area for development is Hughes Landing, will hold up to 1.5 million square feet of office space, along with a 300-unit-plus multifamily project and a retail component. Sutton says construction will launch soon on the multifamily component, and One Hughes Landing, a 197,000-square-foot office building, broke ground in late 2012 – and is already 35% leased. Sutton says when more space is leased, another office building will go in.

Given the nature of The Woodlands, new product will come online in a measured, rather than explosive, pace. Coonrod predicts more build-to-suits in The Woodlands, even has his company recently announced the second phase of the speculative office building, Reserve at Sierra Pines, which is just south of The Woodlands.

Stringent architectural and development requirements has meant that new office space in The Woodlands seems to be coming online in dribs and drabs. But the experts point out that Exxon's anticipated opening could bring even more businesses to The Woodlands, meaning more of a need for office space.

Parsley, for one, says he isn't surprised at the interest shown in The Woodlands. It had been planned, from the start, to have a strong commercial component. "Most master planned communities focus on homes and retail," he says. "The concept behind The Woodlands was, and continues to be, an entire planned city."