The Houston Commercial
Real Estate Markets:
What’s Ahead for 2014
Breakfast Forum

www.boyarmiller.com
December 5, 2013
Land Development,
Homebuildng &
Multi-Family Markets
Will Holder
Trendmaker Homes

www.boyarmiller.com
If Change is good,
then this must be
great!
The pendulum always
moves fastest in the
middle.
We are in a period
when the pendulum is
moving very quickly!
“I think I may have
liked the recession
better?”
Evolving MPC
Sales Leaders
Changing School District Perceptions
Super Low Existing Home Supply
Lot Bidding by Land Developers
More Builder Owned Land
Longer Outlook on Deals
Lots of New Builders/Brands and
Acquisitions and Mergers
• Toll Brothers
• Shea Homes
• MI Homes
• Sitterle Homes
• Megate...
Challenged System-wide Capacity
Human Talent Shortages
Including executives,
employees, trades and
craftsmen
Repurposing Land
1706 Calumet
Market Study-The Villages of Timbergrove
Target Market Area and Competition
The Development-The Villages Of Timbergrove
Recreation Center
Dog Park
Welcome Center
Splash Pad
Fitness Park
Detention Po...
Two Demographic Bubbles
Federal
Regulation
Challenges
Evidence of Surface Connectivity for Texas Gulf Coast
Depressional Wetlands
Bradford P. Wilcox & Dex D. Dean & John S. Jac...
“Galveston BayKeeper is
evaluating legal options to protect
prairie-pothole wetlands on the
Upper Gulf Coast of Texas.”
At issue is the nature of the
connection between these wetlands
and “traditional navigable waters,”
such as Armand Bayou. ...
Galveston BayKeeper contends, as
academic research has shown, that
these wetlands are hydrologically
connected to traditio...
What’s staying
the same?
Houston is still a spec
home market.
School perception still
drives home demand!
Houston is still a
supply rich market.
Jobs Are Driving
Home Demand
Not Low Interest Rates
Houston’s new
home value, quality,
complexity and
finish is still the best
in America!
Retail Market
Jay K. Sears
NewQuest Properties

www.boyarmiller.com
Annual Job Growth
U.S. Consumer Sentiment Index

Source: www.sca.ir.umich.edu “Surveys of consumers Thomson Reuters University of Michigan”
Retail Trade Sales

Source: U.S. Census
Holiday Sales

Forecast

Online / Mobile Shopping

 NRF expects sales in the months
of November and December to
marginall...
Best Buy Annual Sales

Best Buy Quarterly Comparable Store Sales - Continuing Operations
Fiscal Years 2011-2014
January Fi...
Kroger 2nd Quarter Highlights

Reports Record Second Quarter Earnings Per Share
 Kroger's adjusted earnings per diluted s...
Population Growth

Houston MSA Population Growth
7,000,000

6,754,896

6,800,000
6,593,498

6,600,000
6,435,268
6,400,000
...
Houston’s Retail Market
New Shopping Centers in 2013



at Fry & Grand Parkway



at Northpark & U.S. 59



at Kuykendhal & FM 2920



at Loop...
Grocery Anchored Developments Openings 2013

2013 Store
Openings

Houston – area
Market Leaders

25.0% market share

24.8%...
Planned Grocery Anchored Developments 2014 & Future

2014 & Beyond
Store Openings

Houston – area
Market Leaders

25.0% ma...
New Shopping Centers Project s Planned

Project / Anchor

Developer

Location

Projected Opening

Tanglewood Court
Fountai...
New Shopping Centers Projects Planned

Project / Anchor

Developer

Location

Projected Opening

FM 1960 & Townsend

2014
...
New to Houston’s Market

•
•

•

•

•
•
•
•
•

New concept
Opened first store in
Sugar land at 13833
Southwest Freeway at
...
Houston Sales Comps 2013
FOR LEASING: CALL 281-477-4300

Spring Town Center

Chambers Town Center

NEC & SEC of FM 2920 & Kuykendahl
Houston, Texas...
Office Market / Multi-Use
Development
Jonathan Brinsden
Midway

www.boyarmiller.com
BoyarMiller
Houston Commercial Real Estate Markets
What’s Ahead for 2014
Big Picture

 Houston’s Economy Continues To Outperform
 The Energy Business Has Changed
 Houston Is A Great Place To W...
Current Market

midwaycompanies.com |
New Developments

midwaycompanies.com |
New Developments – Owner/User

midwaycompanies.com |
New Developments – Under Construction

midwaycompanies.com |
New Developments – Build to Suit

midwaycompanies.com |
New Development

Total Non Build to Suit

5,400,000

Total Build to Suit

6,100,000

Total Under Construction

11,500,000
...
Houston Supply, Demand and Vacancy

midwaycompanies.com |
Houston Supply, Demand and Vacancy

midwaycompanies.com |
Mixed-Use

midwaycompanies.com |
midwaycompanies.com |
Industrial Market
Welcome W. Wilson, Jr.
GSL Welcome Group

www.boyarmiller.com
HOUSTON WEATHER
We ARE the Machine
HOUSTON: THE PARAGON CITY
HOUSTON INDUSTRIAL MARKET TOTALS
2012
2013
 506 million SF
 1.977 million SF
under construction

 521 million SF
 5.36...
VACANCY RATES
Vacancy by Product Type
Warehouse/Distribution

4.9%

Flex Projects

9.4%

Houston Overall Vacancy Rate

5...
www.colliers.com/houston
LARGEST PROJECT
RECENTLY COMPLETED
 420,000 SF
BTS
 Warehouse
and
Distribution
Center
 250
Additional
Employees

Igloo ...
GOYA FOODS, INC.

400,000 SF Operations and
Manufacturing Center
KATY GRAND PARKWAY
SALES ACTIVITY
Q3 2013
Total Sales:

$146M

No. of Properties:

24

Average $/SF:

$46.36

Average Cap Rate:

7.67%
TEXAS’ BIGGEST CITY
AND THE LARGEST
IN THE
SOUTH!!
EXXON/QATAR UPDATE

Deal signed in May 2013
between Exxon Mobil Corp. and
Qatar Petroleum International
CORPORATE CAMPUSES
AMERICA’S GROWTH
CORRIDORS
THE PANAMA CANAL &
THE HOUSTON SHIP CHANNEL
E.T. ISN’T PHONING HOME,
HE’S FUELING UP…
THE “SHALE” REVOLUTION
Driving
Energy
&
Producing
Jobs
HOUSTON…

The Gateway City!!!
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014
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BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014

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As part of its ongoing Breakfast Forum series, BoyarMiller gathered industry experts for a panel discussion on what's ahead 2014 for Houston's Commercial Real Estate Markets.

Speakers included: Will Holder with Trendmaker Homes; Jay Sears with NewQuest Properties; Jonathan Brinsden with Midway; and Welcome Wilson, Jr. with GSL Welcome Group.

Published in: Business, Real Estate
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BoyarMiller Breakfast Forum – The Houston Commercial Real Estate Markets: What's Ahead for 2014

  1. 1. The Houston Commercial Real Estate Markets: What’s Ahead for 2014 Breakfast Forum www.boyarmiller.com December 5, 2013
  2. 2. Land Development, Homebuildng & Multi-Family Markets Will Holder Trendmaker Homes www.boyarmiller.com
  3. 3. If Change is good, then this must be great!
  4. 4. The pendulum always moves fastest in the middle.
  5. 5. We are in a period when the pendulum is moving very quickly!
  6. 6. “I think I may have liked the recession better?”
  7. 7. Evolving MPC Sales Leaders
  8. 8. Changing School District Perceptions
  9. 9. Super Low Existing Home Supply
  10. 10. Lot Bidding by Land Developers
  11. 11. More Builder Owned Land
  12. 12. Longer Outlook on Deals
  13. 13. Lots of New Builders/Brands and Acquisitions and Mergers • Toll Brothers • Shea Homes • MI Homes • Sitterle Homes • Megatel Homes
  14. 14. Challenged System-wide Capacity
  15. 15. Human Talent Shortages Including executives, employees, trades and craftsmen
  16. 16. Repurposing Land
  17. 17. 1706 Calumet
  18. 18. Market Study-The Villages of Timbergrove Target Market Area and Competition
  19. 19. The Development-The Villages Of Timbergrove Recreation Center Dog Park Welcome Center Splash Pad Fitness Park Detention Pond Entry Fence and Gates Landscape of Recreation Center Landscape Around Pond Street Trees At Entry. Intersections, and Around Pond
  20. 20. Two Demographic Bubbles
  21. 21. Federal Regulation Challenges
  22. 22. Evidence of Surface Connectivity for Texas Gulf Coast Depressional Wetlands Bradford P. Wilcox & Dex D. Dean & John S. Jacob &Andrew Sipocz Department of Ecosystem Science and Management, Texas A&M University This study provides the kind of documentation called for by Justice Kennedy in the Rapanos decision. It demonstrates a “substantial” nexus between headwater depressional wetlands on the Pleistocene Texas Coastal Plain and navigable waters of the U.S.—a nexus that is not speculative but is the result of scientific observation. While further study is warranted and needed, this study… suggest that unless demonstrated otherwise, depressional headwater wetlands—at least on the Upper Texas Gulf Coastal Plain as a class—should be considered as hydrologically connected to navigable waters of the U.S. and thus may play a critical role in the maintenance of the aquatic and biological integrity of U.S. waters in this region.
  23. 23. “Galveston BayKeeper is evaluating legal options to protect prairie-pothole wetlands on the Upper Gulf Coast of Texas.”
  24. 24. At issue is the nature of the connection between these wetlands and “traditional navigable waters,” such as Armand Bayou. The fear is that the U.S. Army Corps of Engineers will acquiesce to developer contentions that headwater prairiepothole wetlands, such as these, are essentially closed depressions with no significant nexus to traditionally navigable waters.
  25. 25. Galveston BayKeeper contends, as academic research has shown, that these wetlands are hydrologically connected to traditionally navigable waters, and that the aquatic integrity of these navigable waters is dependent on the nature of the headwater wetlands.
  26. 26. What’s staying the same?
  27. 27. Houston is still a spec home market.
  28. 28. School perception still drives home demand!
  29. 29. Houston is still a supply rich market.
  30. 30. Jobs Are Driving Home Demand Not Low Interest Rates
  31. 31. Houston’s new home value, quality, complexity and finish is still the best in America!
  32. 32. Retail Market Jay K. Sears NewQuest Properties www.boyarmiller.com
  33. 33. Annual Job Growth
  34. 34. U.S. Consumer Sentiment Index Source: www.sca.ir.umich.edu “Surveys of consumers Thomson Reuters University of Michigan”
  35. 35. Retail Trade Sales Source: U.S. Census
  36. 36. Holiday Sales Forecast Online / Mobile Shopping  NRF expects sales in the months of November and December to marginally increase 3.9% to $602.1 billion.  Online and mobile continue to be a leading area of growth for retailers.  Retailers are expected to hire between 720,000 to 780,000 seasonal workers.  In this economy savvy, costconscious consumers go to the web to do their research and get the best bang for their bucks.  13% year-over-year increase from 2011.  The forecast is higher than the 10-year average holiday sales growth of 3.3%.  Shop.org released its 2013 online holiday sales forecast, expecting sales in November and December to grow between 13-15% over last holiday season to as much as $82 billion.  In addition to researching with their peers are saying online about products and gifts this holiday season, consumers will use the buy online pick-up in store option, retailers’ aps and mobile website. Seasonal Employment  Retailers operate more than 3.6 million U.S. establishments that support one in four U.S. jobs – 42 million working Americans.  The U.S. Department of Commerce announced that final Q4 2013 e-commerce sales increased 15.5%. Source: www.nrf.com “NRF Forecasts Marginal Sales Gain This Holiday Season”
  37. 37. Best Buy Annual Sales Best Buy Quarterly Comparable Store Sales - Continuing Operations Fiscal Years 2011-2014 January Fiscal Year-End Enterprise Comparable Store Sales Fiscal Year 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year Fiscal 2014 (1.3%) (0.6%) 0.3% Fiscal 2013 (5.2%) (3.3%) (5.1%) (1.4%) (3.5%) Fiscal 2012* (3.1%) (3.8%) (0.3%) (1.0%) (1.9%) Fiscal 2011* 5.1% 0.7% (2.8%) (5.0%) (1.2%) Domestic Comparable Store Sales Fiscal Year 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year Fiscal 2014 (1.1%) (0.4%) 1.7% Fiscal 2013 (3.7%) (1.6%) (4.0%) 0.9% (1.7%) Fiscal 2012* (3.8%) (4.1%) 0.1% (1.1%) (2.1%) Fiscal 2011* 4.7% 0.0% (3.9%) (5.2%) (1.7%) International Comparable Store Sales Fiscal Year 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year Fiscal 2014 (2.8%) (1.8%) (6.4%) Fiscal 2013 (13.4%) (11.3%) (10.3%) (12.6%) (12.0%) Fiscal 2012* 0.7% (2.2%) (2.0%) (0.5%) (1.0%) Fiscal 2011* 7.7% 5.2% 3.3% (3.6%) 2.0% Source: www.investors.BestBuy.com
  38. 38. Kroger 2nd Quarter Highlights Reports Record Second Quarter Earnings Per Share  Kroger's adjusted earnings per diluted share was a record $0.60 for the quarter.  Identical supermarket sales growth, without fuel, was 3.2% in the third quarter.  Achieved 39(th) consecutive quarter of positive identical supermarket sales Source: www.ir.kroger.com “Quarterly Results”
  39. 39. Population Growth Houston MSA Population Growth 7,000,000 6,754,896 6,800,000 6,593,498 6,600,000 6,435,268 6,400,000 Population 6,280,138 6,200,000 6,000,000 6,127,645 5,946,800 5,800,000 5,600,000 5,400,000 2010 2011 2012 2013 Years 2014 2015 Source: State of Texas – Texas Department of State Health Services
  40. 40. Houston’s Retail Market
  41. 41. New Shopping Centers in 2013  at Fry & Grand Parkway  at Northpark & U.S. 59  at Kuykendhal & FM 2920  at Loop 306 & Hwy 105  in Sugar Land  in Sugar Land
  42. 42. Grocery Anchored Developments Openings 2013 2013 Store Openings Houston – area Market Leaders 25.0% market share 24.8% market share 22.2 % market share Source: www.bizjournals.com/houston – “The Business Journal Interview with Bill Breetz of Kroger”
  43. 43. Planned Grocery Anchored Developments 2014 & Future 2014 & Beyond Store Openings Houston – area Market Leaders 25.0% market share 24.8% market share 22.2 % market share Source: www.bizjournals.com/houston – “The Business Journal Interview with Bill Breetz of Kroger”
  44. 44. New Shopping Centers Project s Planned Project / Anchor Developer Location Projected Opening Tanglewood Court Fountainview & San Felipe 2014 Spring Marketplace Rayford & Kuykendahl 1st Qtr 2014 Post Oak & San Felipe Spring 2014 Barker Cypress & Tuckerton 2nd Qtr 2014 Blvd. Place Towne Lake Vintage Marketplace Louetta & Cutten Rd Summer 2014 Spring Town Center Kuykendahl & FM 2920 FM 518 & Pearland Pkwy South Shore Blvd. & Hwy 96 June 2014 Spring 2014 2014
  45. 45. New Shopping Centers Projects Planned Project / Anchor Developer Location Projected Opening FM 1960 & Townsend 2014 I-10 & Grand Parkway 2014 Grand 10 Center Creekside Park Village Center Kuykendahl & Creekside September 2014 Hughes Landing Lake Front and Lake Woodlands 2015 Clear Lake City Blvd & El Dorado 2015 Near 610 & Westheimer 2015 Clear Lake Marketplace River Oaks District Green Street formerly Houston Pavilions 1201 Fannin Street Renovations are in progress
  46. 46. New to Houston’s Market • • • • • • • • • New concept Opened first store in Sugar land at 13833 Southwest Freeway at Sugar Creek Blvd on July 17 Under construction Grand Katy location opening February 2014 Now Open Sugarland location at Hwy 59 & University 4 new stores opening Village Plaza at Bunker Hill – Spring 2014 The Woodlands Mall – September 2014 Willbrook Mall – Fall 2014 Baybrook Square – Spring 2015 • • • • • • • • • • • North Carolina based gourmet grocery store 4 new stores former Rice Epicurean locations Now Open • Phoenix based healthy foods/ organic grocery store • 4 stores now open New Concept About 7,500 sq. ft. – 10,000 sq. ft. Sells products that cost no more than $5 Grocery anchored • • • • • New wireless concept subsidiary of AT&T Prepaid service Looking for 1,000 – 1,800 sq. ft. 20 planned stores • • • • • Limited assortment grocery with over 1,000 stores nationwide • 13 new stores in Houston out of 30 planned • 5,000 sq. ft. Petco store Grocery anchored & Urban markets No live animals Organic foods • • • New pet store concept Looking for 7,000 – 9,000 sq. ft. • • • New pet store concept Chicago based All-natural food and treats Dallas based liquor store 28,000 sq. ft. Opened 2 stores in Houston (Humble and Westoaks) Plans to open 1 more in 2013 and another in 2014. • • • New Palladium Theatres 22 stadium-style theaters Located on The Grand Pkwy near Long Meadow Farms Now Open • • • 8 screen 560 seat luxury theater Located at Westheimer and Westcreek Ln Open 2014 • • • • California base specialty Grocery 3 stores now open 4th store to open in Katy at LaCenterra with 12,500 sq. ft.
  47. 47. Houston Sales Comps 2013
  48. 48. FOR LEASING: CALL 281-477-4300 Spring Town Center Chambers Town Center NEC & SEC of FM 2920 & Kuykendahl Houston, Texas SEC of I-10 & Hwy 146 Baytown, Texas SWC & SEC of FM 1463 & Spring Green Katy, Texas Project Size: Project Size: Project Size: 300,000 SF Walmart-anchored power center with pad sites 17,500 SF of multitenant retail and junior anchor space available 286,074 SF Grocery Anchored shopping center located in the explosive growth area of west Katy. This project is surrounded by the high end home developments of The Reserve at Katy (Toll Brothers with homes from the 400’s to 800’s) Woodcreek Reserve (Homes from 260’s to over $1 million). Over 1,000 new homes are projected to close in the next 12 months within a 1 mile radius of this center. Anchors: Retail: Pad Sites: 425,157 SF 153,845 SF 32 Total; 5 Available Tenants: Tenants: NOW OPEN: 12 Screens COMING SOON: 28,350 S.F. Shops At Katy Reserve
  49. 49. Office Market / Multi-Use Development Jonathan Brinsden Midway www.boyarmiller.com
  50. 50. BoyarMiller Houston Commercial Real Estate Markets What’s Ahead for 2014
  51. 51. Big Picture  Houston’s Economy Continues To Outperform  The Energy Business Has Changed  Houston Is A Great Place To Work & LIVE  The Office Worker Is Different  Third Coast/“Core” Investment Market midwaycompanies.com |
  52. 52. Current Market midwaycompanies.com |
  53. 53. New Developments midwaycompanies.com |
  54. 54. New Developments – Owner/User midwaycompanies.com |
  55. 55. New Developments – Under Construction midwaycompanies.com |
  56. 56. New Developments – Build to Suit midwaycompanies.com |
  57. 57. New Development Total Non Build to Suit 5,400,000 Total Build to Suit 6,100,000 Total Under Construction 11,500,000 Total Pre-Leased 8,500,000 74% midwaycompanies.com |
  58. 58. Houston Supply, Demand and Vacancy midwaycompanies.com |
  59. 59. Houston Supply, Demand and Vacancy midwaycompanies.com |
  60. 60. Mixed-Use midwaycompanies.com |
  61. 61. midwaycompanies.com |
  62. 62. Industrial Market Welcome W. Wilson, Jr. GSL Welcome Group www.boyarmiller.com
  63. 63. HOUSTON WEATHER
  64. 64. We ARE the Machine
  65. 65. HOUSTON: THE PARAGON CITY
  66. 66. HOUSTON INDUSTRIAL MARKET TOTALS 2012 2013  506 million SF  1.977 million SF under construction  521 million SF  5.366 million SF under construction
  67. 67. VACANCY RATES Vacancy by Product Type Warehouse/Distribution 4.9% Flex Projects 9.4% Houston Overall Vacancy Rate 5.3%
  68. 68. www.colliers.com/houston
  69. 69. LARGEST PROJECT RECENTLY COMPLETED  420,000 SF BTS  Warehouse and Distribution Center  250 Additional Employees Igloo Distribution Warehouse
  70. 70. GOYA FOODS, INC. 400,000 SF Operations and Manufacturing Center
  71. 71. KATY GRAND PARKWAY
  72. 72. SALES ACTIVITY Q3 2013 Total Sales: $146M No. of Properties: 24 Average $/SF: $46.36 Average Cap Rate: 7.67%
  73. 73. TEXAS’ BIGGEST CITY AND THE LARGEST IN THE SOUTH!!
  74. 74. EXXON/QATAR UPDATE Deal signed in May 2013 between Exxon Mobil Corp. and Qatar Petroleum International
  75. 75. CORPORATE CAMPUSES
  76. 76. AMERICA’S GROWTH CORRIDORS
  77. 77. THE PANAMA CANAL & THE HOUSTON SHIP CHANNEL
  78. 78. E.T. ISN’T PHONING HOME, HE’S FUELING UP…
  79. 79. THE “SHALE” REVOLUTION Driving Energy & Producing Jobs
  80. 80. HOUSTON… The Gateway City!!!
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