Texas Adds 12,000+ Apartments In 3rd Qtr

CARROLLTON (ALN Apartment Data)  – October 20, 2017 – ​Texas apartment markets a​dded more than 12,000 units over the 3rd quarter, according to the latest report from ALN Apartment Data​​​​.

“Even with all the new units added, the only Texas markets to have noteworthy negative occupancy growth were College Station and Lubbock,” the report said.

“Competition in Austin is heating up and average rents fell 0.7 percent to $1,210 per unit. Laredo and Texarkana saw modest decreases of a few dollars per unit over the summer.

“Hurricane Harvey took its toll and damaged almost 15,000 units, but that managed to push average occupancy up 1.8 percent to 89.1 percent as the displaced tenants were absorbed elsewhere in the market. Rents in Houston also spiked up more than 2.4 percent to an average of $1,​042 per unit.”

OVERALL TEXAS APT MARKET

Worlds Largest Ethane Cracker Plant South of Houston

FREEPORT, BRAZORIA COUNTY – (Houston Chronicle) October 3, 2017 – DowDuPont will open a new ethylene and plastics plants, the first major ethylene complex along the Texas Gulf Coast.

The $4 billion complex is the crown jewel of the old Dow Chemical’s recent $6 billion expansion along the Gulf Coast.
The project includes a massive ethane cracker which will provide the feedstock for some 1.5 million metric tons a year of ethylene.
A large portion of the expansion will go toward expanding the plant to 2 million metric tons a year, making it the world’s largest ethylene production plant.
The ethane facility is near DowDuPont’s new polyethylene plastics plant.

Q3 Office: Leasing Sluggish, Investments Not So Much

The not-so-good news? Leasing continues to be sluggish.

Though Hurricane Harvey had little, if any, impact on office inventory, “leasing activity remained muted during the third quarter, and failed to surpass its 10-year quarter for the seventh consecutive quarter,” according to JLL’s Office Insight. This led vacancy to increase – again – taping out at 22.8%, while absorption clocked in at -2.4 million.

On the bright side, the market favors tenants. Yet even here, JLL was somewhat pessimistic, pointing out that the majority of tenants in the market are okay with their current space footprints. “This is best evidenced by the market’s paltry average deal size of 4,700 square feet during the quarter,” the report noted.

Harvey is Houston’s 1000 Year Flood

HOUSTON (Washington Post-Jason Samenow) August 31, 2017 – As Harvey’s rains unfolded, the intensity and scope of the disaster were so enormous that weather forecasters, first responders, the victims, everyone really, couldn’t believe their eyes. Now the data are bearing out what everyone suspected: This flood event is on an entirely different scale than what we’ve seen before in the United States.

A new analysis from the University of Wisconsin’s Space Science and Engineering Center has determined that Harvey is a 1-in-1,000-year flood event that has overwhelmed an enormous section of  Southeast Texas equivalent in size to New Jersey.

There is nothing in the historical record that rivals this, according to Shane Hubbard, the Wisconsin researcher who made and mapped this calculation. “In looking at many of these events [in the United States], I’ve never seen anything of this magnitude or size,” he said. “This is something that hasn’t happened in our modern era of observations.”

Hubbard made additional calculations that accentuate the massive scale of the disaster:

  • At least 20 inches of rain fell over an area (nearly 29,000 square miles) larger than 10 states, including West Virginia and Maryland (by a factor of more than two).
  • At least 30 inches of rain fell over an area (more than 11,000 square miles) equivalent to Maryland’s size.

A 1,000-year flood event, as its name implies, is exceptionally rare. It signifies just a 0.1 percent chance of such an event happening in any given year. “Or, a better way to think about it is that 99.9 percent of the time, such an event will never happen,” Hubbard said.

While no one questions the exceptional nature of Harvey’s rainfall, the concept of a 1,000-year flood event has been criticized by some academics and flood planners. For one, rainfall and flood data generally go back only 100 years or so, so statistical tricks must be applied to determine what 500-year and 1,000-year events actually represent. Furthermore, the climate is changing and precipitation events have become more intense in recent decades, so what constitutes different return frequencies (100-year, 500-year, 1,000-year and so forth) is probably changing.

Climate change studies have found that what’s considered a 500-year flood today may become much more frequent in coming decades.

But Hubbard, who analyzes geographic information to help decision-makers plan for floods, stands by the use of these return interval metrics despite their shortcomings. “For a community, they help put these events into perspective and understand the impact of a flood,” he said.

He added that they have “tremendous” value for flood planning and designing infrastructure to be able to withstand events up to a certain intensity. “Decision-makers have to be able to pick a number and say this is the number we need to be prepared for,” he said. “If we debate and belabor the accuracy of these estimates, the community will not have a value to plan for.”

Hubbard agrees that the climate is changing and precipitation is becoming more intense in some areas, but he said it would be complicated to adapt the flood return frequencies. “The challenge is trying to separate when you have these 500-year events happening all the time, what part is a changing climate, what part is changes in urbanization and agriculture and what part is the lack of understanding of what’s happened in the past,” he said.

In any event, Harvey puts an exclamation mark on the pattern of disastrous rain events in recent years and may be a harbinger of more such events in the coming decades.

“Expect #HarveyFlood record will be broken in 5, 15, 25 years from now — sooner rather than later,” tweeted David Titley, professor of meteorology at Penn State.

 

H-Town’s 7 Largest Real Estate Assets for Sale

HOUSTON (Bisnow) – July 31, 2017

Houston Center — 4.2M SF

The four-building, 4.2M SF Downtown Houston office complex Houston Center just hit the selling block, making it the largest office asset for sale in the entire Houston MSA. With the help of JLL and Avison Young,  BISNOW rounded up the biggest.

Greenspoint Place — 2M SF

Greenspoint Place is a 36-acre mixed-use development in North Houston that consists of six office buildings and three connecting retail centers. It is known for being the former home of a large portion of Exxon’s Houston operations. When Exxon left to consolidate in Springwoods, Greenspoint Place took a major hit and has yet to recover. Sitting at 40% occupancy, the asset is owned by the lender, Northwestern Mutual.

Esperson — 599K SF

Investors looking to enter the Houston office market could own a piece of history. Esperson consists of the 32-story Niels Esperson building, completed in 1927, and the adjacent 19-story Mellie Esperson building, completed in 1941. Five years after purchasing the building, Cameron Management is looking to sell the renovated Downtown icon.

Halliburton Oak Park Campus — 568K SF

Halliburton’s 48-acre former home is just west of the intersection of the Sam Houston Tollway and Bellaire Boulevard. The site includes a 568K SF office building, an 18K SF fitness center, a daycare center, a central plant and a five-level parking garage. Halliburton took good care of the structure built in 1979, making many cosmetic, mechanical and electric upgrades. The asset’s location makes it prime for a redevelopment play.

5959 Corporate — 567K SF

Prescott Group has developed 5959 Corporate into a premier Class-A telecommunications asset in terms of power, fiber and power systems. Features include a generator farm, two separate utility feeders providing 10,000 KVA of electricity power, multiple fiber optic entries, four 500-ton chillers backed up by two 1,400 KW generators and a 2,600-ton cooling tower. In addition, the property has a 20,000-gallon fiberglass tank for diesel fuel and a 20,000-gallon reserve water tank.

Sugar Creek On The Lake – 515K SF

Sugar Creek On The Lake is an 88.9% leased headquarters-quality office building just south of 59 between Sugar Creek Boulevard and Williams Trace Boulevard. Built in 2008, the asset is one of the newest assets on the list. The building was 100% leased by Chevron until 2010. Since then, it has had ups and downs. PMRG purchased the asset in 2012, and together with PCCP and Fuller Realty put $13M into capital improvements.

Pin Oak Park — 504K SF

The Offices at Pin Oak Park is a 504K SF office complex consisting of five buildings in a 12-acre campus that fronts Houston’s West Loop in Bellaire. The project is close to the Galleria and the Texas Med Center. Pin Oak Park is the only Class-B asset on the list.

Westway Plaza — 313K SF – Triple NNN Deal

Open in 2015, Westway Plaza is the newest building on the list. On nine acres just northwest of the Energy Corridor, Westway Plaza is leased primarily (70%) by General Electric. The asset was developed by Transwestern and is 100% leased to three tenants with long-term triple-net leases.

Bird’s Eys View of Houston Commercial RE

HOUSTON (Bisnow) – July 20, 2017 -Those waiting for Houston to bounce back will have to wait a while longer. Houston has made plenty of gains this year, signing 3.2M SF of office leases in Q2 alone, but with 11M SF of sublease space still on the market and more multifamily units opening every month, Houston’s rebound is hard to see.

Office

Houston’s office market has borne the brunt of the market’s downturn. Vacancy increased 60 basis points to 17.4% in Q2 as several large sublease terms expired, adding more than 600K SF of direct available space, according to CBRE data. Even with the removal of expired listings and increased sublease transactions, available sublease rose to 11.1M SF as more than 1M SF of new sublease listings were added this quarter. The combined result is Houston’s sixth consecutive quarter of negative absorption. Flight to quality is expected to continue as tenants benefit from lower rates and increased concessions. Long-term leases in prime locations are offering an average of 12 months free rent and $100/SF in tenant improvement allotments. Industrial

Industrial

Houston’s industrial sector has been keeping the area afloat. Nearly every metro in the country would love to have Houston’s vacancy rate at 5.5%. Q2 marks 24 consecutive quarters below the 6% vacancy mark. More than 60% of the 5.5M SF under construction can be attributed to four large projects, with an average building size of 850K SF. These major build-to-suits have dwarfed spec development recently: Only one spec project greater than 100K SF broke ground in the second quarter out of 1.4M SF of total starts.

Retail

This year leasing activity is struggling to keep up with the blistering pace set last year. A deficit of quality space has slowed leasing, CBRE research shows, causing Houston retailers to take down only 808K SF so far in 2017 (which is still double the 10-year average). In Q2 2017, approximately 774K SF was occupied in new projects. As the development pipeline slows, Houston’s net absorption continues to taper. Grocery expansion has slowed. The pipeline is mostly speculative strip centers and mixed-use developments. Only 1.2M SF of retail is under construction, a third of which is grocery-anchored. Development activity is concentrated in the Far North and Far West submarkets.

Multi-Family

So far this year, Houston has delivered just over 10,000 units and absorbed just over 11,000, causing occupancy to increase. There are still roughly 7,800 units under construction across the city, for a total of nearly 18,000 units to deliver in 2017, ranking third in the nation. The building boom is pushing rents lower, down 1.9% from this time last year, according to Axiometrics.  By 2019, Houston’s pipeline will be down to only about 2,000 units.

Foreigners Love Texas Agricultural Land

AUSTIN (Austin American-Statesman) – July 20, 2017– Foreign investors buy more agricultural land in Texas than in any other state, snatching up 1.7 million acres over the past decade. That is more land than the State of Delaware.

Foreign-owned land totals an area the size of Travis, Hays, and Williamson Counties combined and is worth about $3.3 billion.

Canadian firms bought more than 800,000 acres over the last decade, much of it in​ timber-rich East Texas. Entities from the Netherlands, Germany, and Portugal bought a combined 600,000 acres. Other countries with a stake in Texas agriculture include Indonesia, Mexico, India, and Malaysia.​

The Lone Star State has more farms and ranches than any other U.S. state. Texas also leads the land in cattle, cotton, and hay production.

An Office Tale of 2 Cities

CHICAGO (RealtyNewsReport) – July 19, 2017 -– According to a midyear report by Cushman & Wakefield, Houston has the worst office absorption​ in the nation, while Dallas has the best.

Houston had just over 1.5​ million sf of negative net absorption in the first half of 2017. More than 11 million sf of sublease space is on the market, a slight improvement over last year. The vacancy rate is above 20 percent.

On the other hand, the DFW area had three million sf of positive absorption during that same period. The vacancy rate is at 16 percent, up from 22 percent in 2011. Leasing activity totals 6.3 million sf for the first six months of the year.

Cushman & Wakefield’s research covered 87 markets across the nation.

12 Big-Box Retailers Searching for Distribution Deals Greater than 500K SF

Houston (Bisnow) – July 18, 2017 – A recent industrial report stated that a dozen big-box retailers are looking for distribution deals greater than 500K SF. Most are being driven by e-commerce needs, with a core requirement to be as close to UPS and FedEx shipping hubs as possible. Continued demand for larger distribution facilities and a lack of developable industrial sites close to shipping hubs is driving counties like Waller to create incentive packages to attract developers.  Although the second quarter only saw 10K SF of positive absorption, nearly 5M SF of new leases were signed.

Roughly 3.4M SF of those lease agreements will not begin occupancy until mid-2018.  There is 4.3M SF under construction in the Houston industrial market, with only one-fourth of that space available for lease.  The asking rent for all sectors dropped 2.1% from Q1 2017 to $6.84/SF at the end of the second quarter as pressure from the continued low oil prices influences rates.

Texas Job Creation Continues to Exceed Nation

COLLEGE STATION (Real Estate Center) – July 5th, 2017 – Texas’ pace of job creation continued to exceed the nation’s last month, according to the Real Estate Center’s latest Monthly Review of the Texas Economy​.

The state gained 266,600 nonagricultural jobs from May 2016 to May 2017, an annual growth rate of 2.2 percent, higher than the nation’s employment growth rate of 1.6 percent. The nongovernment sector added 233,200 jobs, an annual growth rate of 2.3 percent, higher than the nation’s employment growth rate of 1.8 percent in the private sector.

Texas’ seasonally adjusted unemployment rate last month was 4.8 percent, up from 4.7 percent a year ago. The nation’s rate decreased from 4.7 to 4.3 percent.

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

All Texas metro areas except Odessa, Beaumont-Port Arthur, San Angelo, Wichita Falls, Longview, and Texarkana had more jobs. Dallas-Plano-Irving ranked first in job creation followed by Killeen-Temple-Fort Hood, Austin-Round Rock, El Paso, Tyler, Fort Worth-Arlington, Laredo, and College Station-Bryan.

The state’s actual unemployment rate​​ was 4.4 percent. Amarillo had the lowest unemployment rate followed by Austin-Round Rock, College Station-Bryan, Lubbock, Midland, and San Antonio-New Braunfels.