Topping Out In Houston Again

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Send the architects south. Silicon Valley may be powerless and profitless, but Houston, the nation's energy capital and home to the oil-baron excesses of the 1980s, is back in "bidness." The energy giants in Texas have big fat wallets these days--and even bigger construction plans. Not since the boom days of 1982, when trophy architects like Philip Johnson and I.M. Pei reconfigured the skyline, has Houston seen so much construction activity by the energy sector.

Leading the parade, ironically, is Enron, an old energy behemoth that has reinvented itself as a high-tech trading firm dealing in everything from natural gas to Internet bandwidth. In fact, its new 40-story headquarters, designed by Cesar Pelli, will be fronted by a seven-story "podium"--or shorter building--to house what Enron is calling the largest commodities-trading environment in the world.

This environment, spread over four floors, each the size of a city block, will become home this August to 2,000 employees trading commodities that range from Old World (crude oil, petrochemicals, steel and lumber) to New World (emission credits and derivatives). Chairman Kenneth Lay and CEO Jeff Skilling are even moving from their skyboxes to work in seventh-floor offices so they can peer down into the pit.

When the bigger 40-story structure is finished in December, Enron's will be the first new skyscraper in downtown Houston since 1987--to be followed by three more by 2003. Besides Enron, Calpine Corp., the nation's leading independent-power company, based in California, will move into a new 32-story high-rise. And Reliant Resources, the IPO spun off this month from its Houston parent to deal with Texas' new deregulated electricity market, has signed on for offices in a 36-story skyscraper.

What's fueling the high-rise fever is simple: excess cash. Enron's first-quarter revenues were up 281%, while Calpine's revenues and net income were each up more than 400%--even with California's deadbeat utility PG&E owing the company more than $300 million.

After a decade of contraction in the business, with companies having shut offices from New Orleans to Oklahoma, deregulation and new marketing strategies are sparking Houston's renaissance. "Enron is a leading example of the new energy industry. Ten years ago, there were no trading floors," points out Stephen Brown, senior economist with the Federal Reserve Bank in Dallas. Both Calpine and Reliant will also have trading operations in their new offices.

Though Houston no longer relies so heavily on the energy business (down to 48% of the local economy from 82% in 1982) the turnaround sure feels good after the city lost more than 15,000 energy-sector jobs two years ago, says Barton Smith, director of the Institute for Regional Forecasting at the University of Houston. It has gained those jobs back, plus some. Says Smith: "The current boom is what's keeping Houston afloat while the rest of the country is suffering."

None of this matters to real Houston lovers, of course. They're just interested in bragging rights. After a bad decade, they're beginning to sound like the biggest and the best in Texas again. "Boomlet?" says Laura Schwartz, spokeswoman at Enron. "It's more than a mini-boom. It's a boom."