One Word Defines The State Of Houston's Market: Despite
Despite. Despite oil prices, despite the glut in sublease space, despite changes in financial markets—Houston remains strong. To hear more about why Houston's struggle is greatly exaggerated, make sure to get a ticket to Bisnow's State Of The Market event on June 16th.
Despite is a word you can't stop hearing around Houston. In recent months, the city on track to be the nation's third largest has proved its resiliency.
Avison Young principal Rand Stephens has been living in Houston since the early '80s and he says this downturn is the best he's ever lived through. In fact, 2015 was the best year Avison Young ever had, and the first two quarters of 2016 have surpassed last year's numbers. He's not without concerns, though.
Houston is in the mud, no doubt, but we're slogging through it. Rand points to Houston's strong fundamentals as a major factor in the area's resiliency. Changes in financial markets and leverage have bolstered Houston against the worst.
Rand says the office market is hurting from the glut of subleases, but even that is overblown. Almost half of sublease space is still occupied. Rand pointed out that sublease space isn't an economic loss for the city. Tenants are still paying rent. So far, cause for concern has been limited.
As co-president and principal of one of Houston's largest construction firms, Randy O'Donnell sees Houston development first hand. He's the first to admit that O'Donnell/Snider's corporate interior division has slowed down quite a bit, but other areas have picked up.
Randy says medical and retail are going really well. The hospital systems have money and plans to continue work in areas surrounding Houston. Retail in Houston is shockingly hot. Randy's firm has multiple projects in nearly every major Houston submarket. Although he, too, is not without concern. Randy is worried about job prospects in Houston, but so far, those concerns have yet to materialize.
Ilene Duwaji (pictured) offers another unique perspective of Houston as an officer at Stewart Title. She's seeing a lot of selling, particularly industrial, land and Class-B and -C multifamily properties. The multifamily deals are not in the urban core, they're in Bellaire, Sharpstown, places that offer workforce housing.
She admits that big deals are rare,and the ones that are there are taking a lot longer to close due to financing. She's still seeing plenty of transactions, though. Because Houston is such a submarket-driven city, ripples in one area are limited in others. She points to the Galleria, an area that is seemingly bulletproof despite its high cost and mobility issues.
Another area that has remained strong is The Woodlands. While growth has slowed, there is still plenty to go around. The Howard Hughes Corporation EVP Paul Layne (pictured) says there's been some surprising improvements in the market in the last 30 days, with groups that are breaking off of oil and gas ventures creating their own new companies.
These companies want to be in The Woodlands; the area is benefiting from a flight to quality. The walkability, work/life balance and luxury are drawing more residents. That's spurring double-digit leasing every week in several multifamily complexes in The Woodlands. Even though it's a challenging economy, occupancy is trending up.
To hear more, be sure to grab your ticket to Bisnow's State Of The Market event June 16.