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Real Estate Bisnow
January 10, 2013
Industrial Booming!

Mac Haik Enterprises is a sponsor of our Future of the Energy Corridor on Feb. 1. Mac Haik’s latest Class-A office building, Energy Tower III, is under construction. Learn more here and register for our event today

Investor interest in Houston’s industrial sector is at an all-time high. And it’s not surprising: As Duke Realty SVP David Hudson said at Bisnow’s Industrial Summit yesterday, you have to look really hard to find anything negative in the market.
industrial panel
We snapped our superstar panel: Avison Young principal Caleb Lawson, National Property Holdings CEO Michael Plank, Arch-Con VP Jason Cooper, Haynes and Boone partner Bruce Merwin, David, and Seeberger Architecture prez Perry Seeberger. David says our stats are the envy of the nation; North Houston has 5% overall industrial vacancy, and Northwest is a stunning 3.8%. Even flex space (a hard property type to lease) has 10% vacancy across the city. Rents are increasing; David recently saw $0.40 net for a distribution lease, a new benchmark high for Houston, and he thinks it’ll go higher.
Bisnow (Writer2) Jumbo
Jason Cooper
Jason says construction costs increased $3/SF in the last six months to about $28/SF. They’re still rising dramatically, but probably won’t take the overwhelming leap that many predict (he’s heard as high as 25%). Labor is the biggest issue; most quality contractors are too busy, and some subs are hopping around projects. Bruce recommends putting incentives into your contract to make subs focus on your deal, and Jason said he did this recently to meet an aggressive timeline.
Geri Pacheco, Dave Lawrence, Jason Cooper
Jason and colleague Geri Pacheco sandwiched DCT Industrial’s Dave Lawrence before the panel started. Arch-Con starts work Monday on DCT’s latest project, a 267k SF cross dock distribution center near the intersection of Airtex and I-45. There are no leases signed for the building, which delivers in August. Other factors contributing to the rise in construction costs include major competition driving up land prices. And don’t be excited if you get a great deal—Jason says most sites left in the uber desirable North and Northwest submarkets have hair on them, which can cost big to resolve. He recommends doing your due diligence but building now before prices get any higher.
Perry Seeberger
Perry says he’s designed a number of facilities as spec projects only to see them lease up shortly after groundbreaking. (Something about a bulldozer makes a person want to take action.) Sometimes those rapidly turn into BTS deals. Our panel talked LEED: Perry has a number of those projects under way but says the process typically adds 2% to 3% to your costs. Plus, certified buildings aren’t leasing more quickly or getting higher rents, so most landlords aren’t bothering.
Bruce Merwin
Bruce says it might be a good idea to start building green, though. He predicts in the next decade or so, the US will adopt a code requiring some level of sustainability in every building. Plus, the occasional tenant requires a LEED building (usually for branding).
Jason Atkinson
The biggest debate on our panel wasn’t about fundamentals or forecasts, but football. (Well, this is Texas.) Our sponsor Bury + Partners SVP Jason Atkinson played football at A&M (in fact, he played in the 1993 Cotton Bowl… with less enjoyable results), and Mike is an ’83 alum. But David, a staunch Red Raider, said he’s sick of the words “Johnny Football.”

Bon Voyage
Our Houston reporter and her hubby are finally going on their honeymoon next week, a cruise to Mexico. Bisnow will continue to run in her absence, but she won’t be able to respond to your story suggestions and hilarious commentary. She’ll make up for it by sharing pictures of Cozumel and maybe a Mayan ruin or two.

Upcoming Bisnow Events!
Friday, Feb. 1, 7:30am-10:30am. Bisnow's Houston Future of the Energy Corridor. Hear experts talk about the area with over 20M SF of office space and another 13M SF projected by 2030. Register today.
We'll do our best to come back tanned and relaxed. Until then, email your news to Catie Dixon, catie@bisnow.com.
McCord (GenerationPk)
Furniture Basix (Strategy
Moody Rambin (9801West)
NewAcre (300k) HOU
Reznick (CohnDebut) HOU
Arent Fox (REI) HOU
Bisnow (PropManage)
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