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H O U S TO N Commercial Buzz BoyarMiller Law Firm Annual Houston Commercial Real Estate Breakfast Forum Panelists discuss homebuilding, office and industrial development in Houston
RAY HANKAMER Hankamer & Assoc, Broker, Houston Contributing Writer
Will Holder
Will Holder, President Trendmaker Homes • The pendulum swings fastest in the middle, and we are in the middle • Home building in Master Planned Communities accounts for about 25% of homebuilding in Greater Houston, and is growing, although most existing communities are almost sold out of lots • New developers are coming on the scene, many north of I-10 and west of BW-8, driven by Grand Parkway construction, Energy Corridor growth, and ExxonMobil campus • We have a super low inventory of new home supply, and builders are bidding for lots—absorption of lots exceeds supply • More and more builders are developing their own lots • There is a talent shortage in the homebuilding industry, from executives in the home office down to the carpenter and mason on the job • Homebuilders are densifying Houston at a steady pace, converting one single family lot, for example, to four dwellings • Trend now is toward two ground floor living suites per home, counting on aging relatives living with their children • The two demographic bubbles are Baby Boomers and Millennial, and homebuilders are building to these bubbles • The perception of the quality level of the school district drives home buyers • Rental rates now exceed costs of home ownership, which has consequences for multi-family developers and homebuilders • The quality, value, and finish the Houston homebuyer gets is the best in the nation
Jay Sears, Managing Partner NewQuest Properties – Retail • 2008-2011 were tough years in this segment, and those who fared best were grocery-anchored centers • Houston job growth is twice as strong as in the rest of US…homes follow jobs, and retail follows homes • Walmart has 100 deals in the Texas pipeline, and Target has one • Online shopping will account for 6% of retail sales in
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Jay Sears
Jonathan Brisden
2013 as opposed to 2% in 2004-however, this is not a threat and online actually helps bring shoppers into the bricks and mortar stores-online is a significant issue but not a “deadly” one • Jeff Bezos said on 60 Minutes recently that 18 years ago when he started Amazon he personally drove orders to the post office • NewQuest is focusing on creating an administrative team which mirrors the marketplace from an ethnic point of view—they want to have the right feel for what all shoppers want, whether Asian, AfricanAmerican, Hispanic, etc.—“We are using Los Angeles as an example of how to market to an ethnically diverse population, and Houston has a similar diversity of population.” • Not all bad news in the “Big Box” department, since Best Buy has turned around and their stock is up to $44 from $11 due to increasing sales—J.C. Penny, a 100 year old brand, may be in its final death throes • Kroger is the largest US grocer in the US and the largest florist in the world--Kroger and WalMart and H.E.B. each have about ¼ of the Houston grocery market • Whole Foods is now moving out from the inner city to the far suburbs • The Grand Parkway is a game changer, and has stimulated growth in all segments, including retail • River Oaks District mixed-use development just east of the Galleria is pulling high-end retailers out of the Galleria, retailers who want to be in a more exclusive environment—Galleria has “too much” traffic for them • Some trophy retail centers in Houston are selling for cap rates in the 5s, 6s, and 7s and “there are 20 buyers competing for each one” • Huge industrial investments have been announced for the East Side and this is where significant new retail development will be going
Jonathan Brinsden, CEO Midway Companies-Office and Mixed-Use • Office development is expanding due strongly to big oil—Woodlands, Energy Corridor/Katy,Downtown, Grand Parkway NW
Welcome Wilson, Jr.
whole can be greater than the sum of the parts: i.e. each component can charge higher rents, thanks to the amenities provided by the other nearby components • Mixed-use developments which have failed have done so because they were driven by developers too rooted in one single discipline to be able to balance all the different components in a synergistic way • Current Midway projects include a mixed-use development on Kirby and re-development of the former Pavilion in the CBD
Welcome Wilson, Jr., President & CEO GSL Welcome Group • We have 521 million existing industrial square feet with only 5 million under development; hence demand exceeds supply, and there is only a 5.3% vacancy rate, and it has been stable for at least two years • Industrial demand is driven by companies relocating here and by expansion of local companies • Igloo and Goya Foods are the two largest projects currently under development with over 400,000 SF each—Igloo says it is now just as economical to manufacture here as to manufacture in China and ship trans-Pacific • The Grand Parkway is a “game changer” and will open large new territory for industrial development • Houston is a full-fledged “Gateway City” now in the eyes of the national investor/lender • ExxonMobil and Qatar Petroleum have just signed a $10 billion deal for a project on the Ship Channel • The trend will be toward more “campuses” for industrial firms – think Google, Microsoft, ExxonMobil—think of an industrial “campus” as a mixed-use development where an employee can have all of his needs met in one accessible location • Panama canal expansion will have a big positive influence on industrial development in Houston: terminals, pipelines, rail, storage, distribution
• There is the risk that outside developer money wanting to come to Houston will result in overbuilding [sound familiar?]
• Houston industrial space provides support to the fracking boom all over the world, not just in Texas fields
• Well-executed mixed-use developments can be extremely profitable if carefully put together, and the
• Industrial outlook overall is very promising in Houston for years to come