Commercial property values in Houston should trend upward in 2020, as the region’s positive job growth will increase demand for development opportunities, according to Houston-based valuation firm Deal Sikes.
“Houston’s commercial real estate values will be on a solid upswing in 2019,” Deal Sikes principal Matthew Deal said. “With Houston expected to gain population significantly in the next decade, the long-term forecast must include rising property prices that will be very impressive over the long haul.”
The firm said rising land prices have pushed industrial development farther away from the center of the city, and outer suburban land prices have increased accordingly. But that hasn't stopped development: More than 15M SF of warehouse and industrial space is under construction in the greater Houston area, the firm said.
Meanwhile, property values in the urban core remain strong, as developers and builders locate buildings for redevelopment, or seek sites that are appropriate for new construction.
“Multifamily construction is strong in Houston and researchers report more than 25,000 units are now under construction, although the pace is expected to be slightly more moderate in 2020 as the new inventory is absorbed,” principal Mark Sikes said.
“Investor demand is good and multifamily valuations have not yet peaked in most submarkets.”
Though newer office buildings and Class-A towers under construction are leasing briskly, Houston’s office market is its most sluggish sector, according to the firm. The energy industry — a juggernaut in Houston’s leasing arena — is in the midst of a downturn, which is hurting growth.
The healthcare sector is faring better. The firm identified the Texas Medical Center as a source of growth for Houston, pointing to the expansion of several hospitals and research facilities.
“Although there are a few exceptions, the real estate market in Houston is headed for another good year,” Sikes said. “The region’s economy is healthy and although the energy industry is in a lackluster period, the overall economic outlook is outstanding.”
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