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Only 40 of Houston’s 1,200 Office Buildings Damaged by Hurricane Harvey, CBRE Reports

Spencer Levy, CBRE Head of Research, the Americas.

HOUSTON – The vast majority Houston’s office buildings escaped major damage from Hurricane Harvey with flood loss primarily confined to West Houston, Allen Parkway, West Loop/Galleria and FM 1960/Highway 249, according to an analysis by global commercial national real estate firm CBRE. Forty of Houston’s 1,200 office buildings were damaged to a certain extent.

Single-family homes and multifamily properties were mostly affected by the storm, with damage in the industrial and retail sectors confined to hard hit areas of the city.

“Houston’s commercial real estate market is resilient after weathering Hurricane Harvey and the largest rainfall the area has recorded in decades,” says Spencer Levy, CBRE’s Head of Research, the Americas. “The outlook for recovery is optimistic, but short-term disruptions are to be expected. Available space to house displaced workers — is likely to become scarce in certain Houston submarkets, and the rebuilding effort will temporarily fuel a rise in retail sales and additional demand for warehouses in the area from building supply companies.”

Hurricane damage to retail properties was not widespread. “It was mainly limited to neighborhood and strip centers in the hardest hit areas such as the suburban and residential neighborhood of Kingwood to the northeast, Cypress in the northwest, and West Houston,” adds Robert C. Kramp, Director, Research & Analysis for CBRE’s Texas-Oklahoma Division.

Residential properties were the largest sector affected by flooding — primarily in three of the nine counties in the 700-square-mile Greater Houston market. “The majority of these were single-family homes in suburban areas to the northeast, west and southwest of downtown Houston,” he says. “As many as 100,000 multifamily units — one out of six — were flooded, which means that any spot softness in the multifamily market is now gone. A small number of high-density submarkets sustained damage in as much as 30% of existing inventory totaling approximately 22,300 occupied units and creating immediate leasing demand.”

The retail and industrial sectors of the city fared better. Hurricane damage to retail properties was not widespread but mainly limited to neighborhood and strip centers in the suburban and mainly single-family residential neighborhood of Kingwood to the northeast, Cypress in the northwest, and West Houston.

Robert Kramp, Director, Research & Analysis for CBRE’s Texas-Oklahoma Division.

“Harvey is not expected to impact national retailers’ expansion plans, although a market strained by limited availability will continue to hinder leasing,” says Kramp. “Displaced retail tenants have already begun searching for temporary space, with little success due to the tight market conditions. Home improvement and related retailers already active in the robust housing market are expediting their location decisions to capture demand for housing repairs due to the historic flooding.”

The majority of Houston’s industrial product weathered the storm with no major structural damage. “There were isolated instances of damage to institutional, dock-high Class A product, particularly on the West Side and along the I-10 corridor,” says Kramp.

Affected tenants in the office market are already actively searching for turn-key temporary space and expect to return to their original locations as soon as next month. “Many of them will sign very short-term leases rather than longer-term direct ones,” says Kramp. “There was more than 11.1 million sq. ft. of available sublease space in Houston at midyear, providing numerous options for these tenants. We expect to see a decline in sublease availability in the third quarter.”

Houston’s largest industrial cluster, the inner Northwest and inner North/Northeast, reported few “major damaged” or “destroyed” properties, according to the Federal Emergency Management Agency (FEMA). The damage likely is greater within older properties and those near Houston’s bayous.

Houston’s massive reconstruction and repair project including an estimated 100,000 homes likely is expected to fuel a significant increase in industrial occupancy—particularly in light-industrial space for building and construction material distribution.

Harvey is already active in the robust housing market are expediting their location decisions to capture demand for housing repairs due to the historic flooding.”

Multifamily northwest and northeast Houston will see sharp occupancy increases with concessions quickly disappearing, CBRE reports.

“Overall, Houston’s recovery will take time, but the area’s strong economy will help it rebound soundly,” says Levy.

Sept. 12, 2017 Realty News Report Copyright 2017

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