trends: houston cre market update

7/29/2019 Trends: Houston CRE Market Update

1/24

K.C. Conway, MAI, CREExec. Managing Dir. R.E. Analytics

Colliers [email protected]

Whats imPORTant in 2013?Reading of the Crystal Ball

TRENDS 2013January 29, 2013


2/24

2

Lets Start with a Review of 2012

Report Card on KCs 2012 Predictions ... 4 out of 5 or 80%.

r

U.S. GDP would Grow by 1.5% - 2%

Home Prices to bottom-out in 2012 Warehouse to be a Star Performer

Overall CMBS DQT to surpass 10%

X Cap Rate Compression would end.


3/24

3

For 2013, read the letters in KCs Eco. Alphabet Soup.

Look for direction outside Governmental data in places like NAHB, ONEI

NAHB Improved Mkt IndexHousing Recovery is real.

TX has most MSAs on NAHB IMI

with 18 (FL is #2)

Rail Time Indicators

by Association of Am. Rail Roads

ONEI On Numbers Eco Index

by Am Biz Journals.Quantify Recovering MSAs

TX key 4 MSAs ranked in top 20 &

Houston is #3

Dodge PipelineNew Construction

(Familiarize yourself with

new supply to jobs ratios)

MF is 8-9 jobs : 1 new MF

TX ratio in 2012 = 9.2:1

Company 10(q)s

Earnings reports are atreasure trove of info.

Why FED doesnt use in Beige

Book is a mystery to me.

MSA-level Job Gr.TX MSAs = 20% of Top 20 (Houston #2)

Journal of CommerceAn easy/cheap way to keep up

with Indl, Ports, etc.


4/24

TX and Houston by the Numbers / Rankings#1 is such a lonely number, so Houston is 1,2,3,8 Still room for improvement

4

#1 State on NAHB IMI, and Foreign Tr.Zone Imports & Exports. #2 in 2012 MSA-level job growth

#3 ranking in latest On NumbersEconomic Index & #5 by AFIRE.

#8 in TEU container cargo in N.Am., butMost Irreplaceable port by Colliers.


5/24

Those kind of numbers explain why Houston is AFIRE!Note: 4 of the 5 U.S. cities are all key port markets; & Indl R.E. #2 prfd property

5


6/24

MSA-level Job GrowthTX MSAs hold 4 of the Top-20 Rankings

6


7/24

NAHBs Improved Housing Markets

The Recovery is Broad-Based note the Gulf & East coast port MSAs

7

A post 2007 peak of 201 MSAsmake the Dec 12 list


8/24

8

Yr-End NAHB IMI

TX has most MSAs

with 18. Houston hasmost growth fromtrough of large TXMSAs.

FL ranks #2 among all

states with 15

CA ranks #3 (14)

Recovery in housing

will drive renewed

demand for all

commercial R.E. typesin the suburbs (nhood

retail, professional

services & small-bay,

multi-tenant indistrial

by contractors,

suppliers).

Housing Recovery will stimulate sub-office, retail & warehouse demand

NAHB/First American Improving Markets Index (IMI)

Permits Growth Prices Growth Employment Growth

Trough From Trough From Trough From

MSA Date Trough Date Trough Date Trough

Baton Rouge, LA* 01/31/09 1.4% 01/31/12 2.4% 02/28/10 1.5%

Houma, LA 03/31/10 4.2% 06/30/11 3.1% 06/30/11 6.5%

Lafayette, LA 02/28/09 2.3% 10/31/11 2.3% 01/31/10 15.4%

Lake Charles, LA 04/30/11 2.2% 11/30/11 1.7% 11/30/10 3.3%

Monroe, LA 03/31/09 2.4% 06/30/10 4.6% 09/30/09 3.2%

New Orleans, LA 11/30/05 0.5% 12/31/11 4.4% 02/28/10 1.9%

Shreveport, LA 01/31/09 1.3% 12/31/11 5.1% 08/31/10 4.3%

Beaumont, TX 12/31/05 0.7% 12/31/11 2.4% 12/31/09 2.0%

Brownsville, TX* 03/31/09 1.1% 05/31/11 3.3% 03/31/09 3.4%

College Station, TX* 10/31/10 2.5% 09/30/10 6.1% 01/31/08 3.0%

Corpus Christi, TX 01/31/11 3.3% 12/31/11 9.2% 11/30/09 6.3%

Dallas, TX 03/31/09 2.1% 02/28/11 5.7% 12/31/09 5.9%

Houston, TX 04/30/09 1.8% 08/31/11 9.7% 12/31/09 8.5%

Killeen, TX* 01/31/09 1.9% 01/31/12 4.3% 12/31/07 4.7%

Lubbock, TX 09/30/11 7.4% 09/30/11 2.8% 09/30/10 3.9%

McAllen, TX 01/31/09 0.2% 11/30/10 6.5% 12/31/07 5.7%

Midland, TX 04/30/09 2.4% 01/31/10 21.1% 08/31/09 20.6%

Odessa, TX 02/28/09 29.3% 10/31/10 13.7% 08/31/09 23.2%San Angelo, TX 12/31/10 1.1% 04/30/11 9.5% 06/30/09 8.7%

San Antonio, TX 04/30/11 2.6% 12/31/10 7.0% 09/30/09 5.1%

Texarkana, TX* 08/31/11 5.3% 01/31/10 2.4% 10/31/09 6.7%

Victoria, TX 09/30/10 6.2% 02/28/11 9.9% 11/30/09 4.8%

Waco, TX 04/30/09 1.5% 11/30/10 2.9% 01/31/12 2.8%


9/24

9

Recovering Markets ONEI November RankingsHouston ranks #3 TX has 4 of Top-20, and 6 in Top 65 (State with most in Top-10,25,50

r

ON NUMBERS ECONOMIC INDEX - January 2013 (Top 102 U.S. MSAs ranked by Am. Business Journal)

Rank

(Jan '13) MSA

Overall

Scorre

Prior

Rank

Rank

(Jan '13) MSA

Overall

Scorre

Prior

Rank

Rank

(Jan '13) MSA

Overall

Scorre

Prior

Rank

1 Oklahoma City 90.473 2 35 New Orleans 55.497 53 69 New York City 41.413 61

2 Austin 89.755 1 36 Charleston, S.C. 55.225 28 70 Orlando 41.14 72

3 Houston 82.627 3 37 San Francisco-Oakland 55.126 35 71 Allentown-Bethlehem, 41.042 524 Columbus 78.765 4 38 Madison, Wis. 54.432 45 72 Dayton, Ohio 40.867 74

5 Tulsa 77.922 6 39 Raleigh 54.285 39 73 Memphis 40.57 81

6 Provo, Utah 76.908 10 40 Albany, N.Y. 54.086 38 74 Philadelphia 40.422 76

7 Honolulu 74.037 17 41 San Diego 54.086 42 75 Sacramento 40.397 67

8 Omaha 72.577 5 42 El Paso, Texas 53.963 50 76 Bridgeport-Stamford, 38.244 80

9 Pittsburgh 72.304 9 43 Cleveland 53.714 41 77 Atlanta 37.898 82

10 Des Moines, Iowa 71.561 8 44 Wichita, Kans. 53.021 47 78 Los Angeles 37.65 83

11 Denver 70.052 11 45 Grand Rapids, Mich. 52.997 26 79 Stockton, Calif. 37.551 73

12 Dallas-Fort Worth 69.805 14 46 Greenville, S.C. 52.65 29 80 Worcester, Mass. 37.501 69

13 Boston 69.606 12 47 Harrisburg, Pa. 51.932 48 81 Bakersfield, Calif. 37.18 6614 Nashville 69.507 18 48 Birmingham 51.312 59 82 Springfield, Mass. 37.08 78

15 Salt Lake City 69.409 22 49 Boise, Idaho 50.893 44 83 Oxnard-Thousand Oa 34.357 97

16 Baton Rouge, La. 69.061 32 50 Buffalo 50.175 31 84 Miami-Fort Lauderdal 33.54 85

17 Little Rock, Ark. 68.541 7 51 Poughkeepsie, N.Y. 49.309 63 85 Augusta, Ga. 32.748 77

18 Ogden, Utah 68.195 16 52 Indianapolis 49.11 46 86 Detroit 32.724 88

19 San Antonio 67.775 21 53 Charlotte 49.086 55 87 Albuquerque 32.574 86

20 Louisville 67.156 13 54 Milwaukee 49.085 57 88 Virginia Beach-Norfol 32.55 95

21 San Jose 66.785 15 55 Portland, Ore. 47.799 51 89 Bradenton-Sarasota, 31.956 89

22 Lancaster, Pa. 63.096 27 56 Rochester, N.Y. 47.725 54 90 Cape Coral-Fort Myer 31.213 84

23 Cincinnati 62.75 23 57 Jackson, Miss. 46.807 58 91 Greensboro, N.C. 30.843 90

24 Washington 62.428 19 58 Syracuse, N.Y. 45.892 64 92 Lakeland, Fla. 30.842 87

25 Durham, N.C. 60.992 24 59 Richmond 45.546 65 93 Palm Bay-Melbourne, 30.322 92

26 Phoenix 59.308 36 60 Columbia, S.C. 45.496 43 94 Tampa-St. Petersbur 30.076 94

27 Scranton-Wilkes-Barre, Pa 59.185 20 61 Toledo, Ohio 44.976 56 95 Hartford 29.061 93

28 Portland, Maine 58.516 25 62 McAllen-Edinburg, Texa 44.334 70 96 Chicago 28.887 98

29 Chattanooga, Tenn. 58.046 49 63 Youngstown, Ohio 43.294 79 97 Las Vegas 27.253 100

30 St. Louis 57.452 34 64 Tucson 42.797 75 98 Jacksonville 26.907 91

31 Akron, Ohio 57.452 30 65 Baltimore 42.477 62 99 New Haven, Conn. 25.15 99

32 Seattle 57.131 33 66 Fresno, Calif. 42.204 71 100 Riverside-San Bernar 22.105 102

33 Minneapolis-St. Paul 56.735 40 67 Kansas City 41.833 60 101 Colorado Springs 21.213 101

34 Knoxville, Tenn. 56.042 37 68 Modesto, Calif. 41.634 68 102 Providence 20.694 96


10/24

10

Rail Time Indicators Manufacturing & TradeForget ISM, Empire State Mfg Index & FED Mfg Surveys go to the source!

Q. Why did rail cars in storage rise at YE?A. Impending ILA E-Coast port strike.


11/24

Dodge Pipeline New Supply is Distr-Ctrs & Logistics

Indl U/C 2013

32.1 msf

(not a lot)

8 states=45%of all constr.GA #1TN #2IN #3

75% Build-to-suit or largenew D-Ctr &Logistics Ctr

No Spec

risk in Indl

11

Construc tion Sq. Ft.

Cost ($ m) (000's) Completion

Estrella Logistics Warehouse Distribution Cent Phoenix AZ Underway 18.0 593 July-13Coldwater Depot Logistics Office/ Warehouse Avondale AZ Underway 20.0 509 March-13

Total Sq Ft Under Construction at Yr-End 2012: 1,493

FedEx Warehouse Distribution Facility Pacoima CA Underway 20.0 236 June-13Chino Logistics Center Chino CA Underway 12.0 300 February-13Whole Foods Market Distribution Center Richmond CA Underway 12.7 136 February-13


United Natural Foods Refrigerated Warehouse (De Aurora CO Underway 25.0 542 July-13FedEx Ground Distribution Center South Winds CT Underway 25.0 222 October-13Dollar Tree Distribution Center Windsor CT Underway 57.0 1,001 May-13Publix Warehouse & Distribution Center @ LeeVist Orlando FL Underway 100.0 970 October-14


Tractor Supply Distribution Center (Design/Buil Macon GA Underway 30.0 686 May-13

Lowe's Flatbed Distribution Center Rome GA Underway 80.0 1,451 April-13PPG Pittsburgh Paints Warehouse Bldg at Southp Fairburn GA Underway 30.0 300 April-13Home Depot Online Distribution Center Mcdonough GA Underway 91.1 1,000 April-13


Toro Distribution Center (Design/Build) Ankeny IA Underway 43.0 450 December-13FedEx Distribution Center Grimes IA Underway 19.0 186 March-13FedEx Distribution Center Romeoville IL Underway 15.0 239 September-13


Manufacturing/Distribution Building (PGP Internatio Evansville IN Underway 6.0 70 March-13IDI World Connect Building 1 At Ameriplex Indianapolis IN Underway 25.0 795 December-12


Coca Cola Distribution Facility (Pre-Engineere Joplin MO Underway 5.5 56 March-13Rubbermaid Warehouse & Distribution Center Brimfield To OH Underway 22.9 811 April-13Volkswagen Passat Parts Warehouse Kingston TN Underway 40.0 400 March-13Amazon Distribution Center Lebanon TN Underway 33.0 1,016 February-13Whirlpool Manufacturing and Distribution Facility Cleveland TN Underway 84.0 400 January-13

Total Sq Ft Under Construction at Yr-End 2012: 1847

Refrigerated Distribution Warehouse (Design/Build) Denton TX Underway 20.0 450 March-13Total Sq Ft Under Construction at Yr-End 2012: 749

Family Dollar Distribution Center Saint George UT Underway 80.0 820 June-13

US total 2,132 32,112

($ millions) SqFt 000s

Target DatesProject Title City State Phase


12/24

12

What is the Crystal Ball indicating for 2013?

Beware of Q1, but be prepared for a robust 2H2013.

GDP:Pulls back to 1% or less in 1H2013,

but Rebounds >2% in 2H2013(No Cash for Clunkers or housing tax

credit artificial stimulants).

Employment:

Focus on Labor Participationrate (63.6%), U-6 (14.4%), &

expect another year of 153k/mo.

job growth

U-3 could drop to 7% just on

workers losing Unempl. benefits.

Interest Rates:Get eer done in 2013!

2nd U.S. Debt downgrade >50%

FED balance sheet @ 20% US GDP

Monitor commodity prices.

Housing:The recovery is real!

NAHB IMI > 200 markets.

US Census Housing Occupancy

(50 MSAs 90% to 96%)

MF:Overbuilding Risk is exaggerated

Too much in just a few MSAs (DC)TX is OK: 1 unit : 9.2 jobs in 2012

Office:ICEE office MSAs still hot.

Recovery in housing will add to

suburban absorption. the 71.5msf of new office

construction is Med Office

Industrial:Ports will remain an imPORTant story!

Port Labor Strife not done Feb 6, 2013.Leasing activity remains robust

Dearth of new constr & assets for sale.


13/24

Colliers 2013 Industrial Warehouse Perspective

13


14/24

Colliers Yr-End 2012 Industrial Warehouse Perspective

14


15/24

15

r

www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012

www.colliers.com/us/insightsCRE.org/Publications/rei_absdetail.cfm?lid=1897&lparent_id=1892
http://www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012http://www.colliers.com/us/insightshttp://www.colliers.com/us/insightshttp://www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012http://www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012http://www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012


16/24

16

r

www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012

www.colliers.com/us/insights

How well do you know the U.S. Ports?Colliers recognizes 10 ports 2X a year for distinction beyond size
http://www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012http://www.colliers.com/us/insightshttp://www.colliers.com/us/insightshttp://www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012http://www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012http://www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012


17/24

17


18/24

Intermodal, Intermodal, Intermodal it means

Industrial Now Turns Especially to Rail to Move Ocean Distribution Across Land

18


19/24

Office Space Trends

Source: Colliers Atlanta

19

Note:The old ratio (growth in officeemployment means X squarefeet of office absorption) is out

the window.The open space architecture ismoving the space per employeeratio from 1:300 to 1:250 to1:200.

That means a 20% growth in

office employment = no net newabsorption.


20/24

Colliers Yr-End 2012 Office Perspective

20


21/24

Office Space Trends: FIRE Vs ICEE markets

21Jan 23, 2013 Chicago fire: Building turns to ICE after fire.


22/24

22

The Multi-Family PerspectiveConstruction Activity & Costs Vs Vacancy & Cap Rates.

Is new construction overheating?New Supply under construction or in lease-up approximates 2007 activity.

Are higher costs being rationalized by Cap Rate compression andunrealistic rent growth? The cost per unit of new construction has increased 40%.


23/24

23

The Multi-Family PerspectiveA recent record MF sale in Denver is a warning sign for hot MF MSAs.

Ri k


24/24

Thank YouK.C. Conway, MAI, CREExec. Managing Director, R.E. Analytics

Colliers InternationalKC Conway@Colliers com

Risks:

Congress/political dysfunction

leads to 2nd Debt Downgrade

ILA Port Strike Impacts East& Gulf coasts ports February6, 2013; NW Grain ports in

Spring & West coast ports at

Yr-End

End of Bernanke Fed in 2013- Impact on interest rates & QE

Opportunities:

Housing Monitor NAHB IMI. Asurprise stimulant to small-space

warehouse users, like buildingcontractors & suppliers.

Job Gr in secondary MSAs fueledby ICEE sectors.

Industrial especially port & inland

distribution MSAs where retailersare remaking their supply-chains.

trends: houston cre market update

Documents