colliers international houston trends 2017

2017

0

5,000

10,000

15,000

20,000

25,000

30,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Texas Drilling Permits

Energy

2017

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Rotary Rig Count

North America Texas

Energy

2017

“For every oilfield job created – two jobs are created in Houston” - Dr. Ray Perryman, the Perryman Group - 2012

Jobs

-111

49,800

83,200

118,600

89,800

117,800

15,200 14,800

-20,000

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2009 2010 2011 2012 2013 2014 2015 2016

Houston-Sugar Land-Baytown Annual Job Growth

2017

-5.0%

-1.7%

-7.5%

-2.0

-1.3%

-0.3%

0.8%

2.3%

1.6%

3.7%

-15,000 -10,000 -5,000 0 5,000 10,000 15,000 20,000

Construction

Professional and Business Services

Mining and Logging

Manufacturing

Other Services

Information

Financial Activities

Government

Trade, Transportation and Utilities

Education and Health Services

Houston 2016 Annual Job Growth

Energy

An estimated 80,000+ energy industry jobs lost after 2014

Jobs

2017 Houston Office – 230.8M SF

Houston’s office inventory doubled between 1982-1988 causing the vacancy rate to soar from 5.7% to 28.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

$0

$20

$40

$60

$80

$100

$120

1980

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2015

YTD

2016

Houston Office Vacancy WTI Crude Oil Annual Average Price

Avg. Annual WTI Crude Oil Price Houston Historical Office Vacancy

doubled office

inventory

2017

Office Big Picture – End of Q4

• Total Market – 230,820,000 SF

• Vacancy up 40 basis points Q3 – Q4

• Vacancy up 220 basis points Y-Y

• Negative net absorption decreased Q3 to Q4 from -300,000 SF to -100,000 SF

• Available sublease space contracted Q3 – Q4

• Construction pipeline increased marginally Q3 – Q4 but decreased significantly Y-Y

• No deliveries in Q4


11.4M SF of Available Sublease Space Q4 2016 available sublease space decreased for the first time since Q2 2014


Forecast

Vacancy rates should level off in 2017 and rents will remain flat

Confidential – Colliers International 2016

2017

Average Class A Vacancy: 18.1%

Houston Office Class A Submarket Vacancy

Q4 2016 Vacancy Rate 0.0% - 16.1%

16.2% - 18.1%

18.2% - 20.1%

20.2% - >


2017 2017

Average Cap Rate (Yield) Average Price ($) Per SF

Data Source:

Houston Office – 230.8M SF

Sales by Total ($) (mil)

0

1,000

2,000

3,000

4,000

5,000

6,000

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15 Q4 '16

Rolling 12-mo. Total Quarterly Vol.

0

50

100

150

200

250

300

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15 Q4 '16

Houston United States

3%

5%

7%

9%

11%

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15 Q4 '16


http://www.rcanalytics.com/


2017 2017

Industrial Big Picture – End of Q4


• Vacancy low at 5.6% up 10 bps Q3 – Q4 ;

• Vacancy up 60 bps Y - Y

• 9.1M SF absorbed in 2016. Daikin Applied America + 3.9M SF in the NW

corridor.

• Several large B2S distribution facilities under construction –

FedEx 800,000 SF in the NW Outlier corridor Two 500,000 SF buildings for Ikea in the ESE

Far corridor.


2017 2017

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

$5.00

$5.50

$6.00

$6.50

$7.00

$7.50

Houston Average Rent Houston Average Vacancy

Houston Industrial – 534.9M SF

Forecast


2017

Average Industrial Vacancy: 5.6%

Houston Industrial Submarket Vacancy Q4 2016 Vacancy Rate 0.0% - 3.6%

3.7% - 5.6%

5.7% - 7.6%

7.7% - >


2017 2017

Sales by Total $ (mil)

Data Source:


Houston Industrial – 534.9M SF

0

500

1,000

1,500

2,000

2,500

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15 Q4 '16


0

20

40

60

80

100

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15 Q4 '16


3%

5%

7%

9%

11%

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15 Q4 '16




2017 2017 Retail Big Picture – End of Q4


• Absorption down due to limited (quality) available space

• 2.4M SF under construction, 75% pre-leased

• Galleria upscale renovation sparked by high-end tenants moving to River Oaks District.


2017 2017

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Houston Average Vacancy

Houston Retail – 281.6M SF

Forecast


2017 2017 Retail Under Construction

2.4M SF 75% Pre-Leased Grand Parkway Dominant Largest Projects: Fairfield Town Center Simon 374,000 SF 100% Pre-Leased Paragon Outlets Lightstone 300,000 SF


2017

Active Larger (Anchor) Tenants

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjr8szfhs_JAhWFSCYKHa_-CdAQjRwIBw&url=http://www.storebrandsdecisions.com/news/2011/08/23/h-e-b-to-add-two-joe-vs-smart-shop-stores&psig=AFQjCNH0VuZLqFxkrGvYMCPN-X3IwU_u5Q&ust=1449759930866093


2017 2017



Data Source:

Houston Retail – 281.6M SF

0

500

1,000

1,500

2,000

2,500

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15 Q4 '16


0

50

100

150

200

250

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15 Q4 '16


3%

5%

7%

9%

11%

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15 Q4 '16




2017 2017

Multifamily Projects Under Construction

15,933 units in 61 projects #1 - 2016 #3 - 2017


2017 2017 Multifamily Big Picture – End of Q4

Total Market – 626,027 Units

Absorption is down – Demand is stabilizing

Under Construction – Inner Loop Hot Spot

Developers pushing new projects to 2018


2017 2017

80.0%

85.0%

90.0%

95.0%

100.0%

$600

$700

$800

$900

$1,000

Houston Average Rent Houston Average Occupancy

Houston Multifamily – 626.0K Units

Forecast


2017 2017

Data Source:

Average Cap Rate (Yield) Average Price ($) Per Unit


Houston Multifamily 537.8K Units

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15 Q4 '16


020,00040,00060,00080,000

100,000120,000140,000160,000

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15 Q4 '16


3%

5%

7%

9%

11%

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15 Q4 '16




2017 2017

• Consultants back log continues to dwindle.

• Some firms are branching out supporting markets outside Houston while others are supplementing national account requirements with local personnel.

• The general contracting community chasing new markets to supplement the lack of new ground up projects as well as the tenant improvement sector.

• Sublease office tenant improvement market has limited significant construction allowances.

• Residential construction continues to thrive in “premium” locations. Medical and retail have not been adversely affected by the current downturn.

• The number of proposals received in individual trades has increased, pointing to increased interest in upcoming work.

• Companies are looking to trim costs without affecting production. This has not translated to any significant decrease in recognized cost.

• Long lead delivery times for critical path material and equipment continues to drive completion dates.

Construction Comments


2017

Office

Retail

Industrial

Apartment

Phase I Recovery

Phase II Expansion

Phase IV Recession

Phase III Oversupply

Rent Increasing

Rents Decreasing

Above Long-Term Avg.

Occupancy

Below Long-Term Avg. Occupancy

SELL

HOLD

BUY

Houston Commercial Real Estate Market Cycle

Thank you, have a great 2017.