HOUSTON, Dec. 18, 2014 /PRNewswire/ -- While the
impact of declining oil prices on Houston's economic and real estate growth may
be top-of-mind, speakers at the BoyarMiller Real Estate
Forum expressed comfort in the city's resiliency.
Four local experts shared their predictions for 2015 activity in
retail, mixed-use, residential and industrial real estate markets
at the annual event attended by about 200 business influencers. The
panelists included: Will
Holder, President of Trendmaker Homes; Allen Crosswell, Managing Principal of
NewQuest Crosswell; Jonathan
Brinsden, CEO of Midway; and Welcome Wilson Jr.,
President and CEO of Welcome Group.
"As media headlines heed almost daily warnings about a possible
economic slowdown due to oil prices, the panelists agreed that
Houston would weather the storm
and the market can adjust," said Chris
Hanslik, Chairman of BoyarMiller. "Some of that is
because we have been there before, but most of the assurance is
because Houston is so quick to
recover. My takeaway is that our city is still the best place to be
for jobs and opportunity."
Residential outlook – full-steam ahead
Will Holder of Trendmaker Homes
confirmed that the key driver of residential real estate is job
growth and cited 119,000 new jobs in Houston through September – the largest the
city has seen and the fastest growing in the country at a 4.3
percent increase.
"We have enough steam to push through this dip in oil.
Houston housing is resilient and
flexible," said Holder. "Existing homes cannot keep up with the
demand and we have more spec homes under construction than in the
last four years."
He cited the typical ratio of jobs to home sales as
three-to-one; 60,000 jobs mean 20,000 homes are needed in the
market. The challenge may be with supply meeting demand.
Holder said the key challenge impacting the residential market
involves the low inventory of completed spec homes and vacant lots.
"Lot shortages persist and that creates some havoc in the market.
We are at full employment buying lots years in advance."
Additionally, Holder said there is much cost escalation in
homebuilding because of capacity restraints that create market
resistance and hesitancy for new listings. Homebuilders are seeing
higher costs for raw materials, licensed contractors and skilled
labor.
He closed by confirming that the "fundamentals" are in place for
the foreseeable future and new homes are still priced within the
medians.
Retail market expands north and west
Allen Crosswell of NewQuest
Crosswell is an expert on the retail real estate market, which is
driven by home sales and population growth.
"Houston's population has grown
by 450,000 people since 2011," said Crosswell. "That growth fuels a
lot of retail activity and the National Retail Federation forecasts
holiday sales will increase four percent this year, higher than the
10-year average."
Retail activity in Houston is
centered in the north and west quadrants of the city with large
grocers – like Kroger, HEB and Walmart – as primary anchors in
shopping centers, according to Crosswell. There are 15 new shopping
centers planned in the city through early 2017 with either new
retailers entering the market or expanding.
"There is finite retail space available that is driving up rent
prices about 35 percent," said Crosswell. "However, the increase in
retail rent prices is counterbalanced by higher land costs."
Looking ahead, Crosswell cited the Grand Parkway as the catalyst
for much speculation about new retail as it offers access to new
areas. He said, Newquest has approximately $300 million of retail development in its
pipeline for 2015/16 and the retail market growth cycle should
continue in the period ahead, making continued investment
attractive.
Energy Corridor fuels office market
The office market is where Houston first experiences the effects of
declining oil prices according to Jonathan
Brinsden of Midway. "There
is a lot of sensitivity around that $60 per barrel price and concern that it may
continue to drop," he said. "So in 2015 and 2016, you will see
vacancy rise a bit."
In Houston, one direct energy
job results in four additional jobs, said Brinsden. The Energy
Corridor accounts for about 40 percent of office development with
16 projects under way.
"Leasing activity in the Energy Corridor has been in big blocks
by major employers," said Brinsden. "Now we may see a different
dynamic with leasing in smaller chunks meaning it will take longer
to absorb the space and there will be an uptick in vacancy."
Brinsden said that pre-leasing and new construction activity
will be "just about at an equilibrium" by 2016. There are 17.8
million sq. ft. of new construction under way with about 12.1
million of it leased representing 68 percent, down from about an
average of 70 percent.
The mixed-use market in Houston
is still strong and defined by having three or more significant
revenue-producing uses with integrated project components and a
coherent design plan. Brinsden mentioned BLVD Place, Regent Square,
Kirby Grove and Hughes Landing as
examples of mixed-use projects either under way or expanding.
"Connectivity is important for successful mixed-use projects,"
said Brisden. "Houston's
infrastructure and mass transit is vital, so Metro's bus
reimagining plan, with a new grid system, will have a positive
impact."
Bullish on the industrial market
An enthusiastic outlook for Houston's industrial market was delivered by
Welcome Wilson Jr. of the Welcome Group as one of Houston's all-time largest land sales – the
11,000-acre Cedar Crossing Industrial Park – had just closed.
"Houston has had such enormous
success with around 300 percent of jobs recovered since the
recession," said Welcome. "However, in 2015 Houston will be
observed nationally to see how our economy is affected."
There is demand in Houston for
crane-served buildings and no availability, according to Welcome.
With supply trailing demand, there is 532 million sq. ft. of
industrial space and 6.3 million sq. ft. of new space under
construction. The 2014 vacancy rate for industrial space is five
percent.
"Low oil prices are temporary, and with the backlog of
industrial activity in Houston, we
can coast through it," said Welcome.
Two major projects that incite the industrial market are the
completion of segment E of the Grand Parkway, which has brought a
lot of new companies to the city, and the pending 2016 completion
of the Panama Canal expansion, that will facilitate LNG exports
from Houston.
"Additionally, land costs for industrial development have
doubled, which makes our existing properties look really good,"
said Welcome. "The industrial real estate sector in Houston is resilient; we have a lot to be
grateful for."
To view the presentations from the BoyarMiller Real Estate Forum
visit www.BoyarMiller.com.
About BoyarMiller
BoyarMiller, a Houston-based
law firm, is comprised of two practice groups: business and
litigation. The business group serves multinational companies,
middle-market businesses and entrepreneurs in need of collaborative
and strategic representation. The litigation group represents
organizations of all sizes, from entrepreneurs to Fortune 500
companies, seeking to resolve complex business issues and
employment disputes. See www.boyarmiller.com for more information.
Media contact:
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Martin
713-299-5619
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