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www.boyarmiller.com
The 5th Annual
Houston Commercial
Real Estate Markets:
What’s Ahead for 2012
Breakfast Forum
December ...
www.boyarmiller.com
Office Market
Brandi McDonald
Newmark Knight Frank
Third Quarter 2011
183M SF, 8th Largest Office Market in the Nation
Source: Newmark Knight Frank, Research Group, Class A ...
Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics
Two years have passed since the end of the Great Re...
The Dow Jones Industrial Average, the Standard & Poor's 500 and corporate profits have each experienced around 40% growth ...
United States, Nonfarm Business, Output Per Hour
Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics
Th...
United States, Profits From Current Production, Seasonally Adjusted at Annual Rates (billions)
Source: Newmark Knight Fran...
 Business investment is gaining strength (non-defense capital goods
orders increased 2.4% in the month of September)
 Re...
United States, Total Nonfarm, Not Seasonally Adjusted
The BLS reported that the number of job openings in September was 3....
Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics
United States, Not Seasonally Adjusted
The BLS repo...
Length of Recession
Months from Peak Employment to Employment Uptick
November 2011
*Excludes Detroit
Source: GHP and U.S. ...
*Excludes Detroit
Source: GHP and U.S. Bureau of Labor Statics
Depth of Recession
% Jobs Lost During Recession
November 20...
Source: GHP and U.S. Bureau of Labor Statics, November 2011
Total Jobs Lost
Listed by Population Size
Metro Area Jobs Lost...
Percent of Recovered Jobs
Percent of Recovered Jobs through September 2011
Houston vs. Top 10 Metros
Source: GHP and U.S. ...
Houston MAS Job Recovery
Through August 2011
Midway Point
* Transportation, Warehousing and Utilities
Source: GHP and Texa...
1990 Through March 2011
AnnualAverageWorkingRigs
Source: Baker Hughes, Inc; Nov 2011
U.S. Rotary Rig Count
Dollars per Barrel
Source: Newmark Knight Frank Research, U.S. Department of Energy
• According to the U.S. Department of ...
United States, October 2011
Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics
Unemployment Rate by St...
U.S. Shale Plays
Bakken
Gammon
Niobrara-
MowryHilliard Baxter
Mancos-Niobrara
Niobrara
Niobrara FM
Mancos
Cane Creek Gothi...
National
Vacancy Rate: 16.4%
National Rates 3Q 2011
Source: Newmark Knight Frank Research Group; 3Q 2011
Office Vacancy Ra...
Source: Newmark Knight Frank Research Group, Class A & B Buildings
Net Absorption (SF)
Houston Metro Area Q3 2011
Historical Houston Absorption and Vacancy
Houston Metro Area Q3 2011
Average Asking Rent & Vacancy
Source: Newmark Knight Frank Research Group, Class A & B Buildings
Houston Metro Area Q3 2011
*Class A Office Only (Medical Excluded)
Source: Newmark Knight Frank Research Group
Class A Off...
New Developments
3009 Post Oak
SKANSKA
302K Delivery 1Q 2013
2200 Post Oak
BBVA Compass
380K Delivery 2Q 2013
842 W Sam Ho...
Source: Newmark Knight Frank Research Group; Class A and B
Submarket Comparison
Size (MSF) Vacancy % Vacancy (MSF) Rate (C...
2012 Forecast
Vacancy
Absorption
Lease Rates
New
Construction
Job Growth
www.boyarmiller.com
Land Development,
Homebuildng & Multi-
Family Markets
Joel Marshall
Trendmaker Development Company
17,100 16,500
55,700
66,300
11,100
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Austin Fort Worth Dallas Hous...
Houston's Historical
and Projected Population
5,000,000
5,500,000
6,000,000
6,500,000
7,000,000
7,500,000
2006
2007
2008
2...
Houston's Historical
Population Growth
-100,000
-50,000
0
50,000
100,000
150,000
200,000
250,000
1970
1973
1976
1979
1982
...
Houston
Apartments – Supply v. Demand
-5,000
0
5,000
10,000
15,000
20,000
25,000
30,000
35,0001996
1997
1998
1999
2000
200...
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Sep-02
Mar-03
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
S...
$0.55
$0.60
$0.65
$0.70
$0.75
$0.80
$0.85
$0.90
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-...
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
80.0%
85.0%
90.0%
95.0%
100.0%
Class A Class B Class C Class D Total
Houston
Apartment...
National Economic Overview
30 Year Mortgage Rate
3.50%
5.50%
7.50%
9.50%
11.50%
13.50%
15.50%
17.50%
19.50%
Sep-73
Sep-75
...
3Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
4Q00...
3Q11 © Copyright Metrostudy 20113Q113Q11 © Copyright Metrostudy 2011
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
3Q02
1Q03
3Q03
1Q04
...
-3.89%
-2.27%
-2.04%
0.24%
-3.43%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
Houston Austin Dallas San Antonio Fort...
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08...
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
3Q99
1Q00
3Q00
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03...
2Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
0
200
400
600
800
1,000
1,200
<$100k $100k-
$125k
$125k-
...
2Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
0
10,000
20,000
30,000
40,000
50,000
60,000
3Q92
3Q93
3Q9...
2Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
National Comparison
Vacant Developed Lot, Months of Supply
3Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0...
2Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
0
5,...
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
1985
1987
1989
1991
1993
199...
3Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$45...
3Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
$150,000
$250,000
$350,000
$450,000
$550,000
$650,000
$75...
www.boyarmiller.com
Retail Market
Ewing King
Ewing King Commercial Real Estate
State of Local Economy
Houston, Texas: Population Growth
Houston continues to improve employment and outpace the
rest of the country despite the ...
• Among the nation’s 20 most
populous Metropolitan areas,
Houston has recovered the highest
percentage of jobs lost in the...
A Corporate Center for Business
Energy Capital
The Port of Houston
Houston Airport System (HAS)
The Texas Medical Center
•...
Houston Retail Markets at a Glance
Retail Breakdown
Houston continues to be
among the top cities in
the country for new retail
development. As retailers
seek...
Houston Retail Statistics
Market Occupancy
Retail occupancy rates are the highest they’ve been
since 2005 at 92.9% led by ...
Houston continues to
experience positive
absorption as development
continues to be on an as
needed basis with
speculative ...
eHoliday & Holiday Sales
Changing Market Conditions
Retailers have exhibited a “Flight to
Quality” mentality with the past three
years providing opportunity for those
typical...
Challenges Still Facing Us
• National consumer confidence continues to be dampened by
the fear of a double dip in the economy.
• Economic strain in t...
What’s Ahead
Grocery Anchored Developments 2011 Openings
Houston-area
Market Leaders
Wal-Mart
Supercenter
27.4% market share
Kroger
26....
Future Grocery Anchored Developments 2012 & Beyond
Houston-area
Market Leaders
Wal-Mart
Supercenter
27.4% market share
Kro...
Urban Mixed Use Projects
Last Year’s Projections
 Increase in number of tenants actively
seeking locations.
 Continued pressure on public retaile...
Outlook 2012
• New concepts will be drawn to the Houston
markets due to economic and population
growth.
• Increase in non-...
www.boyarmiller.com
Industrial Market
Welcome W. Wilson, Jr.
GSL Welcome Group
2010 2011
 499 million SF
 219,000 SF under
construction
 507.9 million SF
 1.977 million SF
under construction
U.S.
vs
Houston
Population
Growth
Questions & Answers
BoyarMiller Breakfast Forum: The Houston Commercial Real Estate Markets - What's Ahead for 2012
BoyarMiller Breakfast Forum: The Houston Commercial Real Estate Markets - What's Ahead for 2012
BoyarMiller Breakfast Forum: The Houston Commercial Real Estate Markets - What's Ahead for 2012
BoyarMiller Breakfast Forum: The Houston Commercial Real Estate Markets - What's Ahead for 2012
BoyarMiller Breakfast Forum: The Houston Commercial Real Estate Markets - What's Ahead for 2012
BoyarMiller Breakfast Forum: The Houston Commercial Real Estate Markets - What's Ahead for 2012
BoyarMiller Breakfast Forum: The Houston Commercial Real Estate Markets - What's Ahead for 2012
BoyarMiller Breakfast Forum: The Houston Commercial Real Estate Markets - What's Ahead for 2012
BoyarMiller Breakfast Forum: The Houston Commercial Real Estate Markets - What's Ahead for 2012
BoyarMiller Breakfast Forum: The Houston Commercial Real Estate Markets - What's Ahead for 2012
BoyarMiller Breakfast Forum: The Houston Commercial Real Estate Markets - What's Ahead for 2012
BoyarMiller Breakfast Forum: The Houston Commercial Real Estate Markets - What's Ahead for 2012
BoyarMiller Breakfast Forum: The Houston Commercial Real Estate Markets - What's Ahead for 2012
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Transcript of "BoyarMiller Breakfast Forum: The Houston Commercial Real Estate Markets - What's Ahead for 2012"

  1. 1. www.boyarmiller.com The 5th Annual Houston Commercial Real Estate Markets: What’s Ahead for 2012 Breakfast Forum December 9, 2011
  2. 2. www.boyarmiller.com Office Market Brandi McDonald Newmark Knight Frank
  3. 3. Third Quarter 2011 183M SF, 8th Largest Office Market in the Nation Source: Newmark Knight Frank, Research Group, Class A & B Buildings Source*: Represents all of Texas. The Texas Workforce Commission www.texasworkforce.com Houston Office Market Trends Vacancy 16.3%, down from 16.9% Q3 2010 Absorption 1,026,124 absorbed in Q3, 4th positive qtr Lease Rates Rents stabilized, trending up in desired markets New Construction 1.4M SF under construction Job Growth 286,200 jobs added over the last year*
  4. 4. Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics Two years have passed since the end of the Great Recession, so the recession has now been over for a longer period than its duration. So far, the recession has taken a slower recovery path than any other the previous four U.S. recessions. United States, Total Nonfarm Employment, % change from recession end Recession End Post-Recession Employment Growth
  5. 5. The Dow Jones Industrial Average, the Standard & Poor's 500 and corporate profits have each experienced around 40% growth since the end of the recession, with corporate profits setting new historical highs on a quarterly basis. Total nonfarm payroll employment has been essentially unchanged since the end of the recession, while average hourly earnings have managed a 4.6% improvement and personal income has increased 4.0%. In addition, productivity has increased almost 30% since the end of the recession. United States, June 2009 to Current Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics, Bureau of Economic Analysis, Yahoo! Finance Recovery of Major Economic Indicators
  6. 6. United States, Nonfarm Business, Output Per Hour Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics The BLS reported that nonfarm business sector labor productivity in the U.S. increased at a 3.1% annual rate in the third quarter of 2011, compared to a decreased of 0.1% in the second quarter and an increase of 2.1% in the third quarter of 2010. For the third quarter of 2011, output increased 3.8% and hours worked increased 0.6%. Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers. Productivity
  7. 7. United States, Profits From Current Production, Seasonally Adjusted at Annual Rates (billions) Source: Newmark Knight Frank Research, Bureau of Economic Analysis Corporate profits in the U.S. continue to break quarterly all-time highs. According to data from the BEA, from the end of the recession in June 2009 to August 2011 corporate profits increased 53.5%. The BEA reported that profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $61.2 billion in the second quarter, a 3.3% quarterly increase, compared with an increase of $19.0 billion in the first quarter. Over the last year, corporate profits have increased 8.5%, or $151.8 billion. Corporate Profits
  8. 8.  Business investment is gaining strength (non-defense capital goods orders increased 2.4% in the month of September)  Retail sales reached a historical high of $395.5 billion Consumer confidence is on the decline in the U.S. (Lower than any level in the 40-year history of the index outside of the most recent recession) Possible Factors: - European Debt Crisis - Protests against Wall Street and the government - Negative tone of economic news reports Consumer Confidence Source: U.S. Bureau of Labor Statistics
  9. 9. United States, Total Nonfarm, Not Seasonally Adjusted The BLS reported that the number of job openings in September was 3.4 million, up from 3.1 million in August. Although the number of job openings remained below the 4.4 million openings when the recession began in December 2007, the level in September was 1.2 million openings higher than the most recent trough in July 2009 and the highest level since August 2008. (There were 4.2 unemployed persons for every job opening in the U.S. in September 2011.) Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics Job Openings
  10. 10. Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics United States, Not Seasonally Adjusted The BLS reported that the average duration of unemployment in the U.S. was 39.8 weeks in October 2011, compared to 41.0 weeks in September and 34.9 weeks in October 2010. The historical high average, on records going back to 1948, was 41.4 weeks, reported in April 2011. Of the 13.9 million people unemployed in the U.S. in October 2011, 43.8% were unemployed 27 weeks and longer, a total of 5.7 million persons. 18.6% of unemployed persons had been unemployed less than 5 weeks, 22.8% of unemployed persons were unemployed 5 to 14 weeks, and 14.8% were unemployed 15 to 26 weeks. Duration of Unemployment
  11. 11. Length of Recession Months from Peak Employment to Employment Uptick November 2011 *Excludes Detroit Source: GHP and U.S. Bureau of Labor Statics
  12. 12. *Excludes Detroit Source: GHP and U.S. Bureau of Labor Statics Depth of Recession % Jobs Lost During Recession November 2011
  13. 13. Source: GHP and U.S. Bureau of Labor Statics, November 2011 Total Jobs Lost Listed by Population Size Metro Area Jobs Lost* Metro Area Jobs Lost* New York -389,600 Detroit -480,900 Los Angeles -549,300 Phoenix -246,900 Chicago -340,800 San Francisco -169,300 Dallas -155,900 Riverside -172,500 Philadelphia -144,700 Seattle -141,500 Houston -121,200 Minneapolis -115,900 Miami -245,900 San Diego -101,600 Atlanta -224,800 St. Louis -83,900 Washington -95,800 Tampa -138,900 Boston -104,600 Baltimore -70,400 *Seasonally adjusted
  14. 14. Percent of Recovered Jobs Percent of Recovered Jobs through September 2011 Houston vs. Top 10 Metros Source: GHP and U.S. Bureau of Labor Statics
  15. 15. Houston MAS Job Recovery Through August 2011 Midway Point * Transportation, Warehousing and Utilities Source: GHP and Texas Workforce Commission
  16. 16. 1990 Through March 2011 AnnualAverageWorkingRigs Source: Baker Hughes, Inc; Nov 2011 U.S. Rotary Rig Count
  17. 17. Dollars per Barrel Source: Newmark Knight Frank Research, U.S. Department of Energy • According to the U.S. Department of energy, the spot price of West Texas Intermediate (WTI) crude oil, a traditional benchmark for the U.S. market, fell to $85.32 in October from $85.52 in September, although remained higher than the $81.89 reported one year ago. The 10-year high for the WTI was $133.88 in June 2008. • The spot price for Brent, a global benchmark, was $109.55 in October compared to $112.83 in September and $82.67 one year ago. Crude Oil Prices
  18. 18. United States, October 2011 Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics Unemployment Rate by State
  19. 19. U.S. Shale Plays Bakken Gammon Niobrara- MowryHilliard Baxter Mancos-Niobrara Niobrara Niobrara FM Mancos Cane Creek Gothic Mancos Pierre- Niobrara Barnett- Woodford Avalon- Bone Spring Eagle Ford Barnett Haynesville- Bossier Tuscaloosa Woodford Woodford- Caney Excello- Mulky Fayetteville Monterey- Temblor Kreyenhagen Monteray Antrium Collingwood New Albany Floyd-Neil Consauga Marcellus & Utica United States, October 2011 Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics EIA, July 2011
  20. 20. National Vacancy Rate: 16.4% National Rates 3Q 2011 Source: Newmark Knight Frank Research Group; 3Q 2011 Office Vacancy Rates
  21. 21. Source: Newmark Knight Frank Research Group, Class A & B Buildings Net Absorption (SF) Houston Metro Area Q3 2011
  22. 22. Historical Houston Absorption and Vacancy
  23. 23. Houston Metro Area Q3 2011 Average Asking Rent & Vacancy Source: Newmark Knight Frank Research Group, Class A & B Buildings
  24. 24. Houston Metro Area Q3 2011 *Class A Office Only (Medical Excluded) Source: Newmark Knight Frank Research Group Class A Office Under Construction Submarket SF % Pre-Leased West Loop 682,000 26% Energy Corridor 452,000 51% The Woodlands 302,000 33% Total 1,436,000 36%
  25. 25. New Developments 3009 Post Oak SKANSKA 302K Delivery 1Q 2013 2200 Post Oak BBVA Compass 380K Delivery 2Q 2013 842 W Sam Houston CityCentre Three 120K Delivery 3Q 2012 West Loop Energy Corridor 945 Bunker Hill – Nexen Bldg Metro National 332K Delivery 3Q 2012 The Woodlands Three Waterway The Woodlands Development Company 302K Delivery 1Q 2013
  26. 26. Source: Newmark Knight Frank Research Group; Class A and B Submarket Comparison Size (MSF) Vacancy % Vacancy (MSF) Rate (Class A) CBD 41.0 Far Northwest 24.0% CBD 6.3 CBD $36.21 West Loop 33.7 Greenspoint 15.6% West Loop 4.7 West Loop $30.74 Energy Corr. 21.7 Westchase 15.3% Energy Corr. 3.1 Energy Corr. $29.86 Westchase 12.9 CBD 15.3% Northwest 2.5 Westchase $28.53 Far Northwest 10.5 Energy Corr. 14.4% Westchase 2.0 Greenway $28.47 Greenspoint 10.3 Westloop 13.8% Greenspoint 1.7 Far Northwest $26.05 Greenway 8.7 Greenway 12.5% Greenway 1.1 Greenspoint $20.95
  27. 27. 2012 Forecast Vacancy Absorption Lease Rates New Construction Job Growth
  28. 28. www.boyarmiller.com Land Development, Homebuildng & Multi- Family Markets Joel Marshall Trendmaker Development Company
  29. 29. 17,100 16,500 55,700 66,300 11,100 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Austin Fort Worth Dallas Houston San Antonio Texas Economy MSA – Annual Job Growth September 2011 Source: Texas Workforce Commission
  30. 30. Houston's Historical and Projected Population 5,000,000 5,500,000 6,000,000 6,500,000 7,000,000 7,500,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 People IRF Forecast TSDC - Scenario 1 TSDC - Scenario 2 Population Source: Census, Metrostudy, Institute for Regional Forecasting and Texas State Data Center
  31. 31. Houston's Historical Population Growth -100,000 -50,000 0 50,000 100,000 150,000 200,000 250,000 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 People Population Growth Source: Census, Metrostudy, Institute for Regional Forecasting and Texas State Data Center
  32. 32. Houston Apartments – Supply v. Demand -5,000 0 5,000 10,000 15,000 20,000 25,000 30,000 35,0001996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Multi-FamilyUnits New Units Completed Apartment Absorption Source: Apartment Data Services
  33. 33. 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 OccupancyRate Houston Apartment Occupancy Source: Apartment Data Services
  34. 34. $0.55 $0.60 $0.65 $0.70 $0.75 $0.80 $0.85 $0.90 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 RentalRate Houston Apartment Rental Rates Source: Apartment Data Services
  35. 35. 50.0% 55.0% 60.0% 65.0% 70.0% 75.0% 80.0% 85.0% 90.0% 95.0% 100.0% Class A Class B Class C Class D Total Houston Apartment Occupancy - Class Source: Apartment Data Services
  36. 36. National Economic Overview 30 Year Mortgage Rate 3.50% 5.50% 7.50% 9.50% 11.50% 13.50% 15.50% 17.50% 19.50% Sep-73 Sep-75 Sep-77 Sep-79 Sep-81 Sep-83 Sep-85 Sep-87 Sep-89 Sep-91 Sep-93 Sep-95 Sep-97 Sep-99 Sep-01 Sep-03 Sep-05 Sep-07 Sep-09 Sep-11 Source: Freddie Mac 20-yr Average = 7.00%
  37. 37. 3Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 4Q00 2Q01 4Q01 2Q02 4Q02 2Q03 4Q03 2Q04 4Q04 2Q05 4Q05 2Q06 4Q06 2Q07 4Q07 2Q08 4Q08 2Q09 4Q09 2Q10 4Q10 2Q11 Annual Starts - Fort Bend County (Black) & Katy ISD (Red)
  38. 38. 3Q11 © Copyright Metrostudy 20113Q113Q11 © Copyright Metrostudy 2011 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 MonthsofSupply Houston MLS Months of Supply Source: MLS National Average = 8.5 months
  39. 39. -3.89% -2.27% -2.04% 0.24% -3.43% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% Houston Austin Dallas San Antonio Fort Worth Houston Home Appreciation – 2Q11 Data Source: FHFA
  40. 40. 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Postings Foreclosures Houston Harris County Foreclosures Source: Foreclosure Information & Listings Service
  41. 41. 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 3Q99 1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 Annual Closings Annual Starts 3Q11 YTD = 13,838 New Home Starts Houston Annual Starts and Closings Trends
  42. 42. 2Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011 0 200 400 600 800 1,000 1,200 <$100k $100k- $125k $125k- $150k $150k- $175k $175k- $225k $225k- $300k $300k- $500k >$500k FinishedVacantUnits Houston Finished New Home Inv - Price 3Q-10 to 3Q-11
  43. 43. 2Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011 0 10,000 20,000 30,000 40,000 50,000 60,000 3Q92 3Q93 3Q94 3Q95 3Q96 3Q97 3Q98 3Q99 3Q00 3Q01 3Q02 3Q03 3Q04 3Q05 3Q06 3Q07 3Q08 3Q09 3Q10 3Q11 AnnualLotDelivery&Absorption Annual Lot Absorption Annual Lot Delivery Houston Lot Delivery vs. Absorption
  44. 44. 2Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011 National Comparison Vacant Developed Lot, Months of Supply
  45. 45. 3Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 55.0 0 2,000 4,000 6,000 8,000 10,000 12,000 0-$99 $100- $124 $125- $149 $150- $174 $175- $224 $225- $299 $300- $499 $500- $999 VDLMoS AnnualStarts&VDL Houston VDL Supply and Annual Starts by Price Range
  46. 46. 2Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 0 5,000 10,000 15,000 20,000 25,000 0 to 5 6 to 11 12 to 23 24 to 47 48 to 71 72+ VDLMoS Starts&VDL Annual Starts Ann Starts VDL VDL MoS Houston VDL Supply by Annual Starts Rate Subs with 24+ Annual Starts: 9,604 Annual Starts 13,012 VDL – 16.3 MoS 178 MoS
  47. 47. 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2,000,000 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 National Economic Overview Single Family Starts – NAHB Projections Source: NAHB
  48. 48. 3Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000 $550,000 2Q00 2Q01 2Q02 2Q03 2Q04 2Q05 2Q06 2Q07 2Q08 2Q09 2Q10 2Q11 CA FL TX NV AZ $200K Home Buying Scenario National Markets $200,000 Home Scenario National Markets Data Source: FHFA, Metrostudy
  49. 49. 3Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011 $150,000 $250,000 $350,000 $450,000 $550,000 $650,000 $750,000 2Q00 2Q01 2Q02 2Q03 2Q04 2Q05 2Q06 2Q07 2Q08 2Q09 2Q10 2Q11 CA FL TX NV AZ China $200K Home Buying Scenario National Markets + China Data Source: FHFA, Metrostudy
  50. 50. www.boyarmiller.com Retail Market Ewing King Ewing King Commercial Real Estate
  51. 51. State of Local Economy
  52. 52. Houston, Texas: Population Growth Houston continues to improve employment and outpace the rest of the country despite the continued, unprecedented population growth.
  53. 53. • Among the nation’s 20 most populous Metropolitan areas, Houston has recovered the highest percentage of jobs lost in the recession. At current pace, Houston will return to peak employment by the end of the year. • While the National Unemployment Average is 9.1%, Houston maintains an unemployment rate of 8.1%. • 2011 job growth was 79,500. • 2012 and 2013 projected job growth 80,000-100,000 per annum. Unemployment Rate - Houston vs. U.S Houston employment rose 2.6% over the past year compared to the rest of the nation where employment only rose 0.9% in 2011.
  54. 54. A Corporate Center for Business Energy Capital The Port of Houston Houston Airport System (HAS) The Texas Medical Center • Energy Capital: Home to more than 5,000 energy related firms, Houston is considered the Energy Capital of the world. • The Port of Houston: The Port of Houston ranks #1 in the United States in volume of foreign tonnage and has an $118 billion statewide economic impact. • Houston Airport System (HAS): HAS, the fourth largest multi-airport system nationally & the sixth largest worldwide, has a regional economic impact of $24.2 billion. • The Texas Medical Center: The Texas Medical Center is the largest medical complex in the world & has an economic impact of $14 Billion. “The Houston market continues to face fewer market obstacles than most U.S. markets...Texas’s pro- growth policies and business friendly environment will continue to benefit local housing markets and allow for 2011 to show...growth.” Metrostudy
  55. 55. Houston Retail Markets at a Glance
  56. 56. Retail Breakdown Houston continues to be among the top cities in the country for new retail development. As retailers seek to expand market share and increase sales, Houston is more attractive than ever due to the strong employment and population growth. Neighborhood and Community Centers make up the vast majority of Houston Retail Shopping Centers.
  57. 57. Houston Retail Statistics Market Occupancy Retail occupancy rates are the highest they’ve been since 2005 at 92.9% led by inner loop properties. Average Market Rents, currently at $14.41 psf, appear to have bottomed out and are gradually climbing again. Despite the recent downturn, current retail rents are still above the 8 year historical average. Market Rents
  58. 58. Houston continues to experience positive absorption as development continues to be on an as needed basis with speculative building almost non-existent. Financing requirements and prudent growth plans for developers have created a market place where Class A demand is higher than supply which continues to assist in positive increases of market rents. Absorption Completions and Net Absorption
  59. 59. eHoliday & Holiday Sales
  60. 60. Changing Market Conditions
  61. 61. Retailers have exhibited a “Flight to Quality” mentality with the past three years providing opportunity for those typical Class B tenants to get into Class A space at relatively same rental rates. Retail Trends • Continued effort of retailers to reduce the size of stores. • Retailers and Service Users are focusing on Low Income & Hispanic Markets. • Retailers are creating their own, discounted product lines to reach a wider audience and compete with the online retailers like Amazon. • Retailers are offering No-Interest Financing options to attract consumers back into their stores. • Internet Sales currently make up approximately 11% of total sales and are increasing annually at a rate of 10% - 15%.
  62. 62. Challenges Still Facing Us
  63. 63. • National consumer confidence continues to be dampened by the fear of a double dip in the economy. • Economic strain in the EU continues to take its toll on U.S. Markets. • Pre-recession 2007 leases are expiring, leaving landlord’s unsure about their ability to re-lease the space at equivalent rents. • 1,200 CMBS mortgages with a balance of $17.3 B are set to mature in 2012. Borrowers will likely need to contribute addition equity to secure five year financing. • Tenant Rep Brokers and small in-line retailers are challenged in securing good locations due to the limited supply. • Difficult to secure construction financing due to higher pre- leasing and equity requirements. • Reduced number of active Anchor Tenants (not including grocers). Challenges Ahead
  64. 64. What’s Ahead
  65. 65. Grocery Anchored Developments 2011 Openings Houston-area Market Leaders Wal-Mart Supercenter 27.4% market share Kroger 26.2% market share H-E-B 17.7% market share Randalls <6.0% market share
  66. 66. Future Grocery Anchored Developments 2012 & Beyond Houston-area Market Leaders Wal-Mart Supercenter 27.4% market share Kroger 26.2% market share H-E-B 17.7% market share Randalls <6.0% market share
  67. 67. Urban Mixed Use Projects
  68. 68. Last Year’s Projections  Increase in number of tenants actively seeking locations.  Continued pressure on public retailers to grow externally through new store expansion.  Legacy assets begin developing junior anchor boxes and complementary inline space adjacent to existing anchored developments.  Few if any full price retail centers from ground up.  Outlet center will be announced either in the League City/Texas City submarket.  Class A, small retail space will be in tight supply and high demand.  Rental Rates gradually increasing in the second half of the year.  Continued obsolescence of older and poorly positioned retail centers - candidates for adaptive reuses.
  69. 69. Outlook 2012 • New concepts will be drawn to the Houston markets due to economic and population growth. • Increase in non-retail uses in traditional retail locations. • Shift to a Landlord market in Class A space. • The arrival of Specialty Grocers. • Gradual Increase in construction cost due to increased demand for materials. • Wholesale Clubs will announce a few new locations. • Plans for expansion of existing traditional malls. • Multiple construction starts for Mixed-Use developments both inside and outside the Loop. • Increase in Foreign Capital being invested in Houston.
  70. 70. www.boyarmiller.com Industrial Market Welcome W. Wilson, Jr. GSL Welcome Group
  71. 71. 2010 2011  499 million SF  219,000 SF under construction  507.9 million SF  1.977 million SF under construction
  72. 72. U.S. vs Houston
  73. 73. Population Growth
  74. 74. Questions & Answers
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