Houston Job Growth @ 3.9% in 2018

DALLAS (Federal Reserve Bank of Dallas) – October 23, 2018 –  “Monthly job growth has been volatile over the past few months with a weakening in July, a sharp bounceback in August,​ and then a slowing in September,” said Keith R. Phillips, Dallas Fed assistant vice president and senior economist. “Looking at the past three months, job growth was 2.4 percent—moderately slower than the 3.1 percent in the first half of the year. Jo​​​​b growth has been broad-based across metro areas with particular strength in Houston, which has grown at an annual rate of 3.9 percent over the past three months and 3.6 percent so far this year.”​​​​

Houston: Space 2.0-City Council Approves Utilities for Houston Spaceport

Houston (Houston Chronicle by Andrea Leinfelder) – October 18, 2018 – City Council on Wednesday approved more than $18.8 million for the Houston Spaceport to begin developing streets, water, wastewater, electrical power distribution facilities and other basic infrastructure.

These are necessary to attract future development to Phase 1 of the Houston Spaceport, which is located at Ellington Airport. Officials are hoping to attract a cluster of aerospace companies that can invent, develop and manufacture space technologies.

“We have been talking about this project for now over two years,” said Arturo Machuca, the general manager of Ellington Airport and the Houston Spaceport. “This type of development requires a lot of work. … Now we are ready to move into a more finite offering to potential partners.”

He said the money reaffirms Houston’s commitment to developing a spaceport.

In 2016, the Houston Spaceport opened a 53,000-square-foot Houston Aerospace Support Center. Clear Lake-based Intuitive Machines was the first — and so far only — business to open a location there in August 2016. The Houston Spaceport almost landed a Blue Origin rocket engine manufacturing facility, but it ultimately lost out to Huntsville, Ala.

One reason for Houston being runner-up was that Huntsville already had an experienced rocket engine workforce. To fix this problem, Machuca said the Houston Spaceport is in talks with San Jacinto College to open a location at the spaceport and help create a pipeline of talent for future companies.

Construction in Phase 1 will also eventually include a co-working space near the Houston Aerospace Support Center.

The money approved for the project includes a $1 million federal grant. The remainder will be paid through Houston Airport System revenues.

USA Largest Loop: Grand Parkway Expansion Underway

HOUSTON (Houston Chronicle) October 9, 2018 -– Members from the Grand Parkway Infrastructure met this month to discuss the continued expansion of the $1.28 billion toll road project.

The next phase, an $894 million project, will be the largest highway loop in the United States when it is completed, according to the Texas Department of Transportation.

When completed in 2022, the highway will enable drivers to travel from Baytown to League City in a loop that passes through New Caney, Spring, Tomball, Cypress, and Sugar Land.

The construction will help the region prepare for continued population growth. This phase of the project will be broken into three segments.

The Grand Parkway spans more than 50 miles around the Greater Houston area and falls within Chambers, Harris, Liberty, and Montgomery Counties.

H-Town Industrial Market

HOUSTON (TA&M Real Estate Center) – September 18, 2018 – The Bayou City had its eighth consecutive year of positive absorption for the local industrial market.

Net-occupier demand was 1.2 million sf last quarter, bringing the year-to-date absorption total to 4.8 million sf.

The construction pipeline grew by 3.6 million sf in new starts over the quarter to reach 10.7 million sf of new industrial and flex product currently underway.

Vacancy rates decreased 5 basis points, and availability rates during the same period decreased 60 basis points.
The graph showing amount of vacancy, completions, under construction, ground broken, and net absorption industrial numbers in the area.

Texas Isn’t Just Oil & Gas: Also Tops in Wind Energy

AUSTIN (Houston Chronicle) – August 24, 2018 – Texas installed over 2,300 megawatts (MW) of wind power in 2017, more than any other state.

According to the Department of Energy, the additions push the state to nearly 22,600 MW of total installed wind power, the highest in the country.

The additions are lower than the 3,615 MW and 2,611 MW of wind installed​​ in 2015 and 2016, respectively.

The report said that 14.8 percent of the energy generated in Texas in 2017 came from wind, up from 12.6 percent in 2016.

Oklahoma had the second highest 2017 wind installations with 851 MW. The state is second to Texas for total wind capacity at 7,495 MW. Iowa and California rank third and fourth with 7,308 and 5,555 MW, respectively.

According to the Electric Reliability Council of Texas, a megawatt can power roughly 200 homes during periods of peak demand. ​

Trade War Greatest Challenge for Texas Economy

COLLEGE STATION (Real Estate Center) – August 7, 2018 – Texas’ economic expansion continued amid increased activity in the goods-producing industries, but rising input costs, resulting from domestic tariffs, could deflate the rate of growth.

According to the Real Estate Center’s latest Outlook for the Texas Economy report, employment growth moderated to more sustainable levels after explosive growth to start the year. The improved workforce environment pushed the labor force participation rate to a three-year high. Average earnings remained stagnant but extended to a broader base of workers. Upward inflationary pressure, however, weighed on Texans’ purchasing power.

Shortages of entry-level homes lifted shelter costs and hindered housing sales despite strong demand. A declining trade environment remains the greatest headwind to the Texas economy, challenging some of the state’s most productive industries.

Texas is a Job Creator

COLLEGE STATION (Real Estate Center) – July 27, 2018 – The Texas economy gained 359,500 nonagricultural jobs from June 2017 to June 2018, an annual growth rate of 2.9 percent, higher than the nation’s employment growth rate of 1.6 percent.

According to the Real Estate Center’s latest Monthly Review of the Texas Economy, the nongovernment sector added 351,700 jobs, an annual growth rate of 3.4 percent, also higher than the nation’s employment growth rate of 1.9 percent in the private sector.

Texas’ seasonally adjusted unemployment rate in June 2018 was 4 percent, lower than the 4.2 percent rate in June 2017. The nation’s rate decreased from 4.4 to 4 percent.

All Texas industries except the information industry had more jobs. The mining and logging industry ranked first in job creation followed by construction; professional and business services; leisure and hospitality; transportation, warehousing, and utilities; manufacturing; education and health services; and financial activities.

All Texas metro areas except Longview, Beaumont-Port Arthur, Corpus Christi, and Victoria had more jobs. Midland ranked first in job creation followed by College-Station-Bryan, Odessa, Dallas-Plano-Irving, Austin-Round Rock, and Houston-The Woodlands-Sugar Land.

The state’s actual unemployment rate last month was 4.2 percent. Midland had the lowest unemployment rate followed by Amarillo, Austin-Round Rock, Odessa, and College Station-Bryan.

 

Houston Industrial Soars In 2nd Quarter

HOUSTON (NAI Partners) – July 24, 2018 – Local industrial development reached levels not seen in more than two years, said NAI Partners in its second quarter 2018 industrial market report. The development pipeline logged 12.4 million sf, compared with the all-time recorded high of 15 million sf reached in 2Q2015.

New construction delivered during the second quarter stood at 1.8 million sf, close to the average amount of space completed over the last four quarters (1.9 million sf).

Triple net average asking rents increased by 3.6 percent quarter over quarter to $6.97 per sf and by 2 percent year over year from $6.83.

The overall industrial vacancy rate grew to 5.4 percent in the second quarter, an increase of 20 basis points quarter over quarter and unchanged year over year.

In May, 3.1 million workers were on payrolls throughout the region, according to the Texas Workforce Commission. For the 12 months ending May 2018, Houston created 79,200 jobs, a 2.6 percent increase.

Despite Office Vacancy H-Town Leading Nation in Rent Growth

HOUSTON (BISNOW-Catie Dixon) -June 18, 2018 – Houston office rents have skyrocketed over the last dozen years, at a clip much faster than any other U.S. city despite the struggles of the past few years. With 43.4% rent growth since 2006, Houston is well above even the second-place market, Dallas, with a 32.2% rent increase, and miles ahead of New York City (23.1%) and D.C. (9.1%), NAI Partners’ analysis of CoStar data shows.

Yet Houston has a lot of room to run in rents. Office users here are paying $27.73/SF, less than half the $61.15 average rent New York tenants are dropping. The big increases since 2006 have pushed Houston past Dallas, which has a $25.18/SF average rate. “Despite the perception in the marketplace that the Houston office market is struggling, this data tells a different story, especially compared to Houston’s national cohort,” NAI Partners partner Dan Boyles said. “While the office market is naturally cyclical, the low points for Houston aren’t as pronounced as they have been in past down markets.”

Why Houston Attracting Jobs and People Faster Than Rest of Country

HOUSTON (BISNOW-DESS STRIBLING) -June 7, 2018 – The impact Amazon might have had on Houston is overstated, the speakers at Bisnow’s Houston State of the Market event said pointing out that companies operating in the Port of Houston are going to spend about $50B over the next five years on new facilities and new technology. That is 10 times the economic impact of Amazon.

One mark of Houston’s expanding economic base is what happened when oil prices tanked a few years ago. The short answer: no recession for Houston, though some parts of the local economy suffered.Did Houston ever stand a chance to be on Amazon’s shortlist? The consensus among the speakers: No. Houston does not have the technical workforce Amazon wanted, for one thing. The city also has a great lifestyle, but not the lifestyle that Amazon wanted — which includes major mass transit and a lot of walkability.

Houston has many strengths as an economy and a real estate market, but those aren’t among them. One challenge for Houston is to convince the country that it can fix its flooding problems — and then actually do it — but other than that, Houston is perceived as a growth city. It is the fourth-largest metro in the country, and on track to surpass Chicago to be No. 3 in the near future. Lionstone Investments Head of Acquisitions Andrew Lusk, whose company focuses on walkable mixed-use locations, said Houston is in favor with the investment community. “In the last 18 months, there have been several marquee transactions here,” he said.

Houston’s being taken seriously as a place to invest. The remarkable thing about the Houston office market, Lusk said, is that the energy downturn didn’t crush it like the 1980s downturn did. Office fundamentals are tough, because there is lot of new supply but not as much demand, and rents have been dropping. But the market isn’t on its knees. Johnson Development founder Larry Johnson, whose company has 17 master-planned developments underway in various markets, representing 74,000 single-family units and 6M SF of commercial space, said that 27,000 homes were developed in Houston last year. The region is No. 2 in the nation by that metric, only surpassed by Dallas, and this year the total may be 31,000 new homes. “There’s tremendous demand for homes and for lots,” Johnson said. “Land prices are rising, but overall Houston has a healthy residential market.”

The Houston economy needs to diversify more, and it is doing so, though the mainstays remain the port, medicine and energy, the speakers said. In the decades ahead, growth will be driven by diversification, including tech. What is at the heart of growth here? The same factors as always, magnified by the current U.S. economic environment. Houston is pro-business and the world knows it. Taxes and the cost of living are low, and there is no zoning. None of those are new factors when it comes to spurring Houston’s growth, the speakers said. But now, especially with the change in federal tax law, there is further impetus for people and businesses to relocate from places like New York and California. All of Texas is going to benefit from this dynamic, and arguably Houston most of all. Avison Young principal Darrell Betts, who specializes in high-profile investment sales, said there is a massive influx of companies from New York and California. “The change in the tax law is bringing people,” he said. “We’re the No. 1 U-Haul destination in the country.” JLL Senior Vice President Simmi Jaggi, who specializes in land sales, especially for retail, said Houston isn’t just on the national stage. The city is being eyed by foreign capital more than at any time in history.

Unlike many markets, urban occupancies for retail remains high, and there is strong growth in development and leasing in the suburbs as well. Food and beverage is on fire especially, Jaggi said. There are challenges for retail, however: land prices have increased, and retail developers are finding it hard to compete against multifamily developers.  Betts also pointed out things Houston can do better. Traffic is a struggle. There is no sustainable mass transit from the airport to any major business district, which is a significant missing piece of the puzzle when it comes to economic development. Still, in the long run, Uber and other shared transportation services are going to be a major factor in getting around, lessening the need for individual cars, which might help Houston deal with its congestion problem.