Houston's Largest Property Managers On The State Of Houston Post-Harvey
Hurricane Harvey has wreaked havoc across the Houston metro. As the storm finally clears and flood waters begin to recede, area property managers are starting to assess the damage. Initial estimates indicate between 30,000 and 40,000 homes have been destroyed in the area, but most of Houston's commercial properties have gotten off easy.
Harvey has caused immense damage. Reservoirs filled to capacity, hospitals were evacuated, airports shut down and oil and gas facilities shuttered. Maps of rescue requests, road closures and water channel overflows show the most affected areas. For the most part, Houston's inner core was spared from the worst. Outlying areas like Cypress, Katy, Bellaire, East Houston, Kingwood, Brazoria County and others bore the brunt of the storm as water poured out of nearby bayous, waterways and reservoirs.
The cost of cleanup and repair will be staggering. Reuters estimates $23B worth of property across 285 square miles in Galveston and Harris counties have been affected. Moody's estimates total losses between $45B and $65B. CoStar found 27% of Houston commercial real estate's gross leasable area may be flooded, representing $55B in property value. In addition to real estate losses, analysis from Cox Automotive found over half a million cars may have been destroyed.
Though initial estimates are rolling in, property managers and adjusters urge caution. It will take months to fully assess the impact and cost. But here is what the largest submarkets around town have already found.
Houston's Energy Corridor was particularly hard hit with flooding due to its proximity to both the Addicks and Barker reservoirs. Shawn Isakson, a BP employee, kayaked the oil and gas giant's Westlake campus. As of Thursday morning, many streets in the area remain impassable. The flooding is yet another issue for an already struggling commercial submarket, which has seen record vacancy and sublease space amid Houston's oil and gas downturn.
An initial tally by the Downtown District found 27 affected properties, mostly consisting of water in the first level or basement. The majority of Downtown's issues revolve around the North and Northwest sides, near the Buffalo Bayou. Houston's Theater and Historic districts were the hardest hit in the area. Though a few traffic lights have been knocked out of operation, all streets Downtown are open.
We have not gotten analysis of damage yet, but 3.5M SF of the area's leasable space falls within the 100-year flood plain, leading to huge complications for the area's residents and assets. Greenspoint is a regular flood victim, but the area around Bush Intercontinental Airport was on the lower end of Harvey's rainfall spectrum — only 31.26 inches compared to 53 inches in Missouri City or 44.05 inches in Friendswood, according to the National Centers for Environmental Prediction.
Hundreds of property managers are assessing Houston's 350,000 rental units, 332M SF of office, 285M SF of retail and 325M SF of industrial space. We tracked down Houston's largest commercial managers for an initial assessment. Despite a few rough patches, Houston's commercial real estate sector looks to have dodged a bullet.
As of Monday, 99% of Transwestern's 35M SF portfolio was fairly unaffected, according to Transwestern Executive Managing Director of Property Management Rob Bridges. "We're getting lucky in a lot of instances," Bridges said.
Deeper into the week, properties along Buffalo Bayou, Cypress Creek, below the Addicks and Barker reservoirs, and near Greens Bayou flooded. The water is very slow to recede in many areas, which will complicate building recovery. While this was an event of epic proportion, the advanced preparation and planning by the Transwestern team has resulted in losses that were less severe and positioned assets well to quickly come back online after the water receded, Transwestern Regional President Kevin Roberts said.
Preliminary reports indicate only minor damage to the company's apartment communities in Houston and Corpus Christi, Texas, from Hurricane Harvey, and all communities are currently operational, according to a press release.
JLL manages approximately 10 office buildings and close to 40 industrial buildings in the Houston area. JLL had one case of some flooding in the basement of a building but otherwise experienced only slight impacts, such as minor leaks and temporary power outages, in just a few of its buildings. In some cases JLL is still assessing the full impact of Harvey, but overall, the buildings in its portfolio are in good shape, JLL Houston Managing Director Peyton Collins said.
Parkway's five Class-A assets comprising 19 buildings and totaling approximately 8.7M SF in the Greenway, Galleria and Westchase submarkets of Houston incurred only minimal damage as a result of Hurricane Harvey. The properties maintained power throughout the storm and remained accessible to our customers as needed at all times. Parkway expects that all damage will be insurable under its existing insurance policies. All of Parkway's buildings are open for business and operational as of Thursday, according to a press release.
Weitzman is working hard to get back on track after several of its employees were cut off from the office. Given the circumstances, Weitzman is monitoring its properties as well as can be, Weitzman Senior Vice President Steve Chandler said. Weitzman has been in touch with its tenants, and most of them are closed. Kroger, which anchors several of its projects, kept as many of its stores as possible open during the storm.
Properties managed and leased by PMRG have weathered Hurricane Harvey very well and with minimal damage, according to PMRG Senior Vice President of Houston Property Management Brett Williams. Although PMRG has several ongoing issues due to flooding, overall the vast majority of its buildings saw little to no damage.
After initial inspections, Weingarten sustained significant flood water in only two of the 45 centers in Hurricane Harvey's path, according to a press release. The company's flooded shopping centers represent only 195K SF out of the 27.8M SF in the total portfolio, less than three quarters of one percent of the company's properties. The two properties affected were both in Houston.
Boxer Property is open for business at 95% of its 58 Houston properties, according to a press release.
Franklin Street Properties Corp.
FSP’s properties in Houston were minimally impacted by Hurricane Harvey, with no flood or wind damage, and are fully operational and open for business, according to a press release.
The buildings in NAI Partners' property management portfolio incurred little damage during the recent storms and ensuing flooding, NAI Partners Landlord Services Managing Director James Tainter said. On top of working with employees and tenants to ensure a smooth transition back to normal operations, the company is working with one of its healthcare clients by offering vacant space for its overflow nursing teams working round the clock.
The Howard Hughes Corp.
With over 4M SF of office, retail, hospitality, multifamily and self-storage commercial properties in the Houston area, The Howard Hughes Corp. reported Thursday that all assets, including The Woodlands, Bridgeland and the grounds of the newly announced community of The Woodlands Hills, are fully operational and open with only minor damage, according to a press release.
CBRE is Houston's largest property manager, and assessing a portfolio of 1,031 Houston-area properties is a challenge. CBRE was unable to provide a full property assessment due to lack of access, CBRE Senior Managing Director Matt Nicholson said.
CORRECTION, Aug. 31, 3:55 P.M. ET: Corrected the spelling of Jim Tainter.