DALLAS – Texas employment will grow 2.1 percent this year, according to the Texas Employment Forecast by the Federal Reserve Bank of Dallas. Based on the forecast, the state will add 263,700 jobs this year. Employment in December 2019 will reach 12.9 million. This prediction comes after incorporating September 2019’s annualized employment growth of 0.7 percent and a decrease in the leading index. “After strong growth in June and July, Texas jobs decelerated in August and September,” said Keith R. Phillips, Dallas Fed assistant vice president, and senior economist. “The weakness in oil and gas extraction is spilling over to other sectors such as transportation and warehousing, which experienced job losses in both August and September. “Manufacturing employment continues to grow at a good pace, however, in part driven by continued strength in petrochemical and refining activity. Construction activity also remains robust.” Click to read more at www.recenter.tamu.edu.
Vacancy rate at 21.6%: The vacancy rate in the Houston office market was close to unchanged quarter-over-quarter, up 10 basis points from Q2 2019. The amount of vacant office space on the market is approximately 51.1 million sq. ft.—comprised of 47.6 million sq. ft. of direct space and 3.5 million sq. ft. of sublease space. The Central Business District vacancy rate is at 24.9%, up slightly from this time last quarter at 24.7%, while the Energy Corridor vacancy rate is at 32.7%, down 70 basis points from 33.4% in Q2 2019. Net absorption moved into positive territory at 58,000 sq. ft. compared to this point last quarter when the total was negative 700,000 sq. ft. The increase was primarily due to significant move-outs in Q2 2019 that included HP vacating 260,000 sq. ft. at 11403 Compaq Center W. Dr. and BP vacating nearly 195,000 sq. ft. at Three Eldridge Place in the Energy Corridor. Of the almost 2.5 million sq. ft. currently under construction—57% of which is being constructed downtown, about 35% of that space has been spoken for. The overall Houston average asking full-service rent has steadily grown over the past years to its current rate of $29.32 per sq. ft., while the Central Business District is averaging $41.41 per sq. ft. Click to read more at www.naipartners.com.
Takeaway: Instead of restrictive red tape controls (such as zoning) the City of Houston is unique among big cities in that it lets ‘The Market’ control development. When there is a deal that the City wants but it is not quite viable, after in-depth study, the City, with approval by the Mayor and Council, may offer incentives to ensure the deal happens. This often takes place in underdeveloped neighborhoods that are hard for developers to ‘sell’ to their equity investors or lenders. If the deal is beneficial to the City, the City has a number of economic tools to help make it happen.
Andy Icken, who has had a long and successful career developing for Friendswood/ExxonMobil and the Texas Medical Center, has been called the City’s “Development Concierge”, as he meets with various parties to begin the process of identifying projects good for Houston and Houstonians
• Incentives are only offered if otherwise a desired project would not quite work
Click to read more at www.rednews.com.
Rent prices in Houston are growing the slowest among major Texas cities, according to new data. At midyear, the average rent in Greater Houston climbed just 0.7% year-over-year to $1,045, according to ApartmentData.com. That compares to an increase of 2.4% in Dallas/Fort Worth, 3.3% in San Antonio and 3.4% in Austin. Bruce McClenny with ApartmentData.com said it still goes back to Harvey, which pushed up rents across Houston and ended an apartment glut. “So developers and investors said, wow, maybe it’s time to go back to Houston,” McClenny said. “And it was probably a little earlier than they should have come back because it was not normal market conditions that got their attention.” Click to read more at www.houstonpublicmedia.org.
Fueled by the rapidly growing e-commerce sector, increased activity at the Port of Houston, and the city’s continued high population growth, demand for industrial real estate product in Houston has kept vacancy rates low and pushed the construction pipeline to an all-time high of 21.2 million square feet across the metro. While industrial construction activity has been dominated by build-to-suit activity over the past few years, developers are modifying their strategy to get ahead of requirements with a wave of speculative construction. As a result, the current industrial construction pipeline is 74% speculative space, totaling 15.7 million square feet set to deliver over the next 18 months – an increase of 268% year over year. Click to read more at www.transwestern.com.
During Q1 2019, top leasing transactions totaled 36% more square feet than Q1 2018. This activity was concentrated in the CBD (31%), Energy Corridor (30%), North Houston (22%), and West Loop / Galleria (14%). 87% of tenants leased Class A properties. While no office space was delivered during Q1 2019, the construction pipeline added Park Place River Oaks, a 207,000 sq. ft. office tower in the West Loop / Galleria submarket. Total space under construction increased to 2.4 million sq. ft. Click to read more at www.cbre.us.