Register Real Estate Advisors

HOUSTON (CB Richard Ellis) – H-Town’s office market finished 2011 with more than three million sf of positive net absorption, reports CB Richard Ellis (CBRE) in its latest market analysis. The firm credits area job growth, increasing shale exploration activity and stronger oil prices for the surge in leasing. According to the report, predictions for the city’s 2010 employment gains of 13,700 were later revised to reflect the addition of around 40,000 more new jobs than anticipated. The Greater Houston Partnership’s figures show the city gained 170,700 jobs since economic recovery began. That’s 111.7 percent of the 152,800 jobs lost because of the recession. In addition, CBRE said employment forecasters expect 84,000 jobs to be added this year. Office space absorption in the early part of 2011 was the result of several large transactions that had been shelved during the recession. Fourth quarter absorption, on the other hand, was from many small to medium-sized deals. Class-A vacancy dropped 150 basis points from 12.14 in fourth quarter 2010 to 10.6 percent a year later. With the decreasing vacancy rate and shrinking Class-A available space, proposed developments and new construction are on the rise in the suburban markets.

HOUSTON (Houston Chronicle) – Real estate experts are optimistic about the Houston market’s prospects in 2012. Several recently shared their forecasts with Nancy Sarnoff of the Houston Chronicle.   Here’s what they had to say.

Housing
Houston is going to see somewhere around a 5 percent increase in home sales and maybe as much 2 or 2.5 percent increase in median price, according to Real Estate Center Research Economist Dr. Jim Gaines. He said that’s still lower than the historical norm, but those are better numbers than the last two or three years.

Housing Permits
Bohlke Consulting Group Vice President Gary Latz predicts that the annual 2011 number will be 21,500 permits. This momentum will carry forward into 2012 due to strong job growth and low interest rates. The firm projects a minimum of 5 percent growth in new-home permits for calendar year 2012 over calendar year 2011. This translates to nearly 22,600 permits.

Foreclosures
Both foreclosure postings and actual foreclosures in Harris County declined year-over-year from 2011 compared with 2010. Amanda LeCureux, managing partner with Foreclosure Information & Listing Service, expects these declines to modestly accelerate in 2012.

Apartments
Apartment Data Services President Bruce McClenny said available high-end units are scarce, and it will take up to 18 months before any significant number of new units become available. He said to expect around 9,000 units to be delivered in 2012 and approximately 10,000 units in 2013.

Office Space
Transwestern Executive Vice President J. David Baker expects continued strong job growth to generate four to six million sf of positive absorption. He said the only thing that might hold it to the low end is energy and energy engineering companies not finding enough qualified people.

Retail
Wulfe & Co. President Ed Wulfe expects to see at least a 25 percent increase, or approximately 1.5 million square feet, in new retail construction in 2012. This will exceed the total amounts built and opened in each of the previous two years. Active growth within Loop 610, particularly of supermarkets, will prevail.

2011 YEAR OF ‘SIGNIFICANT CHANGES’ FOR HOUSTON OFFICE MARKET

HOUSTON (Colliers International) – Houston’s office market has undergone significant changes in the past 12 months, benefiting from positive absorption, falling vacancy and rising rental rates, according to the year-end market report from Colliers International.

Increased leasing activity has been key to the year-end positive net absorption of 2.6 million sf citywide, the report said. It attributed the increased business activity to the city’s healthy economic climate. The Houston metropolitan area has gained about 77,000 jobs through November 2011, representing a 3 percent growth rate.

Overall vacancy levels decreased by 50 basis points to 15.5 percent from 16 percent, which was also the citywide overall vacancy rate one year ago. The average suburban vacancy rate decreased by 30 basis points to 15.3 percent from 15.6 percent, while the CBD vacancy rate decreased by 100 basis points to 16.6 percent from 17.6 percent.

On a year-over-year basis the citywide average rental rate increased by $0.12 per sf to $23.20. The citywide average rental rate also rose slightly to $23.20 from $22.93 per sf.

DALLAS (Marcus & Millichap) – In its third-quarter 2011 office market update, Marcus & Millichap predicts strong growth in DFW’s office-using
employment will support an overall reduction in vacancy rates and an increase in rents.

According to the firm’s 2011 DFW office forecast:

• Following a 2 percent gain last year, payrolls will increase by 90,000 positions in
  2011, marking a 3.1 percent increase. Office-using employment will grow by
  more than 28,000 spots, or 3.9 percent.
• Construction in the Metroplex will drop to 20,000 sf this year. Last year, 373,000 sf
  of office space came online.
• Vacancy will drop 140 basis points to 22.1 percent, which is 40 basis points
  above the ten-year average. In 2010, vacancy ticked up 30 basis points.
• Asking rents will climb to $19.42 per sf, increasing 1.1 percent from a year
  ago. Effective rents will reach $15.14 per sf, gaining 1.3 percent. Last
  year, asking rents and effective rents fell 0.9 and 1.9 percent,
  respectively.

HOUSTON (Houston Business Journal) – The recession has prompted a slowdown in new tenants and construction starts for the Energy Corridor, but experts say the submarket is faring better than others in the city and expect it to perform well in the long term.

In 2007, the overall vacancy rate stood at 6.4 percent. In 2008, that dropped to 5.7 percent, but by midyear 2009 it had risen to 8.8 percent. Net absorption was at 1.2 million sf in 2008, although by June 2009 it reached only 48,000 sf.

In the short term, the more than 1.25 million sf of space coming online — 33 percent of which is preleased — combined with low natural gas prices, will result in downward pressure on lease rates, mainly on these new buildings.

Class-A vacancy is expected to rise 50 percent this year, the highest increase in five years.

On the upside, recent expansion of I-10 along the corridor will provide increased access to future and existing buildings and promote growth.