HOUSTON – (By Dale King, Realty News Report) – Investment sales at midyear were up 300 percent in Houston, which now ranks fourth in the nation in investment sales, according to a new Avison Young study.
While the fall-out from low oil prices plagued the Houston market last year, and investors shied away because of uncertainty about the whether Houston had hit a firm bottom. But oil prices have held in the $40 to $50 a barrel range and layoffs have tapered off. So in the first half of the 2017, over $1 billion in real estate sales were completed in Houston, a major increase, says Avison Young’s just-released Fall 2017 North America & European Commercial Real Estate Investment Review.
“Along with a brightening economic outlook, investor interest has returned and Houston is poised to get back on track in 2017 thanks to historic investment volume,” Avison Young reported. “The recent flooding caused by Hurricane Harvey has not dampened investors’ interest in the city, with many large deals still in the works.”
The Avison Young survey ranked 54 metros in the U.S. and Canada, including Houston, Dallas and San Antonio in Texas.
“The most significant increase in U.S. investment sales volume occurred in San Francisco, which registered a 73% hike compared with the same time period in 2016,” said Avison Young. “Among the largest real estate markets, Orlando, Boston and Houston also posted impressive growth rates of 61%, 52% and 40%, respectively.”
The Avison Young survey ranked 54 metros in the U.S. and Canada.
The report says “vendors of commercial real estate assets continue to attract a diverse group of eager buyers deploying an abundant supply of capital across asset classes and geographical boundaries. In some markets, scarcity of product has resulted in peak pricing, leading some investors to look further afield in a world of shrinking returns – and to take on more risk.”
Parkway Inc. sold a 49% interest in Greenway Plaza and Phoenix Tower for $512 million in April. The deal provided momentum to the office market and prompted several other owners to place trophy assets on the market. Then, in the June, it was announced Canadian investors would buy the entire Parkway firm for $1.2 billion, a significant play because Parkway owns an 8.7 million SF portfolio consisting solely of office buildings in Houston.
Top-tier Houston Center, a 4.2 million SF complex in downtown Houston went up for sale earlier this year. Brookfield recently agreed to buy Houston Center from J.P. Morgan Asset Management for $875 million in a deal expected to close later this year.
San Francisco-based Spear Street Capital jumped into the Houston market in a major way this year, buying several Houston properties, including 5 Houston Center in downtown, the Exxon Upstream Research campus on Buffalo Speedway, the 515 Post Oak Boulevard building, and the Energy Center I building near Interstate 10 and Dairy Ashfors.
In addition, Avison Young reported, Houston demonstrated industrial strength. “Houston’s industrial market has benefitted from strong population growth, changing dynamics associated with e-commerce, continued strong trade through the Port of Houston and the ongoing petrochemical boom.”
“The industrial market was Houston’s best performing asset type throughout the downturn. Investment volume in the first half of 2017 was up 126% compared with the first half of 2016. Multi-family properties continued to lead investment activity, recording nearly $2 billion in sales through mid-2017.
“Meanwhile, retail investment volume in the first half of the year totaled $693 million.”
“Houston has established itself as a gateway city because of its global presence as the center for the world’s energy industry. As evidenced by renewed investment activity, Houston remains an attractive investment for international capital – similar to other U.S. gateway markets. Many investors have cited the diversifying market and an understanding of Houston’s cyclical nature as reasons for investment.”
In Dallas, says the report, foreign and domestic investors are taking notice of the explosive growth occurring in the booming Dallas-Fort Worth market. An above-average level of office leasing, construction and investment activity during the past three years has solidified global recognition of D/FW as a strong, stable market. The low cost of living and favorable business climate continue to attract large corporations to the Metroplex, producing substantial employment gains and a population boom.
San Antonio’s commercial market started 2017 on a positive note thanks to increasing consumer confidence and the recovering energy industry, says Avison Young. “The city is a healthy secondary market and has become a target for investors and developers who have been squeezed in primary markets. The IH-35 corridor between Austin and San Antonio continues to record substantial growth and urbanization. San Antonio offers competitive, attractive options for both companies and residents when compared with average costs in Austin.”