HOUSTON – (Realty News Report) -Hurricane Harvey did not derail Houston’s economic recovery; the storm merely delayed the city’s rebound a few months, according to a leading Texas economist.
“Hurricane Harvey had little impact on Houston’s business structure,” continued Patrick Jankowski, CCR, senior vice president research and regional economist for the Greater Houston Partnership. “Harvey hit the recovery reset button, not the rewind button.”
Speaking to a standing room only crowd Thursday night at Trendlines Houston 2017, an invitation only-event at the River Oaks Country Club organized by Transwestern, Jankowski noted that Houston’s office market is in the worse shape of all the city’s real estate sectors “but getting better. We think we’ll see bottom next year. It’s starting to improve. We’ve seen four consecutive quarters of negative adsorption. We’re not going to see significant absorption of office until we see significant job growth.”
Retail and industrial are the best performing of the real estate segments, although retail sales are weak. “Industrial is one of our strongest markets, absorbing 2 million square feet a quarter,” Jankowski continued. “There are a lot of announcements coming out about new industrial projects. Increasingly, Houston is emerging as a logistic center for commercial products, not just energy projects.”
Three things drive Houston economy: U. S. economic growth, global trade and energy, Jankowski said.
“Houston is part of U.S. economy,” he added. “When the U.S. does well, Houston does well. The U. S. has had strong growth — 2.4 percent growth over past six quarters. As the U.S. economy goes, Houston goes. The U.S. buys what we have to produce; even if its industrial machinery, some part of it originates in Houston.”
Global trade is also important, Jankowski said. “Houston is the second largest exporter of goods overseas — $84.1 billion worth in 2016 – only behind New York. We have 5,700 firms engaged in global trade whether it is a company creating transaction software or an engineering firm designing a new gas plant in Indonesia. Global trade supports between 350,000 and 450,000 jobs here. One of every seven jobs in Houston is from global trade and as the U. S. economy continues to pick up steam, that’s good for us.”
The energy sector continues to struggle with West Texas Intermediate crude trading in the $50 a barrel range, although jumped up to $57 in recent days. “We’re not going to see a significant amount of hiring or a significant amount of office space leased until more jobs are created,” he added.
Houston job growth turned slightly negative in June, July, and August of last year. “We reached the bottom of the downturn in third quarter of last year,” he added. “We were definitely seeing growth, then Hurricane Harvey hit.”
Jankowski said Hurricane Ike in 2008 caused more problems for the Houston business sector more than Harvey. “Ike affected the business community while Harvey disrupted families and consumers more. Harvey had little impact on business structure.”
Already, figures about Hurricane Harvey’s damage are being revised. Moody’s Analytics continues to revise its damage estimate, from $107 billion after Harvey down to $73.5 billion, he pointed out. “There also was some bad data given out,” he added. “There was an estimate of 100,000 apartments destroyed by Harvey but in reality, only about 16,000 apartments were destroyed – 2.4 percent of the apartments in Houston. Of the 162,000 homes reporting damage, some 100,000 had significant damage. To put it in perspective, 7 percent to all homes in Houston had some damage.”
He said that some 9.6 percent of Houston’s vehicles were damaged. “But if we lost so many cars, why is traffic still so bad,” he joked.
Houston is on track for a record year for single-family sales, he added.
Jankowski said he isn’t worried about Houston’s future. He noted the Astros won the 2017 World Series. “You need to think about this,” he told those gathered. “The best player on the team was a guy from Venezuela; the best pitcher relocated from Detroit. One of our best catchers grew up in a small town in Texas. The Astros manager is a Stanford grad who brought his smarts to Houston. The Astros fielded a disparate skill set that came together to achieved common success. That’s the spirit of Houston. I’m not worried about the future of this region.”