HOUSTON – Houston’s commercial real estate market will have its ups and downs in 2016, but the city has something to boast about – namely, the largest industrial construction project in the nation, says Trey Odom, CEO of Avera Cos.
With 4 million square feet under roof, the $420 million Daikin Industries HVAC manufacturing plant under construction in northwest Houston will employ 4,000 people.
“That is the largest industrial project under construction in the nation,” Odom told the annual BoyarMiller outlook breakfast at the Houstonian Hotel Thursday.
Odom, a Houston-based developer specializing in industrial real estate, said the long-awaited Panama Canal expansion will supply some uplift to Houston real estate next year. But the main propeller will be a massive industrial expansion at the chemical plants near the Port of Houston and along the coast.
“The industrial market in Houston is extremely healthy,” Odom said.
Currently some $100 billion of expansion projects are under development at chemical plants on the Texas coast, said Jimmy Hinton, managing director of research for the HFF firm.
“We have more manufacturing in Houston than in any other city in the country,” said Hinton, another speaker at the BoyarMiller outlook event.
Hinton said foreign capital has not given up on Houston, despite the decline in oil prices. Investors from Canada, Israel and South Korea, plus other nations, all have money ready to be deployed into Houston realty investments.
Another bright spot for Houston is the retail center market, said Jonathan Brinsden, CEO of Midway. Retail occupancy is at 96.6 percent and rents are high. A slow pace of retail construction has kept the market tight, he said.
In the office markets, some 9 million square feet remains under construction in the Houston area. The build-to-suits will be fine. But the spec buildings are only 32 percent leased, Brinsden said, and when those buildings hit the market, it will jack up the vacancy rate.