HOUSTON
COMMERCIAL BUZZ
RAY HANKAMER Hankamer & Assoc, Broker, Houston Contributing Writer
2014 CCIM’s Forecast Competition
The following consists of a portion of each panelists’ remarks. For Ray’s full recap, go to www.rednews.com/march-buzz. Keynote Speaker: Mark Dotzour, PhD.: • 2014 will see a continuation of growth but at more moderate rate, mainly because oil & gas growth is slowing • Shortage of residential lots could dampen the recovery since so much consumer spending comes with new home development • Few lots mean expensive lots, mean expensive homes, mean more people stay in apartments • “We need serious immigration in this country” because there are labor shortages appearing in construction and other industries • 55% of economy is based on consumer spending, but most wealth concentration is with people who buy Mercedes, and not Walmart and Target shoppers, whose store sales are flat or eroding Land-Moderator Frank Fitzgerald, Sr. VP, NewQuest Properties; Keith Edwards, Sr. VP, Caldwell Companies; David Marshall, Principal, ARA Land • Land prices on developable residential subdivision tracts are high and going higher, and it takes about 3 years to bring lots to the market with permits, drainage, MUD creation required • According to Houston Association of Realtors there is only a three months’ supply of resale homes on the markets, a very low supply-this drives up prices • Infill land prices will remain high and finding sites as large as 2-5 acres remains very difficult • There are 12 high rise apartments under construction in Houston now • Office development, multi-family, and industrial growth may level out in 2014 due to expensive or shrinking availability of good sites Multi-Family-Moderator Alan Patton, PresidentThe Morgan Group; Ryan Terrell, Sr. DirectorGreystar; Kenneth Valach, CEO, Trammell Crow • We will see some softening in some pockets around the Houston Metro area but it will be
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temporary-overall MF development in 2014 could surpass 2013 • Building is all at upper end of market, which will get overbuilt, and there will be softening in Katy, Greenway Plaza, and Galleria for the time being • Medical center area and The Woodlands remain strong-we may see low rise garden apartments aimed at a lower price point going up in the suburbs • 30%-40% have dogs (!) and landlords are accommodating them-75% of new apartments are one bedroom and they are trending smaller and smaller but with more common area amenities • Houston is on the radar for international investors, such as from Lebanon, Israel, Kuwait, Germany, and Japan-this investor interest has intensified in last 18 months • High equity requirements for homebuyers is good for MF landlords Industrial-Moderator Bill Byrd, Principal, Colliers International; Justin Bennett, Regional VP, DCT Industrial; Rusty Tamlyn, Sr. Managing Director, HFF • All industrial investors nationwide are “trying to get to Houston or are already here”-there is a huge demand for projects ten years old and newer • Demand for warehouses has changed from oil & gas and manufacturing to consumer logistics driven development: distribution of food, mattresses, and other consumer items; amazon is coming to Houston • This new demand requires higher “clear heights” of up to 36 feet, which is new for Houston, as sophisticated fork lifts and racking systems are being developed • Port of Houston submarket is seeing increase in production of plastic products and this calls for special warehouses and good rail infrastructure
Retail-Moderator Abe Pacetti, VP, Regency Centers; Lance Gilliam, Partner, Waterman, Steele; Micha van Marcke, Sr. VP, Transwestern • Amazon is going to double its warehouse /distribution space in Houston; in other cities they are leveraging their platform to deliver fresh food and other products • Ecommerce is now responsible for 11% of all retail sales, with a 15% annual compounded growth-the brick and mortar merchant who knows how to use online selling in conjunction with physical stores will succeed • Retailers who are “commodity retailers” who can’t differentiate themselves from their competitors – like JC Penney- will probably not succeed • Rent rolls and tenant mix are changing and in sort of a turmoil, and landlords should pay careful attention to balancing the mix Office-Moderator Dan Miller, Sr. Managing Director, HFF; Bob Parsley, Co-Chairman and Principal, Colliers International; Jon Silberman, Principal/Partner, NAI Houston • 2013 was a great year with pent-up demand, mainly from energy and energy-related companies-2014 should be more “normal” • Tenant floor plans are evolving, as successive generations prefer smaller square footage per employee: Baby boomers: 350 SF; Generation X: 250 SF; Millenials: 150 SF…resulting in revised floor layouts and space utilization • We now have under construction about 6 million SF in a market that has 285 million SF in place, so this is not a surge of overbuilding • Overbuilding is less likely since “every player knows what every other player is doing” • Majority of office growth has been due to oil and gas companies and service companies; but service companies are “people” and they can quickly be laid off if revenues sag