HOUSTON – (Realty News Report) – The Houston office market has reached its low point and is on the road to a gradual recovery, according to Patrick Duffy, president of Colliers International Houston.
“We expect the office market to remain a little ugly and bounce along the bottom for a while,” Duffy said. “Unless oil companies start sucking up three or four floors of space at a time, it’s going to be a long crawl out.”
Overall, the outlook for commercial real estate in Houston is good, Duffy said at Colliers’ Houston Trends 2018 event before hundreds of guests at the Houston Country Club Tuesday evening.
“We think it’s going to be a pretty good year,” Duffy said.
Colliers reports the citywide vacancy rate hit 19.1 percent in the fourth quarter, up from 17.5 percent at the end of 2016.
Rents declined slightly, as well. The average Class A rent was $34.97 per SF in the fourth quarter of last year, down from $35.35 a year earlier. But Duffy said rents have stabilized and appear to have bottomed out.
Positive signs sprout up in the Houston economy, he said, and that bodes well for real estate. Job growth has improved and could be getting even better as oil prices have jumped. West Texas Intermediate has settled in the $65 a barrel range in recent weeks and that is expected to translate into better job growth in Houston, which is called the Energy Capital of the World. Forecasts call for more than 40,000 new jobs in 2018.
“The jobs picture looks good in Houston,” Duffy said.
Oil prices, which had dipped below $30 a barrel in early 2016, are now strong enough that oil exploration is profitable in the Permian Basin of West Texas, Duffy said.
“Oil is coming back. We’re back in the black,” Duffy said, noting that the rig count is up significantly from a year ago.
“The frackers are back and they are back big time.”
Other sectors of Houston’s real estate are doing well, Duffy told the audience:
Residential: “Housing is doing great.” Inventory is tight and sales are good. Although he noted: “Hurricane Harvey was not a blessing to Houston.”
Industrial: Warehouse space is evolving as e-commerce becomes more of a factor in the marketplace. Warehouses play a big role in retail and home deliveries. Industrial vacancy remains low. “Industrial is going strong and we expect it to remain that way,” Duffy said.
Retail: Vacancy remains below 6 percent. Good centers in good locations have no shortage of tenants. New construction clusters around the Grand Parkway outer loop.
Multifamily: Uncharacteristic restraint by apartment developers and the oil price crash curtailed development activity, which had been on an overly robust pathway two or three years ago. Oversupply was averted. Hurricane Harvey created rapid demand and free rent incentives disappeared overnight.
The featured speaker at the Colliers event, Astronaut Scott Parazynski, spoke highly of Houston, which is also known as Space City.
“Houston is a wonderful city with many pillars of growth,” said Parazynski, author of The Sky Below.
Parazynski, who has climbed Mount Everest and walked in space, said explorers are expected to travel to Mars someday and even create a habitable colony there.
“It’s vital to the nation to invest in space programs,” he said.
Jan. 31, 2018 Realty News Report Copyright 2018