Transwestern/Delta Associates'
Greg Leisch: Fundamentals great
for Houston real estate.

HOUSTON-Though uncertainty seems to be dragging down overall U.S. economic growth, Houston seems to be defying the odds of most of the major metro markets. Statistics and information backing the assertion of a hot Houston market were presented at Transwestern’s recent Trendlines, an annual event that highlights economic trends and examines various CRE sectors of the Houston market.

In addition to remarks by keynote speaker Ambassador John R. Bolton, Greg Leisch, CEO of Delta Associates (Transwestern’s research arm), highlighted opportunities throughout the Houston commercial real estate market. And the broad overview points out that there is plenty of opportunity to be had.

  • Overall economic growth. The economy added close to 90,000 jobs (trailing Los Angeles, New York and San Francisco) and Houston’s employment rose by 3.5% in 2012. A potential slowdown could be in the cards from Europe.
  • Infrastructure. The Panama Canal expansion in 2015 will increase investment in the Port of Houston and if the airports can obtain Latin American routes, activity could increase.
  • Office market. Net absorption, to date, is 2.9 million square feet, the overall vacancy rate is 10.9%, rents have increased approximately 2.4%. As the regional economy continues to expand, the office sector should as well. The construction pipeline is active in this sector.
  • Industrial market. The overall vacancy rate here stands at 4.6%, with asking rents up modestly.  Net absorption totaled 3.3 million square feet through the first three quarters of 2012. Though speculative development is underway and continued growth anticipated, global economic uncertainty could put a damper on this sector.
  • Multifamily. This sector continues to expand, thanks to the region’s high growth rate.  Net absorption during a 12-month period ending June 2012 was approximately 17,275 units, with vacancy standing at 7.4%. Rents are anticipated to increase modestly through the remainder of this year and into 2013.
  • Retail sector. As the economy keeps growing, retail keeps strengthening, with an overall vacancy rate of 11.2% as of Q2, 2012. It’s anticipated that vacancy should remain steady or even decline for the remainder of the year and into 2013.

The advice provided to participants interested in becoming involved in Houston’s commercial real estate sector included to buy and prepare land for the upcoming round of development, lock in interest rates while they remain low and narrow any kind of acquisition search to CRE product that accommodates the modern tenant.