Contact Us

Five Ways Houston is Rockin'

Houston Industrial

Let’s take some time to celebrate this morning—in preparation of Bisnow’s State of the Market June 12 (register here), we gathered up five of Houston’s hottest draws. (If you’re more of a glass half empty person, never fear—next week we’ll share some of our biggest challenges.)

1. Room to Grow


We’re just so darn cheap, says Stream managing partner Adam Jackson (right, with colleague Jeremy Lumbreras). Houston has had 59% office rent growth in the last 12 years but we’re still a 32% discount to the other top five AFIRE cities (New York, Los Angeles, DC, and San Francisco). Industrial is even more dramatic, with 22% rent growth still pegging us 82% cheaper than the other markets.

2. Poised to Take Mexico


PMRG SVP/director of research Ariel Guerrero says Houston-area energy companies stand to gain from the opening up of Mexico’s energy sector. State-owned E&P company Pemex will soon relinquish its monopoly position. Private bidding on Mexican oil and gas leases is expected to begin by mid-2015, if not sooner. Besides the opportunity for Houston-based O&G firms to increase revenues, foreign investment in Mexico will boost our exports. (It will also boost our ability to get to Spring Break.) According to a study by the GHP and HSBC Bank USA, the combined impact of Mexico's oil production to Houston and the massive investment into Gulf Coast plants could increase exports 15% and add 55,000 jobs to the regional economy. Ariel says this will further connect us to the rest of the world.

3. Diversity


Economist Dr. Ray Perryman said “Houston is a three-legged economy, and all three legs are doing well.” (Above, the self-proclaimed BBQ enthusiast spoke for Stream last night.) He says Texas’ steadiness through the recession was partially based on oil prices, saying that $130 oil and $12 gas can cover many sins (like a good rouge). Our port has been extending its lead as the No. 1 exporter, a good spot to be in as emerging markets demand more products. Healthcare’s another great industry to excel in—Ray says for a while in the recession, it was the only sector gaining jobs. All in all, he doesn’t see anything to knock Houston of its pedestal as the US’s strongest growth city.

4.  Mo' People and Mo' Jobs


It's undeniable that much of our success is linked to our job and population growth, and Colvill Office Properties prez Chip Colvill says we're actually fueling the national economy. Houston has added 80,000 net new jobs from March '13 to March '14, a 3% increase. And that's broad-based, with all employment sectors experiencing YOY increases. We weren't expecting this—leisure and hospitality led the way, with 10,000 jobs created in that time frame (a 4% jump). Meanwhile, our population growth is accelerating steadily—we added 1.8% in 2011, 2% in 2012, and 2.25% in 2013. (We're going to have some busy kindergarten teachers in a few years.) Chip's always got his mind on office and tells us all this will fuel increased rent growth in existing and new product.

5.  BTS Mania


Stream VP Stewart Lyman (left, with Liberty Property Trust’s Jay Kraft) says we’ve got 22M SF of office under construction in our major submarkets, and 40% is BTS and owner-occupied. In our last development cycle (’05 to ’11), only 13% was BTS or owner-occupied. That shows that our demand is outpacing supply, and (combined with pre-leasing) means we’ve really only got 6M SF of development longing for a tenant.