Saturday, October 4, 2008

Houston Hurricane IKE meets Bubba and a pick up truck

They come from Arkansas, Florida, and South Carolina and all corners of the United States to help out. They chase disaster after disaster to provide moisture removal, debris removal, and tree & chain saw services. Anyone with a pickup and trailer can go into business to help in the massive disaster cleanup that has besieged our city. It has put pressure on the Federal, State and City to provide services for the influx of these helpers and they in turn fill up the hotel, RV parks and take on office space and ware house space to house their temporary business. We need them, we are glad to have them and the problems they some times bring.

Houston was all ready a tight commercial real estate market prior to the Hurricane Ike. Warehouse rates and office services centers have been leasing space at such a rapid pace that brokers and developers were in high gear to keep up with the demand from the oil & gas services company that have explode here with a price of $120.00 + barrel of oil. Now we have clients who lost there offices in the hurricane competing with the influx of day labor companies and mold remediation companies. It makes a tight market even tighter. Any new project on the drawing board has shut down due to the tight credit market and bank melt down. Will the “NO BANKER LEFT BEHIND BILL” help our city recover is anyone’s guess, you got to remember for very square foot of additional office space the major oil & gas firm commit to, all their service companies, such as , accounting, public relations, and law firms must keep up and expand too. This was keeping Houston on track to help pace positive absorption numbers to near record levels again in our 2008 commercial real estate economy:

Mid-Year 2008
A National Leader
Total payroll employment growth grew by 71,100 jobs in Houston--a 2.8% rate of growth--for the 12 months ending April 2008. This far exceeds Houston's long-term average employment growth of 41,000 jobs.
The Houston metro unemployment rate was 3.8% in April 2008, down from 3.9% a year ago and a cyclical high of 7.6% in the summer of 2003. The national unemployment rate was 5.0% in April.

Office Market: Mid-Year 2008
Office Market Conditions Remain Healthy
The Houston office market showed continued growth at mid-year 2008, with the overall vacancy rate ticking down to 10.7%. This expansion reflects the areas's strong job growth and the robust performance of Houston's core industries. Rents continued to rise and as a result, the construction pipeline swelled to 10 million SF, a 32% increase from the previous quarter. Investment sales volume increased after a sluggish first quarter.
Highlights:
· Net absorption of office space in the Houston metro area remained strong, totaling 984,000 SF in the 2nd quarter 2008, bringing 1st half 2008 net absorption to 1.8 million SF. Houston is on pace to slightly exceed the long-term average annual absorption of 3.5 million SF.
· Available sublease space increased by 79,000 SF in the Houston metro area during the 2nd quarter 2008 and represents just 0.6% of standing inventory.
· The overall office vacancy rate in the Houston metro edged down to 10.7% at mid-year 2008, from 10.9% in the 1st quarter and 11.3% a year ago. The direct vacancy rate is 10.1% at 2nd quarter 2008, down from 10.3% in the 1st quarter and 10.5% a year ago.
· There is 10.0 million SF of office space under construction or renovation in the Houston metro area at mid-year 2008, up from 7.6 million SF in the 1st quarter and 5.0 million SF a year ago. 23% pre-leased, up from 19% in the 1st quarter and down from 24% a year ago.
· Houston office deliveries (including renovations) totaled 1.8 million SF in the 1st half of 2008, compared to 3.8 million SF in all of 2007. 74% was leased upon delivery.
· Class A office rents rose by an annualized rate of 13.2% in the 1st half of 2008, while Class B rents rose by an annualized rate of 6.9%. Class A asking rents averaged $27.16/SF, full service; Class B asking rents averaged $19.00/SF, full service.
· Office investment sales totaled $662 million during the 1st half of 2008, down 31% from the $962 million recorded in the same period in 2007. Sales prices averaged $165/SF in the 1st half of 2008, up from the $147/SF in the 1st quarter and $148/SF in 2007.

Industrial Market: Mid-Year 2008
Modest Absorption
Highlights:
· Net absorption of industrial space totaled 1.9 million SF in the 2nd quarter of 2008, bringing the 1st half total to 3.4 million SF, significantly lower than the 7.4 million SF recorded in the 1st half of 2007.
· The overall Houston metro industrial vacancy rate held steady at 5.4% at mid-year 2008 from the previous quarter, but edged down from 5.5% a year ago
· There is 7.1 million SF of industrial space under construction in metro Houston at mid-year 2008, down from 7.4 million SF in the 1st quarter and 7.8 million SF a year ago.
· Deliveries of industrial space in Houston totaled 3.6 million SF in the 1st half of 2008, down from 7.1 million SF delivered in the same period last year.
· Industrial rents held steady in the 1st half of 2008.
· Industrial investment sales volume totaled $79 million in metro Houston in the 2nd quarter of 2008, bringing the 1st half 2008 total to $123 million -- well below the $467 million recorded in the same period last year. Industrial sale prices averaged $120/SF in the 2nd quarter of 2008, compared to $67/SF in the 1st quarter.

Retail Market: Mid-Year 2008
Population and Job Growth Continue to Fuel Retail Demand
Highlights:
· The Houston metro area’s population grew from 4.74 million people in 2000 to 5.54 million in 2006, an increase of 16.9% in six years.
· The Houston metro area gained 7,500 retail jobs over the 12-month period ending April 2008 -- a 2.9% increase. With 262,900 employees in the metro area, the retail industry reflects a thriving local economy, despite a nationwide slowdown in the retail sector.
· The Houston metro area provides its residents with a wide variety of retail options with 31.8 SF of retail space per capita -- well above the national average of 20 SF and third-highest amont U.S. metro markets. Houston's retail inventory will be receiving a boost in the near future with the aid of several high profile developments currently under construction.
· Houston’s retail vacancy decreased to 17.1% in the 1st quarter of 2008 from 17.4% at year-end 2007 and 17.2% one year ago.
· Retail rents experienced a slight decrease in the 1st quarter of 2008 to $1.62/SF/month from $1.63/SF/month at year-end 2007, a quarterly decrease of 0.6%.
· Retail sales in 2007 totaled a record $83.76 billion in the Houston area, up 6.9% from 2006. From 1997 through 2007, retail sales have grown at a compounded 2.5% each year.
Houston and NASA put a man on the moon from this town, no large or small hurricane will stop the entrepreneur sprit that drives this town forward into the 21st century. We have been dodging the hurricane bullet for several years now, it was just our turn and the city withstood the pain then showed the true metal of what we are made of and why people come from all over the world to live and work here. We are use to these growing problems in a modern day city that has become our 4th largest. The old bumper sicker “ GOD PLEASE SEND US ANOTHER OIL BOOM, WE PROMISE NOT TO SCREW THIS ONE UP” are coming back around on the bumpers of cars here. We pray and hope all of Hurricane Ike’s wrath on our fair city will just blow through as we pick up and move forward again because Texas loves a bubba, no matter where they come from!!

For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net or www.edayres.com