Market Reports

Houston Office Market, CBD Experiencing a Renaissance

by Taylor Williams January 26, 2018

In recent months, a renaissance in the Houston’s urban core, paired with a flight to quality and focus on sustainable design, has created a perfect storm for the metro’s office sector. This revival has been combined with a renewed focus on living and working in Houston’s Central Business District (CBD), which has simultaneously driven a resurgence in both retail and mixed-use developments. Downtown Houston’s burgeoning multifamily market is one of the key drivers in Class A office development. Since 2013, downtown Houston has seen 3,355 new multifamily units hit the market. And according to industry estimates from the midway point of 2017, the multifamily market will continue to grow significantly — as much as 40 percent — by the end of this year. These trends, paired with a 6 percent increase in construction of new hotels, have created greater demand in the marketplace for mixed-use developments that offer diverse tenant mixes, including high-end retail and dining options. A Flight to Quality These shifting preferences among residents and employees within the city’s urban core has prompted a flight to high-quality, modern and energy-efficient buildings, as more tenants look for office space in Class A developments that boast top-of-the-line amenities. Over the …

January 26, 2018

Market Reports Multifamily Texas Texas Market Reports

Turning the Page: Houston’s Multifamily Market Poised for Growth in 2018

by Taylor Williams January 19, 2018

Houston’s resilient multifamily market has turned a corner and is poised for growth this year, according to experts across a range of industries. While the city faced significant headwinds in 2017, mainly a sluggish energy sector and a major hurricane that damaged thousands of homes and apartments, Houston’s strong fundamentals have paved the way for the multifamily market to post its strongest performance since 2015. The impacts of Hurricane Harvey generated unexpected changes in the multifamily market. The storm, estimated to be one of the costliest in U.S. history, damaged nearly 135,000 homes and more than 100,000 apartment units. Consequently, the rental market saw a spike in absorption from displaced homeowners and existing renters whose apartments were uninhabitable, thus reversing the supply imbalance and anemic rent growth that had stifled the market since the multifamily building boom — and subsequent oil bust — of 2015. Basic Numbers A surge in demand drove multifamily occupancy up 120 basis points to 90.1 percent between August and September of 2017, its highest level since the fourth quarter of 2015. The heightened demand translated into a monthly rent increase of 1.4 percent. In effect, rent grew to $999 per month on average in September, …

January 19, 2018

Industrial Market Reports Texas Texas Market Reports

Houston Industrial Market Has Come to Reflect City’s Economic Diversity

by Taylor Williams January 12, 2018

The resiliency of Houston’s industrial real estate market is truly astounding. Outsiders have always considered Houston to be an “oil town” whose economic success is tied to the geopolitical intricacies of the international energy markets. Yet three years into the oil and gas downturn, Houston has proven that it has a truly diversified economic base. The city’s industrial real estate market has consequently enjoyed a disproportionate benefit of that concerted effort to establish a truly balanced economy. From 2009 to 2014, while the national economy sputtered along due to anti-business policies of the Obama administration, Houston enjoyed a countercyclical economic boon as all sectors of the oil and gas industry added jobs, increased investment and drove demand for oil service-related real estate. Manufacturers and distributors made significant real estate commitments to property and equipment as they worked to meet the demand for materials and services related to the growth in domestic shale exploration and production. When the music stopped in November 2014, outsiders and pundits threw their hands in the air, called it the end of Houston’s growth story and declared that it would be the 1980s all over again. Houston real estate veterans, however, trusted the diversified economy and …

January 12, 2018

Data Centers Industrial Market Reports Texas Texas Market Reports

Data Centers Double Down on Size

by Taylor Williams January 5, 2018

Demand for data center space stems from a variety of sources. The vast majority of companies across most industries have some sort of web presence, and their customer and employee records and information are stored electronically. At the same time on the consumer side, smartphones and tablet devices are all but ubiquitous, their owners constantly upping their usage of apps and social media platforms. Nonprofit communications firm CTIA tracks aggregate wireless data usage across the country on an annual basis. The Washington, D.C.-based company found that in 2013, Americans used approximately 3.2 trillion megabytes of data. By 2015, a year in which there were about 228 million smartphones and 41 million tablet devices in circulation, that figure had increased threefold to 9.6 trillion megabytes. By 2016, a year in which there were more than 261 million smartphones in circulation, wireless data usage had exceeded 13.7 trillion megabytes. That total represents more than 35 times the volume of data traffic recorded in 2010, according to CTIA’s website. Web presences, records storage and electronic communications — not to mention the ever-expanding role of e-commerce in retail today — each contribute marginally to the growing demand for data center space. However, when combined …

January 5, 2018

Market Reports Retail Texas Texas Market Reports

Grocery, Home Goods Sales Rising in Houston

by Taylor Williams December 29, 2017

After Hurricane Harvey made landfall on the Texas Gulf Coast, the storm’s impacts on commercial real estate were most immediately felt in the single- and multifamily spaces. As the recovery effort got underway, it became clear that some office buildings had been damaged, driving down occupancy in that sector, while demand for industrial materials and space rose. Perhaps because retail occupancy in Houston — which most recently clocked in at 94.6 percent, according to CoStar Group — has been strong throughout the oil downturn, or because most store closures stemmed from employees being unable to get to work, the storm’s impacts on the retail sector have been somewhat trickier to measure. Whatever the case, nearly four months after the storm, retailers in certain industries are seeing their sales figures climb dramatically, and without help from the holiday shopping rush. Grocers Lead the Way The grocery business — a form of brick-and-mortar retail thought to be somewhat insulated from e-commerce — has been at the forefront of retail segments seeing an uptick in sales following Harvey. Residents experiencing power outages and damaged refrigerators generated healthy and immediate demand for groceries. “Grocers were particularly impacted by Harvey, and in the aftermath it …

December 29, 2017

Market Reports Retail Texas Texas Market Reports

Minimal New Development Spurs Investment in San Antonio Retail

by Taylor Williams December 22, 2017

As the real estate world addresses the uncertain future of brick-and-mortar shopping, the market for retail investment in San Antonio remains strong. The recent bankruptcies of physical merchandisers such as Toy “R” Us, Radio Shack, Rue 21 and Payless Shoes — to name but a few — have proven that retailers must adapt their strategies to an ever-changing environment. In San Antonio, however, a historically low volume of new retail development and decreasing vacancy rates, combined with strong fundamentals, have attracted and secured more retail investors than ever before. San Antonio’s thriving economy is supported by steady job growth — 25,000 jobs have thus far been added in 2017, according to the City Employment Statistics survey. The Bureau of Labor Statistics put San Antonio’s unemployment rate at 3.7 percent as of August 2017, versus the national average of 4.5 percent. Often referred to as Military City, USA, San Antonio is home to Joint Base San Antonio, which includes Fort Sam Houston, Lackland Air Force Base and Randolph Air Force Base. These military installations alone employ roughly 90,000 people and have an estimated $27 billion impact on the local economy. These statistics, coupled with the market’s steady job and population growth, …

December 22, 2017

Market Reports Multifamily Texas Texas Market Reports

Strong Demand Underserved in San Antonio Multifamily Market

by Taylor Williams December 15, 2017

San Antonio is one of the nation’s fastest-growing cities, with a booming, diversified economy that’s luring new businesses and young people at a rate that most other metro areas can only envy. Lacking Austin’s hipster cred, Dallas’ moneyed glamour and Houston’s perennial position at the epicenter of a global industry, San Antonio’s many strengths are often overlooked. While this lower profile hasn’t slowed growth in the Alamo City, it has left its expanding market for Class A apartments comparatively underserved. Led by education and health services, the San Antonio area’s economy added approximately 21,500 new jobs in 2016. This represents a 2.1 percent growth rate, a healthy pace for the San Antonio MSA, albeit a slight reduction from the 2.8 percent growth rate in 2015, according to the Federal Reserve Bank of Dallas. This steady expansion fueled a population boom that saw 47,906 new residents join the metro between July 2015 and July 2016. This 2 percent growth rate ranked San Antonio as the 10th fastest-growing MSA with a population greater than 1 million people, according to estimates by the U.S. Census Bureau. Millennials Lead the Way San Antonio isn’t just a leader in total population growth; it also ranks …

December 15, 2017

Market Reports Office Texas Texas Market Reports

Urban Renaissance: San Antonio Office Market Gains A New Identity

by Taylor Williams December 8, 2017

Regional investors have always described San Antonio as a steady market with desirable economic indicators. But with the impending delivery of a Class AA office tower and a growing tech presence, the city is on the brink of emerging as a national contender for commercial real estate investment. Historically, San Antonio has posted strong employment figures that have kept it firing on all cylinders and ready for business. The San Antonio-New Braunfels MSA has experienced seven straight years of job growth. The metro’s unemployment rate has dropped 10 basis points quarter-over-quarter to its current level of 3.7 percent, a figure that strongly outperforms the national average of 4.5 percent. By comparison, the MSA’s 10-year average unemployment rate was 5.5 percent and the nation’s 7 percent. As new investors analyze the San Antonio office market’s history, they should consider the similarities and differences between San Antonio and other major Texas metros. Assessing the last peak-and-valley metrics from 2007 through 2010 provides insight into how the market reacts to a changing economy. Vacancy Rate Stabilizes The vacancy rate for Class A office properties in San Antonio peaked in 2009 at 16.7 percent, while vacancy rates in Austin, Dallas-Fort Worth (DFW) and Houston …

December 8, 2017

Industrial Market Reports Texas Texas Market Reports

Direct Vacancy Reaches 12-Year Low in San Antonio Industrial Market

by Taylor Williams December 1, 2017

As we enter the fourth quarter, fundamentals are strong in San Antonio’s industrial market, with direct vacancy tightening and continuing the hot streak it’s been on the past few years. At the third quarter’s end, the metro’s direct vacancy rate stood at 5.4 percent, down from 6.2 percent during the second quarter and 5.8 percent during 2016. In fact, that 5.4 percent direct vacancy rate represents a 12-year low. The figure is a far cry from the 9.3 percent direct vacancy registered during the third quarter of 2006 — the last time the market posted a rate above 9 percent. This d in direct vacancy is particularly noteworthy given that more than 10 million square feet of inventory has been added to the market since that time. The shrinking rate has also coincided with a slight increase in direct average asking rent, which now stands at $5.99 per square foot following a $0.16 quarter-over-quarter increase. Driving the falling vacancy numbers was an economy that fast-tracked over the summer. The San Antonio Business-Cycle Index increased at its fastest pace since 2016, while the area unemployment rate remained the same and job growth surged. Job growth increased at a 3.6 percent annualized …

December 1, 2017

Industrial Market Reports Texas Texas Market Reports

Spec Developments Growing Quickly in Fort Worth Industrial Market

by Taylor Williams November 17, 2017

In the greater Fort Worth commercial real estate market, there was a scarcity of industrial speculative development until 2007-2008. A number of submarkets saw projects go vertical at this time, including Alliance, North Fort Worth and South Fort Worth. The results were mixed. While there were some successes, a number of developers found themselves at the mercy of unfortunate timing. Deal velocity slowed, leaving well-positioned buildings competing for the same tenants. This resulted in unanticipated, extended vacancy time frames and generous tenant concessions. Fast forward to 2017 — 10 years after the last cycle — and we are in the midst of an even more ambitious round of speculative development. Although many would say we are in the late innings of this real estate upswing, the number of new starts under construction or announced across Fort Worth paints a different picture. Is the continued construction justified, or is this another example of developers falling in love with the market fundamentals and not paying enough attention to market-specific deal velocity? According to the U.S. Census Bureau, Fort Worth’s population has grown 60 percent since 2000, making it the 16th-largest city in the country and the fastest-growing among the 20 largest cities …

November 17, 2017

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