For a state that has weathered its share of storms, Texas was unprepared for the record-setting deep freeze that hit in mid-February and the initially estimated $50 billion in damages. “According to Enki Research disaster modeler Chuck Watson, the severe weather event could cost as much as $90 billion, making this the largest insurance claim event in history,” said public insurance adjuster Scott Friedson, CEO of Insurance Claim Recovery Support (ICRS). REDnews connected with Friedson while he was making the trek to Houston, where he was slated to inspect more than 35 different properties that week. “There is no insurance risk model that accounts for a catastrophic loss to an entire state, especially the state of Texas,” he says. Hurricanes, Friedson explains, typically cause damage along the coast. Even a hail storm or tornado has limited exposure. The freeze, on the other hand, stretched from the westernmost point of Texas to its easternmost point. “Many property owners are juggling pipe repairs, water damage mitigation, satiating tenant demands and dealing with their insurance claims simultaneously,” says Friedson, who exclusively represents commercial and multifamily owners, as well as management companies. “The carriers’ adjusters are coming as quickly as they can as policyholders are grappling with understanding their policy, as well as their contractual obligations in order to ensure a fair and prompt settlement.” Click to read more at www.rednews.com.
Like most major metro markets, Houston’s workforce was hit hard by the abrupt business shutdowns and ensuing economic downturn that followed last spring as the pandemic took hold. Sectors such as hospitality, construction and manufacturing took big hits. In total, the Houston metro area saw a loss of 350,000 jobs during the pandemic, a Cushman & Wakefield report shows, however, the city was able to recover just over 200,000 of those losses by the end of 2020. At its worst, office vacancies in Houston last year reached a staggering 25.5%. And ending 2020 with a vacancy rate of 24.1% meant that Houston continued to lead the nation in vacant office space into the new year. And despite the turmoil, the city’s economic outlook remains positive as forecasts see upwards of 70,000 jobs being added to the Houston economy in 2021. But how is the office market faring in 2021? It’s not looking as cheery. New numbers for this February from brokerage NAI Partners show that the needle has barely moved. As of last month, Houston’s total office vacancy rate was 23.9%. During the same period a year prior, the vacancy rate was 21.8%. Some other fast stats show leasing activity down by nearly half year-over-year between February 2020 and February 2021, going from 2 million square feet leased to 1.225 million leased respectively. Absorption is also in the red while over 4.277 million square feet of new office space remains under construction. Click to read more at www.rednews.com.
Joint venture partners Hines and Ivanhoé Cambridge have topped out Texas Tower, a 47-story, 1.1 million-square-foot Class AA office tower in downtown Houston. Currently the city’s largest office project under construction, the structure reached the milestone several weeks ahead of schedule. The tower is expected to be completed in the fourth quarter of 2021. Construction of the Pelli Clarke Pelli-designed skyscraper commenced in 2018. The following year, the project earned LEED Platinum Pre-certification under the v4 for Core & Shell Rating System. The energy-efficient development also aligns with WiredScore and WELL Building Standards. Once completed, the building will house Hines’ headquarters, slated to take up some 180,000 square feet. The tower is currently 40 percent leased to a variety of tenants, including global law firms Vinson & Elkins LLP and DLA Piper. The latter committed to a 31,000-square-foot, 14-year lease in early 2020. Situated at 845 Texas Ave., the site is well-located between the Central Business District, the Theater District, and the Historic District. Last January, Hines renamed 600 Travis St., the tallest building in Texas spanning 75 stories and 1.7 million square feet, and situated just adjacent to Texas Tower. The supertall structure is now known as JPMorgan Chase Tower after its anchor tenant signed a 250,000-square-foot lease at the location in mid-2020. Click to read more at www.cpexecutive.com.
Buffett’s Berkshire Hathaway Energy wants to build 10 electric plants in Texas, for use when demand peaks or other plants falter. And it’s the first time a price tag has been attached to a remedy since last month’s deadly storm. What would it cost to make the Texas electrical grid robust enough to weather a terrible winter storm? It would cost about $8.3 billion — if the state followed a proposal from the Oracle from Omaha, Warren Buffett. This year’s winter storm killed 111 people in Texas, the Department of State Health Services said Thursday. What’s being pitched by lobbyists for Buffett’s Berkshire Hathaway Energy might not be the only idea spawned by last month’s devastating statewide electrical outages, or even the best one. But it’s the first to price out the answer to a pressing question lawmakers are trying to solve in Austin: What would Texas have to do, and at what cost, to keep the lights and heat going if there’s another winter storm like the last one? The Nebraska cavalry has been working the Texas Legislature for a week and a half, according to The Texas Tribune’s Cassandra Pollock and Erin Douglas. The company’s proposal is for a Texas Emergency Power Reserve that would build 10 new natural gas-fueled power plants in the state. Those would be idle unless they were needed for times of peak demand — or when other electrical generation failed, as some did last month. It’s a slick presentation, complete with a poll and a slide deck that found Texans would pay $3 more every month to “significantly lower their risk of losing power during a winter storm.” As proposed, the new plants would be up and running by winter 2023. Click to read more at www.texastribune.org.
Between pandemic-related lockdowns and a freak cold snap that saw snowstorms and power outages across large sections of the state, Texas has had a rough 12 months between spring 2020 and 2021. But a big part of the country’s economic recovery will depend on how retail and hospitality fare as vaccinations increase and restrictions are relaxed. According to numbers from NAI Partners, Houston’s retail sector has certainly faced its issues in the last 12 months, but it’s certainly a long ways off from its office market, which ended 2020 with the highest vacancy percentage in the country. This February, Houston had a total retail occupancy rate of 93.6%, down slightly from 94.2% during the same period a year prior. Despite the slow churn of retail leasing, the Houston metro area did see an increase in rent prices, at $18.68 triple net average. A year prior, the price was $17.94. Rents have steadily risen over the last few years, starting as low as just over $16 triple net in February 2017.
However, absorption is down and deliveries are significantly lower with only 552,000 square feet of space going online in February 2021 versus nearly a million square feet in February the previous year. Just 590,000 square feet of space was absorbed over 43 buildings last month. Areas seeing the most construction activity include north Houston, the city’s inner loop, and northwest Houston. The regions with the least recent construction activity are the northeast and south. Big leases highlighted by NAI Partners include a 26,000-square-foot renewal at Vanderbilt Square by Barnes & Noble, a 22,500-square-foot deal for Burkes Outlet in Angleton, and a 15,000-square-foot lease by Aaron’s in Fairfield’s Jones Plaza.
March 2021 marks one year since the World Health Organization declared the COVID-19 outbreak a global pandemic, triggering a domino effect that has had a profound impact on Americans’ daily lives, as well as the commercial real estate industry. REJournals spoke to experts in the retail, office, multifamily and industrial fields to reflect on how each sector responded to the challenges posed by the pandemic and their expectations going forward.
RETAIL | “… everyone is so hungry …”
“Retail, more than other sectors of commercial real estate, offers its share of volatility and requires those of us who work in the sector to react and evolve quickly,” said Terry Ohnmeis, director at Cushman & Wakefield. He describes the industry as being at a peak in terms of occupancy, rent growth and overall vibrancy in the first quarter of 2020. Retail being “more nuanced” than other property types, Ohnmeis acknowledges some locationally challenged malls, but generally, if Class A space became available in “A” and “A+” locations, he said it instantly had a dozen offers on it. “This run actually extended longer than many thought it would and left us wondering when it would end and why,” Ohnmeis said. “Still, no one thought it would be a pandemic until the reality of COVID-19 hit.” Click to read more at www.rednews.com.