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Transwestern: Houston has Strongest Economy; Strongest Industrial and a Darn Good All-Around CRE Market

HOUSTON – With an economy that is outperforming most cities, Houston has the lowest vacancy rate in the country for industrial buildings and its office market is exceptionally strong as well, according to Transwestern.

The strength of Houston’s real estate market goes in-stride with its strength as a job creator. And Houston, bolstered by shale energy exploration, leads the nation in job growth with 587,000 new jobs created since 2000 – more than any other city in the nation.

“Houston’s economy continues to outperform every one of the major metro areas in the country and the nation as a whole,” said Greg Leisch, CEO of Delta Associates, the research arm of the Transwestern real estate firm.

Leisch, speaking at Transwestern’s Trendlines event on Tuesday night, said Houston has 11.8 million square feet of office space under construction, just slightly less than the office construction in New York.  But Houston’s new office building projects have a phenomenal amount of pre-leasing – about 9 million square feet, if the Exxon Mobil campus is included, he said.

The apartment market is also strong and rents should rise about 6 percent next year in Houston, Leisch told about 700 people assembled at the River Oaks Country Club. Houston had net absorption of 9,400 apartment units (annualized mid-year 2013), second nationally only to Dallas with 10,000 units. The Houston metro multifamily market continues to expand due to population increases and one of the highest job growth rates in the country. This year has seen market fundamentals improve, with absorption and rents up and vacancy down. Strong demand and declining vacancy have allowed property owners to push rents to record levels in 2013.

In warehouses and industrial space, Houston’s 4.3 percent vacancy – best in the nation – is driving rents up and that should continue in 2014, Leisch said.

The strong performance of Houston’s real estate is attracting international investors, Leisch said. Sales have returned to peak levels in Houston faster than in many other major markets, even as national office investment volume has plateaued. Annualized national office volume for 2013 totals $77.5 billion, compared to $81.1 billion in 2012 and $64.7 billion in 2011. Improved market conditions, driven by one of the nation’s strongest local economies, continue to fuel investor interest in the Energy Capital of the World.

Kevin Roberts, Transwestern’s President of the Southwest, said Houston should be considered a “gateway city’ for investors, along side New York, San Francisco and Washington.





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