Houston Real Estate Story – Hot Spots and Recovery Trends

HOUSTON – (By Michelle Leigh Smith for Realty News Report) – As workers installed shimmering silver holiday trees and lighting along Post Oak Boulevard, a robust, vibrant snapshot of land prices approaching $50,000 an acre opened NAI Partners’ quarterly breakfast Tuesday in Uptown Houston.

As NAI’s commercial real estate experts reviewed various property-types, it was clear that the land market and the warehouse sector are surging; while retail is making a strong rebound. Office leasing is happening at a deliberate pace as companies consider their office needs in the Covid era.

Makris: Land Market is Hot

Land market projections driven by residential development are often $30K-35K an acre, much higher than the $25K we were seeing pre-Covid,” says Alex Makris, NAI’s senior vice president of Land Development. “We’re seeing new development at almost every size, from 20 acres to 20,000 acres starting to ring around the outside of the city. The Heights, Spring Branch and now further out to support the single-family development.  People are looking for land in Waller, Fulshear, Brookshire and Montgomery County and Mont Belvieu. On the industrial side, we’re seeing developers looking for land tracts to develop into business parks that are further out because they can’t find shovel-ready lots in suburban markets.  I’m not sure where the musical chairs will stop but I’m enjoying the ride.”

Gaines: Retail Rebounding to Pre-Covid Level

“We’re almost back to pre-Covid level,” says Jason Gaines, Senior Vice President Retail Services and Team Lead at NAI Partners. “Retail took it on the chin in a more immediate way. Two months in, we had tenants who were having a hard time, in areas like day care, restaurants, other retail that was hit hard by Covid.  Now we have many savvy retailers coming here.  The issues now are more related to labor or equipment packages running late. Some clients are thinking of pushing out three to six months, waiting on steel prices to go down. Medical and dental is moving more quickly.  The low light is that with labor and equipment shortages, there are some frustrating delays. We have 100,000 people moving here a month, so that is 100,000 more sets of needs.

“We’re seeing much more thoughtful approaches to retail than ever.  Developers are building products that make better sense for communal needs,” says Gaines. “I have a huge new center, The Shops at Ventana Lakes, in Katy across from Paetow High School, at 23111 Stockdick School Road at Peak Road.  The centers are being built with outdoor patios and multiple drive through lanes for coffee, tacos, a quick breakfast on the way to school.  These amenities better accommodate the changing demands of the community.  The high school looks more like a community college,” says Gaines. “They have an enrollment of 3,100.”

“In the past, I would have been told to put down two rectangles and do what I do – this is much different,” he says.

Gaines says restaurants are scrambling to reinvent themselves.  “A Chick-fil-A in Irvine, Calif. now offers three lanes, with one lane dedicated to an automated system to fill orders from Door Dash, Uber Eats. We’re seeing the rise of Gopuff and 7now, a delivery service that is part of 7 Eleven.”

Gaines notes that working class tenant Ross Dress for Less has a 2 million SF distribution warehouse in West Houston. “I’m doing two deals putting in new Ross Concepts within five miles of that center. Ross is in the business of selling stuff to people. It’s a big confidence boost.”

Rushing: Houston’s Industrial Strength

Some of the hottest news came from senior vice president Holden Rushing in the Industrial Services area. “In the second quarter, demand is outpacing a supply of more than 9 million SF,” says Rushing. “In the third quarter, there’s 11.6 million SF in demand.  Prior to this, 7 million was the average quarterly demand. With e-commerce having such a massive impact, we have a lot of big distribution coming to Houston. Developers are looking further out to find land with utilities and rents are fairly high. The Port is showing record numbers of inbound containers and they are doing a good job of turning the ships.  That, along with expansion of the channel and oil at more than $80 a barrel, this is an exciting time on the manufacturing side.  We are now becoming a strong national market and Houston is taking its spot on the national stage.”

Boyles: Office Tenants Deliberate Deals

NAI Partner Dan Boyles says tenants are taking more time to analyze their needs.  “Depending on their size and number of employees, they are looking at how to be adaptive to the new work environment.  That is reducing some footprints but we’re not seeing this across the board. I have some tenants considering expansion.”

Nov. 7, 2021 Realty News Report Copyright 2021

For more about Texas real estate, check out the book Houston 2020: America’s Boom Town – An Extreme Close Up  by Ralph Bivins. Available on Amazon  http://tiny.cc/4a2g6y  

Houston 2020 Ebook version  https://tinyurl.com/4xm7z8b5      

File: Houston Real Estate Story

Photo Credit: Ralph Bivins, Realty News Report Copyright 2021

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