Surging Construction in Houston

HOUSTON – Ralph Bivins of Realty News Report: The latest edition of THE RALPH BIVINS PROJECT features an interview with Christen Vestal, principal at Vigavi Realty, a participant a major construction boom.

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RALPH BIVINS: We’re here today to talk with Christen Vestal, a principal who handles development at Vigavi Realty, a Houston-based developer of warehouses, etc. She is in a really strong sector right now, the industrial real estate market. Vigavi is construction buildings – and it’s happening all over the marketplace. We have 22 million SF of warehouses and industrial properties being built around Houston. That’s a lot. Why is it so strong and where are we going?

CHRISTEN VESTAL: One thing I have heard some people speculate is that the reason so much square footage is under construction is that it takes longer to complete because of supply chain demands. Products are not coming online as fast as they used to. This is a factor in the high numbers. There is also the skyrocketing level of absorption. In 12 months, the amount of absorption has been over 30 million right now. That is historically bigger than anything we’ve ever seen. If you’re a developer, and you see that kind of absorption, all it does is bolster more and more development. As long as we keep seeing deals being done, people will keep kicking off new projects. This is playing a big factor in the large amount of square footage under construction right now.

RALPH BIVINS: When it’s going this strong, everyone wants to do one. One thing we know about developers is that they are very optimistic. Even if the market is very overbuilt, they say “Wow! But my project is a little different. My project is going to work.”

CHRISTEN VESTAL: Well, our projects really are different.

RALPH BIVINS: (Laughs)…. So, what is Vigavi up to right now?

CHRISTEN VESTAL: We’ve got a lot of things in our pipeline. We’ve got a bunch of new projects and land sites we closed on during the past six months. There’s the 400,000 SF Park 225 project out in southeast Houston. This is a 400,000 SF building with frontage on 225 just west of the Beltway. This is the area we call the 225 Corridor. It is one of the only greenfield sites available. We felt really excited to get the site and put the property back into production. If you look at the 225 Corridor, the vacancy rate and available property sites are extremely, extremely low. We are looking to deliver this project at the end of December. There is a lot of activity going on in the project site and that is our top priority right now.

We also have lot of other smaller projects in and around the city in the works. We have some 100,000 SF and 200,000 SF buildings. One is a 200,000 SF building under construction, a Ford sales location in the morth market. We feel very lucky to have a Ford sales place that is still pursuing the sale of Ford products, considering the increase in interest rates that has taken place in the middle of the project, which has had an impact on Ford sales. But we have decided to solidify this strategy despite the interest rate increases that have occurred.

RALPH BIVINS: Interest rates are skyrocketing, inflation is skyrocketing. I believe we are in a recession. Two consecutive quarters of negative GDP has always defined a recession. Is the overall economy going to deflate momentum here in Houston?

CHRISTEN VESTAL: Great question. Houston, specifically, has a lot of headwinds. This includes the impact of all the people moving here from California. People are rerouting their supply chains through the Port of Houston. Ask anyone at the port and they’ll say we have two or three more years of runway left – and so many new requirements are coming. They are putting new infrastructure in place to accommodate the bigger container ships.

A lot of things are working in our favor in Houston. When you think about it, Houstonians have always believed we are affected less by global situations; that we tend to better withstand global things.

We are in the southeastern market, where 46 percent of the city’s absorption has taken place during the first part of the year. We are now in Q-2 and that figure is huge. It really shows the activity of the port. To see about 50 percent of absorption happening in that one submarket is really extraordinary.

RALPH BIVINS: A lot of container ships from China that arrive in California ports are blocked. Someday, people may say: “Let’s go to Houston and quit trying to unload ships in Los Angeles and Long Beach in Southern California.” That sounds like growth potential.

CHRISTEN VESTAL: The Port of Houston is working on Project 11 improvements to widen and deepen the Houston Ship Channel.The initial phase involved the investment of $165 million. And, over the next five years, another $2 billion of infrastructure – a massive number – will be added. Houston has really strategically positioned itself to be a place that will benefit from everything that is happening in the supply chain and in California. We’ve seen that.

We had a building available for sale in southeast Houston. We called it the Southeast Crossing, a 130,000-SF structure. We put it up for sale and it was under contract about 45 days before we completed the project. During that waiting period, we got three other offers – all from California firms – that wanted to move to Houston. We had multiple backup offers. Eventually, we sold to a company from Huntington Beach, Calif., which wanted to move its operations to Houston. It is a tool company.

About Christen Vestal and Vigavi Realty

Christen Vestal has been a principal of Vigavi Realty in Houston since 2021. She is also a senior development associate, overseeing the acquisition of property for creation of new industrial facilities for specific clients or for speculative development. She has a Master of Business Administration degree from the A.B. Freeman School of Business at Tulane University and a bachelor’s degree in chemistry from the University of St. Thomas. Vigavi Realty is a privately held industrial real estate investment and development firm based in Houston.