Houston CRE Market Fundamentally Solid

by CoyDavidson on November 7, 2012


Houston Market Reports – 3Q 2012

The long-time and highly respected Houston real estate journalist Ralph Bivins published an article this week making the case that Houston has one of the best — if not the best — overall real estate markets in the country.

While, being somewhat of a homer, I agree you can make the argument that Houston is the strongest commercial real estate in the nation. Some may make a plausible argument for another market, but Houston is undeniably one of the healthiest commercial real estate markets in the country. Market fundamentals have improved significantly since Houston emerged from the recession driven by strong job growth despite an anemic recovery in the national economy. The real question is can Houston maintain the momentum going into 2013?

Here is a recap of the office, industrial and retail sectors in Houston for the third quarter of 2012:


Houston’s Healthy Economy Boosts Office Leasing Activity. Houston’s strong job growth has boosted office leasing in 2012. Third quarter leasing activity reached 2.6 million SF, 1.5 million SF of which was in Class B product. The Houston metropolitan area added 89,500 jobs between August 2011 and August 2012, an annual increase of 3.5% over the years prior job growth. Further, Houston’s unemployment fell to 7.0% from 8.6% one year ago which has bolstered annual Houston area home sales by 20.0%…more


Houston’s Year-to-Date Absorption Nearing 4M SF. Houston’s industrial market remains one of the ten healthiest U.S. industrial markets with low vacancy, stable rental rates and positive absorption. Houston posted 931K SF of positive net absorption in the third quarter, pushing the year-to-date total to 3.97M SF. Leasing activity reached 3.2M SF in the third quarter, pushing the year-to-date total to 9.9M SF. Despite the positive net absorption, the addition of new inventory combined with inventory RBA corrections, caused Houston’s average industrial vacancy rate to increase by 10 basis points from 5.1% to 5.2% in the third quarter…more


Houston’s Retail Vacancy Rate Remains at 7.2%. Although 120,000 square feet of new retail inventory was added to the market during the third quarter, Houston’s retail vacancy rate remains at 7.2%. Another 1.1M square feet of retail space is currently in the construction pipeline, due to deliver over the next 6 months. Houston’s retail market posted 127,000 square feet of negative net absorption in Q3 2012, the majority of which was caused by larger tenants such as Cloth World and Bally Total Fitness closing select locations in neighborhood centers. Some of the tenants expanding in the market include Anna’s Linens, Charming Charlie, and Planet Fitness…more

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