History has proven that the U.S. economy is amazingly resilient to horrific events such as those that occurred during the past year. According to ITR Economics, the recovery of the economy is progressing nicely — consumers are happy and businesses are buying capital equipment. However, there are concerns that excessive government stimulus spending will cause runaway inflation in the future. There were lots of winners and losers in the pandemic. Industrial benefitted the most with the dramatic increase in e-commerce. Costar reports that the industrial market is very tight with low vacancies and increasing rents. Demand for distribution logistics space is at an all-time high. More and more warehouse space is needed closer to the consumer. The office market is struggling and may take years to recover as employees continue to work remotely until they have to return to work. Many Texas office buildings were already hurting with the struggling oil and gas market. Available office space is near record highs according to Costar. Click to read more at www.dmagazine.com.
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.
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.
Last year will definitely be one for the history and economics books. It affected everybody differently—for me, more walks with my dog, Tessa. I was even able to shed a few pounds—not enough, though! Working from home and not traveling meant more time with our families. Zoom, Webex, or Teams calls are the new norm and will forever change our private and professional lives. I know we all hope that this virus will soon be in our rearview mirror, so we move on with our lives and enjoy getting together with family, friends, and business colleagues to rebuild what this virus has destroyed. The commercial real estate industry started strong at the beginning of 2020. During this long-lasting and ongoing economic cycle, all the signs of another booming year were present until it was thrown into a screeching halt in March. Initially, the lockdown threw the commercial real estate market in a state of shock and confusion for a moment but low and behold. It offered some extremely positive surprises, especially as it relates to multifamily apartments. As a result, it manifested itself in the following capital market trends: An enormous amount of pent-up capital has made the pursuit for “for sale” product extremely competitive. Click to read more at www.dmagazine.com.