Texas Market Reports

InterFace Panel: Despite Robust Demand, Houston Retail Owners Face Challenges in Adapting to New Market Conditions

by Taylor Williams August 28, 2024

By Taylor Williams HOUSTON — High occupancy rates paired with low volumes of new construction have been the prevailing narratives in many major U.S. retail markets over the past couple years, and Houston is no exception. And while that dynamic ensures healthy rent growth within stabilized properties, when paired with high construction costs and higher interest rates, the result can be growth that feels rather sluggish. According to second-quarter data from Colliers, the Houston retail market currently has a vacancy rate of 5.2 percent, a mark that has held steady for the past year. The market added about 1.1 million square feet of new product through the first six months of 2024 to go with roughly 732,000 square feet of positive absorption. The average asking rent stands at $20.38 per square foot, which represents a 3.8 percent increase relative to the second quarter of 2023. Rosy as these figures appear on the surface, they do not tell the full story of the market. Most owners cannot afford to simply sit back and let the deals come to them at rents they dictate. For although demand exceeds supply of quality space, the aforementioned macroeconomic factors are squeezing owners’ profit margins, meaning …

August 28, 2024

Market Reports Texas Texas Market Reports

Will Clouds in Texas Commercial Real Estate Clear in the Second Half?

by Taylor Williams August 21, 2024

By Emin Aboolian, senior vice president of underwriting, iBorrow It is not a shock to anyone in the industry to say that the commercial real estate market this year has been challenging and expected to experience further turbulence. The hoped-for interest rate cuts from the Federal Reserve have not yet happened. Price expectations from sellers have remained too optimistic due to the historic low interest rate environment that defined the capital markets for more than a decade. Investors with robust capital buckets continue to sit on the sidelines waiting for price corrections. The wall of impending maturities keeps getting closer — and seemingly larger. The “extend and pretend” approach from large lenders has pushed some maturities out but has not addressed the underlying debt-to-income ratios that these struggling commercial properties face. In summary, no matter what segment you are in — retail, office, industrial or multifamily — 2024 has been a tough year so far and is expected to carry into 2025 until sellers are forced to transact. So why do we think these clouds are going to clear generally, with the Texas market in particular pulling ahead in its recovery? Broadly speaking, the real estate sector is a victim …

August 21, 2024

Market Reports Multifamily Texas Texas Market Reports

Texas Multifamily Brokers Grapple With Declining Deal Volume, New Market Realities

by Taylor Williams July 31, 2024

Newton’s second law of physics holds that what goes up must come down, but unlike objects in freefall, retractions in real estate cycles tend to unfold with varying degrees of pace and severity. In the case of multifamily investment sales in Texas, it’s been clear for some time that the market is in a much different place than it was in late 2021 and early 2022, the latter period being when rate hikes began. In that golden era of multifamily investment sales, owners routinely achieved record highs of rent growth and brokers closed deals at legendarily high prices and low cap rates. What isn’t so clear is whether the market has bottomed out yet with regard to those metrics. Attaining clarity on that subject will remain difficult until deal volume rebounds and gives owners and brokers enough data to accurately establish trendlines. Like everything else in commercial real estate, the question of when deal volume will rebound is tied to movement in interest rates — unless maybe it isn’t. For as the world has seen over the past six months, what the Federal Reserve implies it will do and what it actually does aren’t always in sync. Some brokers …

July 31, 2024

Market Reports Mixed-Use Texas Texas Market Reports

Mixed-Use Developers in North Texas Prioritize Infrastructure

by Taylor Williams June 26, 2024

By Taylor Williams If you build it, they will come — assuming “it” is equipped with the all the facilities, necessities and conveniences of 21st-century living. As residents and consumers, it is remarkably easy to overlook the critical pieces of infrastructure that enable these necessities and conveniences. From the perspective of end users, these facilities and systems are not instrumental to the success of commercial and residential developments because they are taken for granted as minimal requirements for occupancy. Further, in many cases, the infrastructure is not visible to the naked eye. Yet for developers, particularly those in high-growth regions like North Texas, infrastructure is anything but an afterthought. “In the eyes of developers, infrastructure is a primary aspect of any project,” says Jack Turnage, development manager at Wildcatter Realty Partners, the developer behind The Greenbelt, a 325-acre mixed-use project in Hunt County. “Without that, the only way to navigate our site is on horseback.” Located in Greenville on the northeastern outskirts of Dallas, The Greenbelt is one of numerous large-scale mixed-use projects sprouting up in the region. Plans call for close to 1,000 single-family and multifamily units; several hundred thousand square feet of commercial space; numerous restaurant pad sites; …

June 26, 2024

Conference Coverage Market Reports Retail Texas Texas Market Reports

InterFace Panel: San Antonio Retail Market Rises on Radars of Major Tenants

by Taylor Williams June 13, 2024

By Taylor Williams Industry professionals who hail from and work in San Antonio often describe the city’s economy and real estate scene as steady and healthy in a sort of unspectacular way. Rarely does any commercial sector in San Antonio achieve the high highs and low lows of gateway coastal markets. Further, the market’s quiet consistency has come to stand out as its neighbor up the road, Austin, has exploded as a tech hub in the past decade, bringing with it fervent building booms that still can’t put a dent in the skyrocketing cost of living. Yet this same quality that in years past caused major retailers and restaurants — and investors — to pass on San Antonio is now a primary force that attracts them to the Alamo City, at least according to some local industry experts. Some of these individuals elaborated on the trend at the inaugural InterFace San Antonio retail conference, which took place on April 4 at the Hilton Palacio Del Rio hotel. Bethany Babcock, principal and co-owner of full-service firm Foresite Commercial Real Estate, was the first industry expert who addressed the market’s evolution in the post-COVID era. “We noticed at the last couple trade …

June 13, 2024

Market Reports Retail Texas Texas Market Reports

Challenging Assumptions About the Rio Grande Valley Retail Market

by Taylor Williams May 28, 2024

By Kirk Cypel, chief development officer, CBG Commercial Real Estate Misconceptions about the Rio Grande Valley’s (RGV) retail market abound, particularly among those who are unfamiliar with South Texas. But those who are entrenched in shopping center ownership and development in the area are baffled and frustrated by retailers allowing these misconceptions to deter them from actively exploring the RGV. Questions like whether McAllen is an eight- or 10-hour drive from San Antonio, whether there’s an airport, if it’s safe — these are inquiries that simply make local retail owners and operators shake their heads. The same applies to brokers who inquire about securing endcap, freeway-visible spaces for under $10 per square foot. The Valley Reality The RGV is less than a four-hour drive from San Antonio and is served by three commercial airports. It resembles a metropolitan area akin to California’s Inland Empire, where several interconnected cities form a cohesive economic unit. Yet many are surprised to learn of the RGV’s considerable size, spanning 422,107 square miles — 60 percent larger than the Inland Empire and more comparable to San Diego County in size. The Council for South Texas Economic Progress reports that the population is over 1.4 million, …

May 28, 2024

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Conference Coverage Market Reports Multifamily Texas Texas Market Reports

InterFace Panel: Austin, San Antonio Multifamily Markets Face Looming Supply Glut

by Taylor Williams May 21, 2024

By Taylor Williams The multifamily markets of Austin and San Antonio — two of the fastest-growing cities in the country over the last decade — are on pace to deliver above-average volumes of new apartments in 2024, causing some industry experts to express concerns of potential oversupply. The origins of oversupply are not hard to trace, assuming the average apartment project in those markets takes about four years to complete from the time the site is identified and the entitlement and permitting processes begin to when the property is stabilized. Call it five years for some projects that experienced delays due to COVID-19. But in either case, the current wave of new product was largely financed at historically low interest rates at a time when healthy rent growth was easily underwritten. Demand was there, so developers supplied. And for similar reasons, the distress should be short-lived. With interest rates having risen by 400-plus basis points over the last two years and cuts for 2024 looking increasingly less likely, 2025 should be a year of very few new construction starts. Many owners that are delivering product this year will want to allow time for excess supply to be absorbed and see …

May 21, 2024

Market Reports Office Texas Texas Market Reports

How Texas Can Continue to be a Trendsetter in Office Real Estate

by Taylor Williams May 14, 2024

By Brett Merz, senior vice president of asset management, KBS Texas was one of the first states to experience the return of employees to the office post-pandemic. That trend continues today. Even as work-from-home and hybrid work become further entrenched in some parts of the country, Texas still leads the nation in terms of employees coming into the office. According to Kastle’s Workplace Barometer, office properties in Dallas, Houston and Austin have occupancy rates during peak times that are 10 percent higher than the national average. Kastle’s data cuts across all building classes, but in our experience, mid-week occupancy at our Class A office properties in Texas is even stronger. Kastle’s data and our experience contrast with the negativity surrounding the office market and point to the potential for greater opportunity throughout 2024 and beyond. According to JLL’s local market office reports for major Texas cities, vacancy rate increases are slowing down. With new construction in Dallas and Austin trending down, as well as zero new construction in San Antonio and Houston, occupancy rates may begin to grow through the rest of the year. Additionally, rents for Class A buildings are either stable or have seen slight increases over the …

May 14, 2024

Development Industrial Market Reports Texas Texas Market Reports

Combination of New, Old Factors Reinforce Appreciation of Industrial Growth Drivers in Texas

by Taylor Williams April 24, 2024

The more things change, the more they stay the same. More than 150 years after the old French proverb was coined, industrial real estate professionals in Texas who have a penchant for philosophy may well be seeing its application play out in real time. While the industrial market has cooled from 2021 and early 2022, when insatiable demand drove record rent growth, there are still enough positive fundamentals within the space to counteract the likes of inflation, interest rate hikes and geopolitical uncertainty during an election year. Against that backdrop, owners and brokers are frequently reminded of how fortunate they are to be doing business in the Lone Star State. Muchos Gracias Job and population growth are the Letterman guests who need no introduction, as they have always driven expansion and value creation in Texas across all sects of commercial real estate. But as powerful as those drivers are, they’ve been there all along. In recent years, as disruption in debt markets has slowed industrial supply growth and inflation has put pressure on tenants’ costs of occupancy, other macro-level forces have also emerged to buoy the market. Specifically, the impacts of a growing concentration of manufacturing operations in Mexico have …

April 24, 2024

Market Reports Texas Texas Market Reports

Houston Owners, Brokers Dish on Demographic, Economic Drivers

by Taylor Williams April 17, 2024

Historically, the fortunes of many commercial real estate endeavors in Houston have been tied to the energy sector. But as developers and leasing agents across all major property types know, the market now boasts a much more diverse set of growth drivers, including regional distribution, healthcare, aerospace/defense and financial services. Each of these industries fuels growth in development and absorption of commercial space, not to mention housing. Yet even to the layman, these industries are as different as the commercial structures that house their operations. And taken collectively, the performances of Houston’s commercial properties do not always paint a wholistic picture of the larger economy. That holds especially true in times of larger macroeconomic disruption like the present. Texas Real Estate Business recently reached out to developers/owners, as well as leasing agents/managers who are deeply immersed in the Houston multifamily, industrial, retail, office and mixed-use sectors. By posing a quintet of questions that are — almost — equally applicable to each of these asset classes, we uncover insights on how the five major food groups are performing on a relative basis. Participating in the Q&A are Matt Bronstein, vice president at BHW Capital (multifamily); Robert Clay, president and co-founder of …

April 17, 2024

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