The State of the Industrial Market: Q&A with Trey Odom of Avera Cos.
HOUSTON – (Realty News Report) – Houston’s industrial market is on a roll. It remains one of the best performing sectors of the real estate industry. A variety of factors – strong Port of Houston activity, e-commerce, a revived energy sector – are driving industrial construction and leasing. Will such activity continue? Is e-commerce a major factor? Will the energy sector continue to drive activity? To find out the answers to these questions, Realty News Report talked with H.T. “Trey” Odom, president and CEO of Houston-based Avera Companies, a major player in the commercial real estate industry, with industrial development, construction and investment projects in Houston, throughout Texas and across the country. Avera is continuing to develop new projects in the Port of Houston area. New development opportunities include a 60-acre PTRA rail-served site on Greens Bayou and a 135-acre mixed commercial, retail, and light industrial project along Bay Area Boulevard in La Porte.
Realty News Report: Your firm has been developing a number of new projects on the east side, in Pasadena and near the Barbours Cut Terminal and Bayport Terminal. What makes these sites attractive for development?
Trey Odom: Houston has a combination of industries that have mitigated a lot of the volatility found in traditional economic cycles, and many of those plants area concentrated in the Southeast Houston submarket. Petrochemical manufacturers, refineries, and the cracker plants that supply them, among other users, demand institutional and rail-served buildings that are in close proximity not only to the Port and its two terminals, but also each other. That demand has grown significantly since we started looking for sites near the Port several years ago. We have been methodical about selecting sites that are developer friendly – located in jurisdictions that want to see positive development – and tenant friendly in their location and with respect to the burden of tax and other operational expenses are concerned. Many of the surrounding cities and counties near the Port have incentives that are attractive to these new and/or expanding tenants.
Realty News Report: What will be the impact of e-commerce on Houston’s commercial real estate industry?
Trey Odom: The e-commerce growth has affected Houston real estate at slightly slower rate than originally expected, but Houston should continue to catch up to other major distribution hubs as the regional population continues to steadily increase.
Realty News Report: Is the widening of the Panama Canal making a difference in the Houston commercial real estate market?
Trey Odom: Houston has started seeing a difference in demand in submarkets with Port access, and the expansion is certainly one of the drivers. PortHouston is executing on $1.5B worth of projects to deepen the Ship Channel and expand and improve its facilities in the next few years in a direct response to the Canal’s expansion. Those plans will allow for larger ships and higher volumes of traffic. Those improvements along with our proximity to midstream petroleum assets, industry, and the canal are likely to continue to continue driving growth and investment in the Port area.
Realty News Report :Oil prices are up significantly from where they were a couple of years ago and the rig count is up also. Is that making a difference in Houston’s real estate market?
Trey Odom: Industrial real estate has remained steady despite fluctuations in oil prices due to the huge petrochemical construction boom driven by the rise of fracking and low natural gas prices. With the rise in prices, though, we do see oil and gas companies and their suppliers and service providers beginning to make investments in equipment and facilities again.
Realty News Report: Can you comment on the expansion of chemical plants and the production of raw plastic pellets? How has this changed Houston commercial real estate?
Trey Odom: U.S. exports of plastics are expected to rise exponentially in the next few years, and spending on chemical plants softened the blow from energy sector job cuts. I believe Houston is poised for continued growth in this area, particularly with the addition of new LNG terminals here and along the coast.
Realty News Report: Thinking about Houston’s growth in long term, what does the future look like for the city in the next 10 or 20 years?
Trey Odom: Houston will have continued steady growth, driven in part by the reasonable cost of doing business here. Bottom-line to me — the amount of money put into existing and newly constructed chemical plants shows the investment these companis have made in Houston and shows they aren’t going anywhere anytime soon.