Houston's Boom Begins to Fizzle
The good news: Although our growth is slowing across metrics (population, jobs, absorption), we’ll still stay above our own long-term averages and should still outpace the rest of the country for a few more years, according to Delta Associates EVP Sandy Paul who spoke at Transwestern’s annual Trendlines Houston event last week. The WTI hit $75 a barrel last week, the lowest it’s been since 2011. But that will stabilize here and increase 4% annually for the next five years, he says. Job growth will slow to 92,000 annually from 2014 to 2016, but that’s still double our 20-year average and solidly above our last peak. (We’ve led the nation the past 12 months, with 4.3% job growth.)
That same trend is playing out across our real estate market. Sandy (here, showing his love for the Giants even when they’ve just given up five interceptions) projects the office sector will have demand for 14M SF over the next two years, while delivering nearly 20M SF. That may drive vacancy to 11.5% in late 2016 (up from 9.9% right now), but that’s still enough to raise rents 2% to 4% a year across all buildings and submarkets. Similarly, Sandy foresees 6.5M SF of industrial demand over the next year, with 8.6M SF slated to deliver. Result: a vacancy bump to 5% late next year, with continued rent growth of 1% to 3%.
Sandy shared the stage with Ben Stein. Ben called Houston the most optimistic city he knows (and said this is the best time to be here), and assured the crowd he’d live here if he didn’t hate humidity.
Many Transwestern pros were sporting their Movember best, including president of the Americas Chip Clarke and president of the Southwest Kevin Roberts. Nearly 20 gents from the office (including the entire, usually clean-shaven, tenant rep team) are participating to raise money for testicular cancer awareness. They've got about $2,100 raised thus far. (Kevin may not make it all the way through Movember--his wife hates the beard and wants him to shave it before Thanksgiving.)