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14 Predictions for 2014: Part I

Houston

Welcome to the first full week of 2014! By now you, should’ve set off all of your fireworks, drank all of your champagne, and are now ready to face the year. To help, we asked 14 experts for their Houston commercial real estate predictions. 

1) Office development will slow

14 Predictions for 2014: Part I

Goodbye, construction boom. Studley EVP and co-branch manager Derrell Curry (try and find him among the entire Houston team above) forecasts development will slow in 2014. He says we’ve all seen what overbuilding can look like, and the market will pause to inhale this year. (Even developers need to smell the roses once and awhile... before they dig them up.) That’ll be caused in part by a number of the larger leases that have expansion space built into them. Derrell also believes tenants will look toward second-gen space this year to keep costs in check and enhance their profits.

2) ... or will there be more?

14 Predictions for 2014: Part I

On the other hand, Transwestern EVP Michelle Wogan (here with Evelyn Ward and Mark Fowler) thinks office development will continue if energy prices stay consistent. (So tell Motel 6 to continue to leave the light on for ya.) She says companies have shown they like occupying new construction because they want more efficient design/floorplates and quality work environments. Last year, there were 9M SF of commitments from corporations either building their own or leasing newly built facilities. But not everyone will be able to afford those rents, so she foresees an uptick in leasing activity in second-tier, Class-A product. Recently renovated older properties are usually $10/SF cheaper.

3) One CBD office tower will kick off

14 Predictions for 2014: Part I

No more, no less. Studley EVP and co-branch manager Steve Biegel predicts Hines’ 609 Main at Texas (rendered here, slated to break ground in March) will be the only tower to launch Downtown in 2014. He doesn’t see enough demand to support the other announced developments. There are very few large Downtown tenants with lease expirations between now and 2020, and he can count on one hand the number of large tenants that have relocated from the 'burbs in the past 30 years. (Note: He doesn’t see this as a reflection of weakness in the CBD, just a function of current lease conditions.)

4) Office tenants will go online

14 Predictions for 2014: Part I

Boxer regional leasing manager Pamela Sprouse tells us the experience for commercial real estate pros will change dramatically this year. Mobile search, variable pricing to meet demand, listing syndication, and analytics-based leasing will be common buzzwords (heads up, Oxford Dictionary). Pamela says new innovators to the market like The Square Foot, View the Space, 42Floors, Compstack, and O’Connor Data will challenge established players and alter the way tenants get info and how brokers operate.

5) Multifamily will lease up

14 Predictions for 2014: Part I

CBRE SVP Ryan Epstein says multifamily will rock on in 2014 as people continue to move to Houston for employment opportunities. One of the big stories will be the stabilization of apartment developments that were launched over the last two years. But the year will also have a question: Ryan says everyone is interested to see if Millennials will continue to choose urban living or if they’ll start buying houses in the suburbs again. (If you brew coffee, they will come.) How that pans out this year will impact multifamily development going forward.

6) More prefab

14 Predictions for 2014: Part I

Skanska project exec Marty Corrado tells us development across sectors will rely more on prefabrication of building components that are repetitive (think bathroom pods in a hospital or apartment tower). Some Houston projects—including the 158k SF Pearland Medical Center under construction—are already incorporating it, and Marty thinks the trend will accelerate in 2014 because it promotes collaboration among the design team, speeds up construction (prefab parts are built at the same time as foundation work in a warehouse not subjected to weather delays), and improves safety. Pictured, prefab bathroom pods for Alliance Medical Center in Dallas, which Skanska is building.

7) Land values will remain strong

14 Predictions for 2014: Part I

Our hot land market won’t slow one bit, according to ARA’s land team: David Marshall, Tim Dosch, Tom Dosch, and Clark Dalton. Limited infill supply will really push pricing, and we’ll see the whole Grand Parkway area open up to transactions as it’s completed. Other hot spots: the Med Center, Energy Corridor, Westchase, The Woodlands, and the Bay Area.

We'll have seven more predictions for you on Wednesday! (Those of you with better math skills than us probably figured that out. We all have our talents.)