Its tropical climate and poor air quality — basically, it's hot and humid, and smells bad — don't get Houston placed at the top of too many best-places-to-live rankings of U.S. cities.
And despite world-class museums, performing-arts organizations and an enormous variety of excellent restaurants for residents who love to eat out, Houston isn't considered a cultural hub or culinary standout.
But the Bayou City has outgrown its reputation. With an expanding and increasingly wealthy population, an economy that continues to create more jobs than the national average and a welcoming business environment, Houston is undeniably one of the most dynamic cities in the U.S.
Yes, it has heat, humidity and pollution, but natives seem more than willing to put up with it.
“Houston gets painted as one big, giant refinery,” said Pat Mendenhall, chief executive of advisory firm U.S. Capital Advisors. “You may not want to go running outside here some days, but if you want to participate in a thriving economy where you can make a good living in virtually any business, Houston is a great place to be.”
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Mr. Mendenhall, originally from Portland, Ore., has lived in Houston for 31 years. After 19 years as a UBS AG financial adviser, he launched U.S. Capital just over two years ago. “I came from one of the most beautiful cities in the country, and I wouldn't leave Houston for anything,” he said.
Houston, with an unemployment rate of 6.4%, continues to attract people both from within and outside the U.S. because of its booming economy. Over the past four decades, its metropolitan area population has grown by 3.8 million, according to U.S. Census data. The nation's fourth-largest city, Houston has a downtown core population of more than 2 million and a metropolitan count of more than 6 million. Though growth slowed during the recession, an average of 120,000 people have moved to the city annually over the past decade.
DIVERSE POPULATION
Houston is almost equal parts white, African-American and Hispanic, with a substantial Asian-American representation, according to William Gilmer, director of the Institute for Regional Forecasting at the University of Houston's Bauer School of Business and a former Federal Reserve economist.
“Walk the campus here and you'd be hard-put to determine what country you're in,” he said.
The source of Houston's economic strength continues to be energy. The city dominates exploration and development of oil and gas resources in the U.S., and it is a major center for refining and processing energy, with huge industrial facilities on the city's eastern side.
The upstream energy business alone employs about 90,000 people, Mr. Gilmer said. Between 50,000 and 60,000 more work in the energy-refining and chemical industries.
“This is the energy capital of the world,” said Mr. Mendenhall, whose firm has scores of oil executive clients. The massive office complex that Exxon is building in The Woodlands, a suburb, eventually will house as many as 10,000 employees.
Energy-related jobs pay well. The average industry worker earns $75,000 a year, with many making far more. “There are a lot of millionaires here, and the city is creating more all the time,” Mr. Mendenhall said.
Changes in the energy business are driving Houston's rising wealth. The revolution in hydraulic fracking is opening up huge areas of development, including the Eagle Ford shale formation in South Texas. It is a technology-intensive activity and requires thousands of high-paid professionals in a variety of fields.
“Houston used to be a blue-collar town. Now it's a white-collar town,” said Patrick Jankowski, vice president of research at the Greater Houston Partnership, an advocacy association for business. “The city has changed from being the place where the equipment was made to the place where the decisions are made.”
Houston is teeming with engineers, logistics experts, geologists, accountants and lawyers. “This is now an engineering and an applied-technology city with skilled labor and high-salaried jobs,” Mr. Gilmer said.
MULTIPLE INDUSTRIES
It also includes senior-level corporate executives. Twenty-two Fortune 500 companies are headquartered in Houston, making it second only to New York among U.S. cities in that regard. In addition, it has 94 foreign consulates.
While the energy industry has fueled the city's rapid and often cyclical growth, Houston has developed other significant business, most notably in health care. The Texas Medical Center — comprising 51 institutions with more than 90,000 employees — is located just south of the city's museum district.
The growth in high-end jobs is creating a deeper pool of wealthy clients for financial advisers.
At the end of 2011, Houston had 98,500 residents with investible assets of at least $1 million, according to a Capgemini annual survey of high-net-worth individuals in U.S. cities. That puts Houston at No. 8. After the largest percentage drop of such individuals between 2007 and 2008, Houston has expanded its ranks of wealthy residents fastest among the top 10 cities over the past three years.
“There's so much new wealth being created here,” said Jim Trippon, who owns Trippon Wealth Management Group LLC, a registered investment advisory firm that manages $120 million and is affiliated with Raymond James Financial Services Inc. “It's an amazing business community, and it's wide open for anyone who has ambition.”
While every city bills itself as business-friendly, Houston is the real deal — perhaps best symbolized by the fact that the city has no zoning laws. You can basically start a business wherever you want. The lack of state income tax and conscientiously limited regulation make the city a magnet for entrepreneurs and developers.
Houston's cost of living is 10% less than the average for 304 urban areas surveyed by the Council for Community and Economic Research. Housing costs are 21% lower than the national average. “For the cost of a 1,200-square-foot condo in New York, you can get an 8,000-square-foot mansion in Houston,” Mr. Trippon said.
Most of Houston's growth has occurred in the past 50 years, so the business community is open to newcomers. “People don't care who your daddy is here or where you went to school,” Mr. Jankowski said. “People have historically come here to start over. If you work hard, you'll succeed.”
The downside of that pro-growth, pro-business culture is a lack of services and support for lower-income people. What's good for well-educated, higher-income earners doesn't necessarily benefit Houston's poorer residents.
“Houston is a very business-friendly environment in terms of taxes and regulation, but the flip side is a limited social safety net,” Mr. Gilmer said.
The city has hitched its wagon to the growth star, however, and is creating thousands of jobs on both ends of the economic spectrum. For financial advisers, it's all about opportunity.
“One of the great things about Texas is that people are down-to-earth,” said William Heath, CEO of advisory firm Barrington Financial Advisors Inc. “Houston provides great opportunity to build relationships with people in other businesses, and there's always room for more financial advisers.”
And what about the hot, sticky weather? “That's why God invented air conditioning,” Mr. Jankowski said.
aosterland@investmentnews.com Twitter: @aoreport
