Available Capital, Market Growth Boost Houston’s Commercial Real Estate Industry; Experts at BoyarMiller Real Estate Forum Reflect Optimism
HOUSTON (Jan. 30, 2018) – The availability of capital for Houston, ongoing population growth and the improving economy influence positive trends in the city’s commercial and industrial real estate industry, cite three market experts at the annual BoyarMiller Real Estate Forum.
“There was much optimism expressed about the city’s real estate markets and overwhelmingly our panel of experts believe that this is a good time for the industry,” said Chris Hanslik, chairman of BoyarMiller. “Our attendees were encouraged by the positive news and they appreciated the insights from three leaders involved in the research, development and transactions that fuel this important sector of Houston’s economy.”
The influential panel included: Jonathan Brinsden, CEO of Midway Companies; Jimmy Hinton, managing director and head of research at HFF; and John Nicholson, executive vice president of AVERA Companies.
Investment Capital Abounds
“We are quite bullish for 2018 with so much capital earmarked for the Houston real estate market,” said HFF’s Hinton.
Hinton told the audience of over one hundred Houston business investors and real estate professionals that investors from outside the city often have a better view of opportunities here because, as Houstonians, we are too close to what has occurred over the past few years.
Brinsden agreed and said real estate in other cities is either fully priced or overpriced making the value proposition for Houston very attractive.
“Now is a good time to buy or to invest for development in Houston,” said Brinsden of Midway. “A lot of positive things are happening in the market. While the leasing of office and multifamily assets has been fairly tough, the good news is that the pipelines are dwindling and it is a good time for new development that will have a delivery window of two to three years.”
Industrial Real Estate Going Strong
John Nicholson of AVERA said 2017 was a “great” year for industrial real estate and sees continual growth for 2018 along with a race to identify new developable sites.
Historically, industrial transactions in Houston averaged 30,000 to 40,000 square feet and Nicholson said the size has grown to about 60,000 to 70,000 square feet—similar to the size deals typical of those done in other large markets such as Chicago, Dallas and Atlanta.
“The explosion in square footage is a result of our population growth, the oil and gas industry before the downturn, and the expansion of the Panama Canal that caused shippers to change their routes and come through the Port of Houston,” said Nicholson.
He also cited the impact of new or expanded petrochemical plants that are coming on line to produce resins that are manufactured and processed in Houston for export.
“With the plants we have here, Houston has become a Mecca center for export of polyethylene and polyurethane feed stock and that has resulted in growth at the Port of Houston,” said Nicholson. “We will see this growth continuing next year as new plants are just coming into production.”
Office Market Beginning to Improve
Brinsden said the office market continues to improve as available sublease space slowly diminishes. The energy industry still represents “a huge drag” on the office market, especially along the Energy Corridor and downtown Houston with occupancy rates just above 80 percent, he said.
“We started to see more office activity early last year particularly in the professional services sector,” said Brinsden. “It will feel a lot better in 2018 because the market is motivated by opportunity.”
A big trend for the office sector is the move to shorter duration leases.
“The majority of businesses, regardless of industry, are opting not to commit to long-term leases. Employers, as well as employees, want more flexibility. They are taking smaller spaces and using contract labor so they can right-size their workforce at will,” said Hinton who admitted to being a fan of the growing trend in co-working and shared office space.
Evolving Multifamily Market
Hinton and Brinsden agree that the multifamily market is evolving.
“Houston delivered many units going into the oil and gas downturn and the pipeline is effectively shut off. Developers managed the supply so we are a good investment market today,” said Brinsden. “The National Multifamily Housing Council ranked Houston number three in the U.S. for being under supplied in multifamily housing for projected growth to 2030. Houston is going to grow so we will need more units.”
Hinton stated that baby boomers represent a new market for urban upscale multifamily housing. “The price point for rent on a high-end property is significantly less than what it costs for mortgage, insurance and property taxes. This is a larger market now that we are seeing residential growth among baby boomers. Overall, it reflects that we are hitting a good part of the economic cycle as Houston recovers.”
To hear the presentations from the BoyarMiller Real Estate Forum visit www.boyarmiller.com.
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