Houston, TX | 2016 Top #CRE Markets to Watch: Office

Posted on September 13, 2016 by SVN

SVNIC’s 2016 Market Outlook Reports assess the current state of the national commercial real estate market, and identify micro-trends within specific geographic regions and industries for 2016. Today we are delving into the 2016 Top Office Markets to Watch. Not the largest or the most actively contested markets, the 2016 Office Markets to Watch are each at an important juncture that presents unique opportunities for investment. Together, they reflect the diversity of trends that is driving the economy and commercial real estate performance in markets across the country.

Top Office Market to Watch: Houston, TX

Houston is the hub of oil and energy production in the United States and, as such, is uniquely susceptible to the recent oil price declines that appear to have near-term persistence. It is likely that the office market in Houston will experience some pain in 2016 and beyond on a relative basis. Declines are already being felt in key office sectors with Information and Professional and Business Services declining at -2.5% and -1.8% annualized rates, respectively; however, Financial Activities is growing at 2.0% and thus should balance some of the negative effects. Overall, the Houston economy is actually fairly healthy with a 4.8% unemployment rate as of January ‘16 which has stayed near constant for much of 2015; thus, fears of the oil price declines may be overblown.

Advisor Insights: SVN | HINT Advisors

SVN’s Houston-based Advisors at SVN | HINT Advisors have some office market highlights to share. Here’s what to look out for in the Houston office market in 2016:

A mild increase in office sublease due to a zero net job growth, following the thousands of jobs lost between December 2014 and April 2016.
Increase in concessions from landlords when leasing office space is ongoing.
Job losses appear to have stabilized with an unemployment rate at 4.8%, and a resurgence in the energy sector is expected in the future.
Due to Houston’s diverse economy in recession proof sectors such as healthcare, petrochemical, and international trade, employment (and demand for office space) is expected to continue.

Stay Updated…

Over the next few weeks, the SVN Blog will be featuring posts that will focus on each of the top markets to watch for industrial, multifamily, office, and retail properties. SVN Advisors from selected top markets have provided their industry expertise regarding what to look out for in their specific market in the coming months. Don’t miss out on these important insights – subscribe to the SVN Blog on the right side of the blog homepage.

To read more on other top office markets, download the full version of the 2016 Office Market Outlook report here.

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Houston, TX | 2015 Top #CRE Markets to Watch: Multifamily

Posted on July 27, 2015 by SVN

Sperry Van Ness International Corporation’s (SVNIC) 2015 Market Update Reports assess the current state of the national commercial real estate market, and identify micro-trends within specific geographic regions and industries for 2015. Today we are delving into the 2015 Top Multifamily Markets to Watch. Not the largest or the most actively contested markets, the 2015 Multifamily Markets to Watch are each at an important juncture that presents unique opportunities for investment. Together, they reflect the diversity of trends that is driving the economy and commercial real estate performance in markets across the country.

Top Multifamily Market to Watch: Houston, TX

The nation’s energy capital has been rattled over the last year by lower energy prices, though experts disagree on how significant the impact will be on Houston’s increasingly well- diversified economy. Some companies in the oil exploration, production, and drilling businesses will undoubtedly make cuts in 2015. There is no avoiding that five of Houston’s top ten employers are in the oil industry.

While demand may soften, Houston’s most daunting challenge is its pipeline of new apartments. Nearly 30,000 multifamily units were under construction as of the first quarter of 2015, with completions projected to exceed 15,000 units by year’s end. Chandan Economics projects that Houston’s ratio of new jobs to units delivered will slide to below 4.5% in 2015, less than half the national average.

While higher-end construction projects clustered in Houston’s downtown neighborhoods could falter, the suburban multifamily market has a relatively thinner development pipeline and may be better positioned for further rent gains in 2015. Vacancy has evaporated in the mid-tier of the market as many Class B properties have found their way out of the inventory, sometimes through strategic repositioning. Cap rates on these assets are relatively high, affording opportunities for income-oriented investors betting on Houston’s long-run growth record.

To read more on Houston and other top multifamily markets, download the full version of the 2015 Multifamily Market Update report here.

It’s a different world out there.

It requires a different kind of commercial real estate firm working on your behalf in order to be successful. The Lipsey Company has ranked the Sperry Van Ness® organization as one of the most recognized commercial real estate brands in the US for a reason—we know how to deliver a certainty of execution for our clients. Sperry Van Ness International Corporation is one of the largest commercial real estate franchisors with more than 180 locations in 200 markets.

Houston, TX | 2014 Top CRE Markets to Watch : Apartment

Posted on November 4, 2014 by SVN

Sperry Van Ness International Corporation’s (SVNIC) 2014 Top Markets to Watch Reports assess the current state of the national commercial real estate market, and identify micro-trends within specific geographic regions and industries for 2014. Today we are delving into the 2014 Top Apartment Markets to Watch. Not the largest, or the most actively contested markets, the 2014 Apartment Markets to Watch are each at an important juncture that presents unique opportunities for investment. Together, they reflect the diversity of trends that is driving the economy and commercial real estate performance in markets across the country.

TOP APARTMENT MARKET TO WATCH : Houston, Texas

Houston’s multifamily market has been on a two-year high—and lenders are ready to take it down a notch. Construction will add nearly 11,000 units in the Energy City by the end of 2014, more than 6,000 of which will be in a handful of high-end urban submarkets, growing inventory in those neighborhoods by more than 6 percent. With the remaining 5,000 or so units to be completed elsewhere in the city, however, the overall vacancy rate of about 6 percent is unlikely to shift appreciably until 2015 or beyond, and remains low for this market. Houston’s appetite for apartments is growing nearly twice as fast as the pace of construction, which is expected to add 10,000 units annually in 2015 and 2016. Nevertheless, some lenders concerned over the recent volume of development in Houston have tightened underwriting for construction loans, which could create a competitive advantage for investors with other sources of capital.

To read more on Houston, and other top multifamily markets, download the full version of the Top Apartment Markets to Watch report below.

It’s a different world out there.

Download the Top Trends and Markets to Watch Reports

Apartment Trends and Markets to Watch
Office Trends and Markets to Watch
Industrial Trends and Markets to Watch
Retail Trends and Markets to Watch
Commercial Real Estate Trends and Markets to Watch

Office Spotlight: SVN/HINT Advisors in Houston, TX

Posted on June 5, 2014 by SVN

This week, we turn the spotlight on SVN/HINT Advisors with offices in Houston, Texas.

1. What has been your strategy for growing your firm and also your market share?
I focus on retail investments, retail stand-alone (NNN) and retail land. I have a focus in my practice where I go after markets first, then retail opportunities within. One of my best Advisors continues to emphasize the importance of discipline, and I have a daily discipline that extends to a weekly and monthly schedule, divided in blocks of time and activities. It is driven by a set goal but it comes down to execution. My weekly schedule includes daily follow-up calls, business development calls, and conference calls with clients or colleagues morning to noon, followed by emails and computer related tasks after lunch. Next, I do calls to West coast and Central time leads since I cover California and Houston, then I depart to business engagements in the evening or otherwise do research and plan an agenda for the next day. Just before going to bed I check emails for any last minute updates. Throughout the day I also read trade journals and news on relevant retail and check my social networks.

Libby Cadillo | Managing Director | SVN/HINT Advisors

2. What are some of the unique activities you do to motivate your team?
I believe in clarity and definition when it comes to relationships. Therefore I make an effort to communicate the goals upfront, to share the vision, and to share the expectations from each other. I use technology to send reminders, reconfirm agreements, and multitask as efficiently as possible.

3. What’s been the biggest challenge in running your business in the last few years?
Since starting my practice, the biggest challenge has been high productivity per hour. Sometimes I have been guilty of getting distracted by events around me, but I am learning to minimize my distractions as much as possible when I am to be focused on work.

4. How many Advisors/Staff did you have when you joined SVN? How many (in total) do you have now?
Right now just one, but I have a network of peers and three strong Board Advisory Members who assist me when I need something.

Contact:
Libby Cadillo
Managing Director
SVN/HINT Advisors
Houston, TX

*All Sperry Van Ness® offices are independently owned and operated.

Multifamily #CRE Focus on Houston/Harris County, Texas

Posted on March 15, 2013 by SVN

More Expansion in All Sectors

The Houston, Texas apartment market is the fourth largest in the country with nearly 600,000 units. Looking at the real estate drivers, it’s easy see why there’s so much demand. More than 90,000 jobs were added in 2012. New construction of offices in the energy corridor, a new Exxon campus in Harris County, and new apartment construction throughout the Houston area has created a large employment demand that’s expected to be strong for at least the next two years. The Houston Consolidated Metropolitan Statistical Area (CMSA) has gained about 90,000 jobs per year since 2011 which creates a demand for 18,000 new apartment units per year.

Average Class A cap rates have continued to decrease since mid-2010, from 7% to a low of 5.5% in 2012. During the same time average sales prices increased from $50,000 to $66,000/unit. Cap rates for 2013 are projected to stay about the same for Class A properties at about 5.4% to 5.6%. Values will tend to increase as much as 10% due to new demand from job growth and the lagging supply of new product which should cause rents to increase. Class B cap rates should range from 7.0% to 7.5% and Class Cs at 8% to 8.5%. Now is the time to sell before we go into “hypersupply” foreseen in about 18 months.

Vacancy Trend Shows 0.8% Improvement in 2012

Decreasing vacancy rates is one characteristic of the “expansion cycle.” Overall occupancy for all classes has improved 0.8% from year end 2011 to year end 2012. Based on the projected job growth for 2013, net occupancy should increase 1.0% in 2013. A projected 13,000+ units will come on the market in 2013.

High Absorption/Low Construction

While the characteristic of the expansion phase is high absorption, Houston saw an absorption in 2012 of about 12,250 units. The first half of 2012 was a positive 7,141 units with a positive 5,112 units absorbed in the second half. This year, we should see an increase in absorption to as much as 16,000 units. Construction remained moderate in 2012 with 5,457 units constructed. Construction for the past 3 years (2010-2012) has averaged 5,222 units. In 2009 construction peaked at 19,330 units. Construction projections for 2013 anticipate as many as 13,000 units to be completed. At year end 2012 there were 12,785 units under construction and an additional 7,792 units proposed.

Employment Growth

Our fourth characteristic in defining the expansion cycle is a market that shows moderate to high employment growth. As you can see from the Employment Growth chart, Houston has seen a large increase in employment growth in the last three years with last year increasing to 90,000 net new jobs after a negative 102.8 thousand lost in 2009. Basically, we have recovered the 2009 losses in the last three years. Jobs are projected to increase in 2013 to about 91,000. Historically Houston absorbs 1 new unit for every 5 new jobs.
About 16,000 units are expected to be absorbed in 2013. In 2012 there were 198 garden apartment sales in the Houston CMSA – up 13% from 2011. Projections for 2013 are 250 properties based on Houston’s peak years.

Rental Rates and Rent Concessions…

As seen from the Rental Rate chart, in the last two years rental rates in the Houston area have increased about 9.4% or 4.7% per year.
Rental rates are expected to rise in 2013 for Class A & B apartments 4.7% above that of the 2012 levels. Rent concessions are almost non-existent except in the low end Class C & D properties.

Top 6 Lenders of Garden Apartments in 2011-2012

1. Holliday Fenoglio Fowler

880 units

$161,266,000 Total Volume

2. Wells Fargo Bank

2,207 units

$118,095,000 Total Volume

3. CBRE Multifamily Capital

1,832 units

$114,537,111 Total Volume

4. Jones Lang LaSalle

2,822 units

$105,663 Total Volume

5. Berkadia Commercial Mortgage

1,208 units

$84,100,000 Total Volume

6. Metropolitan Life Insurance

960 units

$72,090,000 Total Volume

Is it Time to Buy or Sell?

The best time to buy in Houston was the fourth quarter of 2010 to the 4th quarter of 2012 if you had money to rehab and could wait for the upside. Well the upside is here and expected to continue in the Houston CMSA through 2017 based on job growth and a 3-year lull in new construction. It is definitely a seller’s market and good properties are hard to find. If you are looking for an increasing income in a dynamic market, it is time to buy or build. As an owner it is time to think about selling in the next 12 months.

Prepared by:

Bill Forrest, Sperry Van Ness® Forrest Group

Bill Forrest

MAI, Managing Director

Sperry Van Ness | W Forrest Group

Houston, Texas

*All Sperry Van Ness® offices are independently owned and operated.