This too shall pass…
We never needed a reason to work, we just needed the guidelines and opportunity to do so. We are all resilient, hard working and determined as Texans and Americans.
Real estate is cyclical. and when times are good people think it could last forever…it doesn’t, so enjoy it while it lasts and endure when things are bad. It is fleeting and will pass. Even though at times it seems that it is taking longer than usual, people find a way to make it work, find solutions and live on. Be grateful for what you have and persistent for what you want…. On to the update….
Warehouse Demand is Surging…
E-commerce is one of the main drivers pushing industrial warehouse demand and development. Industrial activity is robust and returning to strong levels sooner than other sectors. We are already seeing that e-commerce is the tailwind enabling this push in demand for additional space located near or along major routes.
This increase in demand is causing developers to scour the area for “developable” land to get ahead of the curve and meet the new expectations of consumers and investors.
The main hurdle is that finding a property that is zoned for industrial at the right price that is not affected by the new floodplain and price increases due to demand is becoming an increasingly difficult task in the southeast submarket. Competition on sites from overall demand have caused pricing to rise making developers get creative and look further out to find acceptable sites. Issues in the supply chain have arisen with labor shortages, which could and will cause issues for some consumers.
Highway 225, Beltway 8 & Independence Parkway/Underwood Road, all see activity due to demand…
The increase in new space is going to cause a short term vacancy increase, but it will be absorbed quicker than you think. Barbour’s Cut, Bayport and the Houston Ship Channel are seeing an increase in activity with new construction. Along with the increase in demand for space, Houston’s Port activity is seeing an increase in activity as well due to Long Beach Terminal being back logged. This adds to Houston’s Terminals reaping the benefits.
Market Highlights
- Trammell Crow built a 350,000 SF tilt-wall distribution facility on Pasadena Boulevard in Deer Park.
- Underwood Port Logistics Center — 400,000 SF + Spec Tilt Wall distribution built on Underwood Road (Independence Parkway)
- Vigavi and Centerpoint properties 400,000 SF Cross Dock Spec Tilt Wall distribution facility planned on Highway 225 near Preston Road and currently under construction
- Monument Business Park on Independence Highway (Battleground Road) has 45,000 – 171,600 SF of distribution space potential
- Beltway-225 Business Park on Beltway 8 have built out 2 additional crane ready manufacturing buildings
- Red Bluff Industrial on Red Bluff Road has 2 Dock High buildings for lease (59,000 SF+ & 95,000 SF+ respectively)
- Southeast Crossing on Pasadena Boulevard has 133,000+ SF for lease
Rail users can go East…
With rail lines in short supply or costly south of Highway 225 rail users are looking to Cedar Port Industrial Park (One of the largest industrial parks in the world) in Baytown for both BNSF and UP rail needs. There is also opportunities for barge users as well.
Suburbia is seeing activity…
Houston has and always will be a sprawling city. To this end, families that migrate to the suburbs or already there have need grocery stores, medical care and places to shop without a long commute.
Home Sales are actually in great shape for the time being…
HAR is reporting that homes sales are healthy. With low interest rates Buyers are still taking advantage of the opportunity. The catch is there the low supply of homes have made listings days on market shortened and a more competitive market for buyers.
The Grand Parkway (Highway 99) is on its final sections making use of the spawl indicative of Houston’s MSA…
Typically lower cost of living in the burbs provides enough incentive to the populace to move there and in turn they have more disposable income to spend on luxury goods and services, while usually the school districts also give suburbanites more for their tax money.
The Houston Association of Realtors (HAR) is reporting a shrinking supply for homes, meaning more housing is needed.
The FED has kept interest rates low…
Meaning for the time being (prognostications are that the Fed will raise rates at the end of the year or early 2022), that borrowing money is still historically at a low interest rate, and while COVID-19 caused unemployment to surge, but now that restrictions are lifted in the Lone Star State this has subsided, people are getting back to work and the curve is heading back up, people are ready to buy assets.
Pent up Money and Demand…
- We can already see the industrial activity coming from the deal pipeline.
- Investors have capital needing placement
- The search for “good dirt” remains at a high with Developers are scouring the area to find acceptable land to develop to meet the demand.
- Multifamily is working out the dichotomy of need, but odd financial situation, where deals mostly make sense, but the numbers have made the deal shelved for a period of time. This is beginning to change in a big way and lending is picking up and meeting the needs of the developers. The Houston MSA will see a significant increase in the number of deals done before the Fed is expected to raise rates.
Medical facilities are also finding homes in freestanding facilities and neighborhood centers. Finding an affordable center with enough parking component is key.
Retail picks up steam….
Multi-Family development is coming back…
Some Keys to understanding Surburbanites
- They love their cars (freedom of movement)
- They care about schools
- They like their space (while shopping and living)
- They enjoy having disposable income
These points are coming to the forefront and seeing our famous Houston urban sprawl take root along the grand parkway at all points.
More people can more easily work remotely, but still desire a “workplace” somewhere…
The world is shrinking. Access to all things is providing consumers and workers alike to be able to get what they need (albeit good or services or virtual meetings) at the click of a button (just make sure your camera and microphone is on during the meeting and that they are tuned off at the end of the meeting). Technology is providing a tailwind push in a key accelerating shift in the market. This is not a new concept, but the current issues facing us have provided a more obvious reckoning for everyone.
That being said, there is still a significant need for formal office to collaborate, build teams and mentally have work space to be productive. This need is causing a demand for office space separate and away from the home office.
Fairmont Parkway has seen a lot of activity
- K Hovnanian’s Parkway Trails in Full Swing – 400+ new single family homes and townhomes planned zoned to Deer Park ISD.
- The Pasadena Convention Center and Fairgrounds is expanding its footprint
- San Jacinto College expanded and built into their 9-hole golf course with a new oil and gas training center named “Lyondell Basell Center for Petrochemical, Energy, Technology”
- Pecan Park Sports Complex fully operational hosting games.
Overall Healthy Current Market conditions have Houston MSA still in good shape for the time being, but potential issues with rise in interest rates, supply chain woes/labor shortages and inflation need to be watched closely.
- Supply and demand pressure still a Sellers market for most assets (industrial, land, multi-family, self-storage, residential)
- Median home prices rising
- New construction for homes, industrial & multi-family strong
- Mortgage rates historically low (for the time being)
- Economy growing (almost back to pre-pandemic levels)
- Texas employment expanded at an annualized 4.4 percent rate in August following a 9.0 percent Jump in July according to the Dallas Federal Reserve
Like what you just read?