Dallas Fed: Texas Economy Continues Strong Growth

​​​​​​DALLAS (Federal Reserve Bank of Dallas) –  August 20, 2019 – Texas employment will grow 2.6​ percent this year, according to the Texas Employment Forecast by the Federal Reserve Bank of Dallas.​ Based on the forecast, the state will add 331,100 jobs this year. Employment in December 2019 will reach 12.9 million.

This prediction comes after incorporating June 2019’s annualized employment growth of 3.4 percent and a slight increase in the leading index.

“Despite continued declines in the energy sector, the Texas economy continues to grow at a strong pace,”​ said Keith R. Phillips, Dallas Fed assistant vice president and senior economist. “Growth in the construction, financial services, and leisure and hospitality sectors has been particularly robust, while the manufacturing sector has picked up from modest growth in the first five months of the year.”​

For more Texas employment data, head to the Real Estate Center’s website. ​​​

8 Mixed-Use Projects Coming To Houston

HOUSTON (BISNOW & JLL) – August 12, 2019 -Mixed-use is taking hold in Houston. The success of CityCentre, and more recently Kirby Collection and the River Oaks District, has increased the demand for projects that embrace the live-work-play mantra.  More than 20 mixed-use projects are under construction, planned or recently delivered within the Inner Loop alone, according to JLL. Office is becoming a heavier focus in these projects — this wave of mixed-use includes 1.8M SF of offices within mixed-use proposed in the long term pipeline, 1.1M SF in the short term and 340K SF under construction. There is 5M SF of existing office space in Houston’s mixed-use projects.    Using data provided by JLL, Bisnow has compiled a list of some of the mixed-use projects coming soon to Houston.

1. M-K-T

Residential: None  Retail: 100K SF  Office: 100K SF  Other: None  Status: Under construction The developer of Heights Mercantile is cooking up another industrial flip, this time stretching beyond retail to include a heavy office component. Radom Capital and Triten Real Estate Partners are redeveloping a 12-acre lot near North Shepherd and Sixth Street into a mixed-use project dubbed M-K-T. The project will equally divide the office and retail offerings and include a 2,000-foot urban boardwalk with several acres of park space. The development is slated to be completed in Q1 2020. Michael Hsu Office of Architecture and SWA Group are the designers. Boston-based Long Wharf Capital LLC provided the financing. Method Architecture is also involved.

2. The Ion Innovation Hub

Residential: None  Retail: TBD    Office: 280K SF   Other: TBD  Status: Under construction  Breaking ground in July, The Ion is aiming to be the game-changer the innovation community has been waiting for. The 270K SF facility will feature office space, restaurants, meeting space and entertainment amenities. It will serve as the center point of the Houston Innovation District, a 4-mile stretch from Downtown to the Texas Medical Center. Houston-based Hines is managing the development of The Ion. SHoP Architects, James Carpenter Design Associates, James Corner Field Operations and Gensler will be responsible for the redesign of the building, constructed in 1939. The project is expected to be completed in late 2020.

3. Regent Square

Regent Square  Residential: 600 Units  Retail: 50K SF  Office: None Other: Hotel   Status: Short-term proposed  GID Development Group is constructing Regent Square, a 600-unit multifamily complex on 24 acres near the border of River Oaks and Montrose. Floor plans will range from studios to large two-bedroom units. The project will include 50K SF of street-level retail and an 8-acre site for green space near Buffalo Bayou Park. This is Phase 2 of Regent Square, after the 21-story Sovereign at Regent Square residential project delivered in 2015.

4. The Driscoll at River Oaks

The Driscoll at River Oaks  Residential: 318 Units  Retail: 10K SF  Office: None  Status: Under construction  Weingarten Realty and The Hanover Co. are developing The Driscoll at River Oaks, a 30-story luxury high-rise, according to Weingarten’s website. Situated at West Gray Street, the residential complex features 318 units with views of Downtown Houston’s skyline. Residents are within walking distance of River Oaks Shopping Center, and the complex will tout 10K SF of its own retail space. Ziegler Cooper is the architect. Construction began in June 2018 and delivery of units is expected to start in summer 2020.

5. Buffalo Heights

Buffalo Heights Residential: 230 Units  Retail: TBD   Office: 35K SF  Other: 96K SF (urban H-E-B)   Status: Under construction  Touting an urban H-E-B prototype on the ground level, Buffalo Heights is the future home of residents, shoppers and office workers alike. The seven-story development includes One Buffalo Heights, the 35K SF office portion, and St. Andie, the upscale multifamily component. On-site amenities include workout and yoga rooms, a glass-enclosed conference room, a clubhouse, multiple seating areas and bicycle storage. The Gordy family (BKR Memorial) owns the property, which was designed by Ziegler Cooper Architects. Located at Washington Avenue and South Heights Boulevard, Buffalo Heights is scheduled to deliver this fall.

6. The Interpose

The Interpose  Residential: 168 Units  Retail: 25K SF  Office: None   Status: Short-term proposed  The Interpose is a mixed-use project slated for the Washington Heights District. Developed by Hunington Properties, the micro-unit mid-rise features 168 apartments and 25K SF of street-level retail with outdoor patio seating, according to the developer’s website. On-site amenities will include Uber pick up and drop off stations, valet parking and a retail-only parking garage. The project is at 1111 Shepherd Drive.

7. The Allen

The Allen  Residential: 99 Condos   Retail: TBD   Office: 333K SF  Other: Hotel Status: Short-term proposed  With views of Downtown and Buffalo Bayou Park, The Allen is bringing luxury to the forefront. The $500M mixed-use project will include a high-end hotel by Thompson Hotels, condominiums, retail and office. Houston-based DC Partners and Tianqing Real Estate Development LLC, the U.S. subsidiary of China-based Tianqing Group Real Estate Co. Ltd., are the developers behind the project at 1711 Allen Parkway.

8. Park Place River Oaks

Park Place River Oaks Residential: None   Retail: TBD   Office: 207K SF    Other: 1-acre park, Hotel   Status: Under construction Stonelake Capital Partners is developing Park Place River Oaks, a 15-story Class-A office building at Westheimer Road and Mid Lane. This is the third phase of Park Place | River Oaks, an 11.5-acre mixed-use development in the River Oaks/Highland Village submarket. The floor plates average 26K SF and the design features a landscaped terrace on the ninth floor available to all tenants. Colvill Office Properties is responsible for office leasing. Dallas-based Beck Architecture designed the building while Harvey Builders serves as the general contractor.

Houston Office Market Disappointingly Slow Even In A Strong Economy-58M SF of Vacant Space Citywide

HOUSTON (BISNOW) – August 8, 2019 – Absorption came in strong for the second quarter at 684K SF; however, it was counteracted by the delivery of 754K SF of office space in the Bank of America Tower in Downtown Houston, according to Transwestern.

“The recovery has been a lot slower than we thought it would have been,” Avison Young principal Charlie Neuhaus said. “At the beginning of the year, we were optimistic that we would have positive absorption for the year, but I don’t think we are going to have that this year.”

The Houston office market is a long way from the heyday before oil prices dropped in 2014. There is 58M SF of vacant space citywide and availability is at 25%. “The high availability in the market is not likely to change over the next year,” said Transwestern Executive Vice President Eric Anderson, who will be a panelist at the Houston State of Office event Aug. 28.  Not all things are bad. Most property types, from industrial, retail and multifamily, are on fire with new developments. The local economy is strong with low unemployment and positive job and population growth.  Texas’ unemployment rate dropped to 3.5% in May, the lowest since December 1969, according to the Texas Workforce Commission. Job growth is expected to eventually improve overall absorption, though it is critical to monitor the ongoing discussion of a global recession, Anderson said.

Tenants are the winners of this cycle, and are taking advantage of the soft market. Companies are often taking less space, but have been willing to pay more for the new space, Neuhaus said. They have improved their efficiency from productivity to space requirements. Energy companies, the bread-and-butter of the Houston office market, have mastered profitability with oil prices near $50. However, those companies are not making long-term decisions, Neuhaus said.  “Limited activity from the energy sector has kept Houston’s office absorption low despite generally strong job growth

Houston Multifamily Occupancy & Rents Up In 2Q 2019

HOUSTON – (RECON-Texas A&M) – July 30, 2019 – Local multifamily occupancy (90.2 percent) and rents ($1.17 per square foot) significantly rose over the year in second quarter 2019, improving on the flat rent and occupancy growth in the prior quarter reached 10,094 units, which means Houston has already absorbed more in two quarters than it had all of last year.

Deliveries (3,303 units) are up compared with last year, as is the number of units identified as under construction (22,094 units).

High-wage job growth has remained strong thanks to manufacturing and professional services job.

Houston Economy at a Glance July 2019

From Houston Economy at a Glance (July 2019 Publication of the Greater Houston Partnership)

  • The U.S. Census Bureau posted population estimates for U.S. metros in April. Metro Houston has a population of nearly 7.0 million, a gain of just over 1.0 million since ’10. The Bureau released estimates for cities in May. The city of Houston has a population of 2.3 million, a net gain of 232,000 since ’10.
  • All nine counties in the Houston metro area gained population over the past eight years. Harris County added the most residents, followed by Fort Bend, Montgomery and Brazoria. Fort Bend grew the fastest, followed by Montgomery and Waller Counties. Among all U.S. counties, Fort Bend ranked as the nation’s 10th fastest growing from ’10 to ’18, Montgomery ranked 18th, Waller 41st, Chambers 52nd and Brazoria 83rd.
  • EMPLOYMENT – THE SHORT VIEW
    Metro Houston created 79,800 jobs, a 2.6 percent increase, in the 12 months ending May ’19, according to the Texas Workforce Commission (TWC). Employment now stands at 3,163,600, the highest point on record. At the current pace of growth, the region should top 3.2 million jobs by year’s end.
  • The recovery in the oil and gas industry began in earnest three years ago this summer. Crude prices began improving in March ’16, the rig count in May ’16, and bankruptcies plateaued in the second quarter of the year. But energy employment didn’t see an uptick until January ’17 and continues to struggle. From peak to trough, the sector cut nearly 93,000 jobs. While pipeline and liquid natural gas projects have helped engineering recoup all its losses, upstream and manufacturing have recovered only a fraction of theirs.
  • Foreign Trade
    Houston’s exports have grown from $80.0 billion in ’08 to $120.7 billion in ’18, according to the U.S. International Trade Administration.1 No other metro area has experienced such growth over the period.
  • Foreign Direct Investment
    The Partnership has tracked 659 deals where foreign-owned companies announced plans to establish or expand operations in Houston. The value of the investments was made public for only 315 of these deals, but the cumulative amount disclosed is significant—$33.2 billion. These investments originated from 36 countries and cover 63 industries across 11 broad sectors.

Houston Industrial Construction at All Time High

HOUSTON (Transwestern) – June 10, 2019 – Fueled by the rapidly growing e-commerce sector, increased activity at the Port of Houston, and the city’s continued high population growth, demand for industrial real estate product in Houston has kept vacancy rates low and pushed the construction pipeline to an all-time high of 21.2 million square feet across the metro. While industrial construction activity has been dominated by build-to-suit activity over the past few years, developers are modifying their strategy to get ahead of requirements with a wave of speculative construction. As a result, the current industrial construction pipeline is 74% speculative space, totaling 15.7 million square feet set to deliver over the next 18 months – an increase of 268% year over year.

Downtown Houston Market Report

DOWNTOWN HOUSTON (Central Houston) – May 30, 2019 – Downtown concluded the first quarter of 2019 with sound fundamentals, and a slew
of office leases, renovations, and new construction activity, thanks to improving industry trends.

Rebounding from its plunge at the end of last year, WTI crude increased steadily throughout the first quarter, settling at $61 per barrel at the end of March (a 40 percent increase over a 3-month period). Despite looming uncertainty as geopolitical tensions weigh on global and national demand outlook, the Downtown and Houston economy continue to experience robust labor market and economic growth, albeit lower than initially foretasted. Houston unemployment is at its lowest in two decades (3.7 percent in March 2019), supported by strong manufacturing employment.

Stable oil prices are likely to translate to increased production, but less so to energy sector job growth, due to the growing technological efficiencies in the industry. In the midst of this, the Downtown market is bustling, as developers and landlords continue to implement innovative offerings and experiences for employees, residents and visitors. Cranes continue to dot the Downtown skyline, as a plethora of new and redevelopment projects are underway in all of Downtown’s major sub-markets—office, multifamily, hospitality and retail.

Downtown’s Residential sub-market is thriving and continues to attract investment and a growing number of residents, given its track record as one of the fastest growing residential neighborhoods in the region. As the demand for Downtown units has increased, evidenced by an 86.8 percent occupancy rate this quarter, so has the supply. Hines has begun construction on Houston’s tallest residential tower—The Preston—slated for delivery in 2022. This is again indicative of the DLI initiative’s success in kick starting an organic response to what was evidently a huge demand for Downtown living. The sub-market has grown to close to 6,100 residential units, up from about 2,500 in 2013; Downtown now houses over 9,000 residents.

The Downtown Office market has been extremely active since the year began, with major lease deals, renovations, and new construction activity. Key fundamentals indicate that the Downtown’s office market delivered strong performance in the first quarter and continues to show signs of improvement. Between January and March alone, Downtown recorded close to 774,000-SF in leases,
close to 50 percent (375,581-SF) were renewals, reiterating tenant’s confidence in the sub-market; BG Group Place (811 Main) is 93.6 percent leased; most of the sublease space in One Shell Plaza (910 Louisiana) has been leased; 609 Main at Texas is over 80 percent leased, after securing several leases this quarter. Co-working trends are also contributing to absorption, with co-working and
innovation-related leases accounting for over 100,000-SF of leases in the first quarter alone. Overall vacancy however remains high 20.4 percent in Q1 2019, a slight increase from 19.7 percent in Q4 2018, all of which Class A buildings accounted for. This is underpinned by growing inventory from the two office towers under construction accompanied by footprint shrinkage.

Downtown’s Retail market is constantly evolving including the culinary scene which continues to grab local and national attention. Narrative around this year’s retail buzzword, ‘Food Halls,’ continues to focus on Downtown, as highlighted in CNN’s February publication, ”9 Great Reasons To Visit Houston In 2019.“ Complementing its growing national recognition, Downtown’s newest food hall, Finn Hall, placed 4th in the top ten winners for 2019 USA Today’s “10 Best Readers Choice Travel Awards’ Best New Food Hall”. However, Downtown’s Finn Hall in The Jones on Main, and its soon-to-be counterparts, Bravery Chef Hall in Hines’ Aris residential tower and Under-story at Skanska’s new office tower, Capitol Tower, play a bigger role than meeting the demand for ‘approachable’ culinary offerings; they are also making both the office and residential buildings they are housed in more attractive to tenants, as Downtown emerges as a true live-work-play destination. Downtown had five new retail deliveries in the first quarter; over 28 new retailers are coming soon or planned. (Bisnow, HBJ, Chronicle Bisnow, HBJ, Bisnow, RNR, Culturemap, RNR)

As with retail, Downtown’s Hospitality, cultural and entertainment sectors continue to receive national attention. In its February publication “9 Great Reasons To Visit Houston In 2019,” CNN not only points to Downtown as having most of the top travel attractions in Houston, but recommends Downtown as one of the three main neighborhoods of choice for accommodation, for travelers to have the best access to the city’s highlights. Brookfield’s C. Baldwin, Curio Collection by Hilton, the rebranded 354-room independent hotel (formerly DoubleTree Hotel), is on track for its grand-opening on October 10, and will formally adopt its new name on June 2. The renovated hotel will feature ballrooms named after influential Houston women, and a new signature Italian restaurant Rosalie, by celebrity chef, Chris Constantino. Hilton Americas-Houston Hotel, the city’s largest convention center hotel at 1600 Lamar, will be undergoing an extensive $37 million renovation. Led by Gensler, each of its 1,200+ rooms will receive $31,000 in upgrades, a new color and design scheme, new artwork from 11 local artists and in-suite technology. Construction will start in the second quarter and be completed in phases throughout the year to limit hotel disruption. Downtown’s Hotel Alessandra took the number-two spot on Interior Design magazine’s national best design list for “cool and captivating lobbies.” Part of the Valencia brand, Alessandra “pairs traditional glamour with modern sophistication.” (Culturemap)

Texas Home Sales Continue To Grow

AUSTIN (Texas Realtors) – May 7, 2019 – Texas home sales​ continued to
rise, and median price moderately increased during first quarter 2019, according to the 2019-Q1 Texas Quarterly Housing Report from Texas
Realtors.

​Last quarter, 70,827 homes were sold statewide, a 0.7 percent increase over the year. The median price increased 2.7 percent to $230,000.

Of all the homes sold in the first quarter in 2019, 32 percent were priced from $200,000 to $299,999, the highest share of sales among all
price-class distributions. Homes priced from $100,000 to $199,999
represented the second-highest share of sales with 30.5 percent.

Real Estate Center Chief Economist Dr. Jim Gaines said sales increased by around 1 percent ​​across the state during the first quarter with notable gains in sales volume in March in the major markets.

“The median price also continued to rise but at a substantially slower
rate,” he said. “Furthermore, listings finally showed signs of growth with a corresponding rise in months inventory, but it’s still a tight market
overall.”

Active listings jumped 14 percent from a year ago to 104,620. Texas
homes spent an average of 68 days on the market.

Housing inventory in Texas also increased 0.4 months over the year from first quarter 2018 to 3.6 months of inventory. According to the Real Estate Center, a balanced market has between six​​ and 6.5 months of inventory.​​

Texas Economy Growing But Cooling

COLLEGE STATION – (The Real Estate Center Texas A & M) – April 29, 2019 – The Texas economy continues to grow faster than the U.S., but it has been cooling off the past six months.

According to the Real Estate Center’s latest Monthly Review of the Texas Economy, the state gained 271,000 nonagricultural jobs from March 2018 to March 2019, an annual growth rate of 2.2 percent, higher than the nation’s employment growth rate of 1.7 percent.

The nongovernment sector added 262,300 jobs, an annual growth rate of 2.5 percent, also more than the nation’s employment growth rate of 1.9 percent in the private sector.

Texas’ seasonally adjusted unemployment rate in March was 3.8 percent, lower than the 4 percent rate a year ago. The nation’s rate decreased from 4 to 3.8 percent.

All Texas industries except the information industry had more jobs in March 2019 than in March 2018. The mining and logging industry ranked first in job creation followed by construction; other services; manufacturing; leisure and hospitality; transportation, warehousing, and utilities; and education and health services.

All Texas metro areas except Longview had more jobs. Midland ranked first in job creation followed by Odessa, Dallas-Plano-Irving, Sherman-Denison, College Station-Bryan, Houston-The Woodlands-Sugar Land, and McAllen-Edinburg-Mission.

The state’s actual unemployment rate was 3.5 percent. Midland had the lowest unemployment rate followed by Odessa, Amarillo, Austin-Round Rock, College Station-Bryan, and Sherman-Denison.

4 Million SF Of Industrial Underway in Southeast Houston

​​​​HOUSTON (NAI Partners) – March 18, 2019 -The Southeast submarket has four million sf of industrial space underway, one-third of the total industrial construction in the metro.

The submarket recently experienced a more than $50 billion petrochemical expansion that​​​ is positively affecting demand for industrial supply, particularly for plastics and logistics.

The largest projects under construction include:

Port of Houston facilities set a record for total tonnage at 35.7 million tons, which reflected an increase of 9 percent from 2017. It remains a leading port in the U.S., and development activity is expected to continue at an accelerated pace for the foreseeable future.