Q4 2011 Houston's Research & Forecast Report Summaries
Q4 2011 | OFFICE MARKET HOUSTON OFFICE MARKETRESEARCH & FORECAST REPORT Houston’s Office Market Ends 2011 on a Positive Note Houston’s office market has undergone significant changes in the past twelve months benefiting from positive absorption, falling vacancy, and rising rental rates. Increased leasing activity has been key to the year-end positive net absorption of 2.6 million square feet citywide. An important driver of these market trends has been a healthy economic climate conducive to MARKET INDICATORS increased business activity. The Houston metropolitan area has gained about 77,000 jobs YE 2010 YE 2011 through November 2011, representing a solid 3.0% growth rate.CITYWIDE NET Overall vacancy levels decreased by 50 basis points between quarters to 15.5% from 16.0%,ABSORPTION (SF) 476k 2.6m which was also the citywide overall vacancy rate one year ago. The average suburban vacancy) rate decreased by 30 basis points to 15.3% from 15.6% the previous quarter, while the CBDCITYWIDE AVERAGE vacancy rate decreased by 100 basis points to 16.6% from 17.6%.VACANCY 16.0% 15.5% On a year-over-year basis the citywide average rental rate increased by $0.12 per square foot to $23.20 from $23.08 per square foot. The citywide average rental rate also rose slightly betweenCITYWIDE AVERAGE quarters to $23.20 from $22.93 per square foot.RENTAL RATE $23.08 $23.20 Houston’s Office Investment sales activity decreased between quarters with only 10 properties changing hands, compared to 15 in the previous quarter. According to Real Capital Analytics,CLASS A RENTAL RATE Houston office sale transactions had a total dollar volume of $732.9 million, averaging $406 per CBD $34.61 $35.29 square foot with a 6.6% capitalization rate. The most significant sale was Trammell Crow JV’s sale of Hess Tower to H&R REIT for $442.5 million or $524 per square foot. SUBURBAN $27.11 $27.34CLASS A VACANCY Houston’s office leasing activity reached 1.4 million SF in the fourth quarter, bringing the year- end total to 3.3 million SF. One of the most significant transactions that occurred in the fourth CBD 10.4% 14.3% quarter was Shell’s renewal of 1.3 million SF in One and Two Shell Plaza in the CBD submarket. SUBURBAN 17.5% 14.4% With solid expansion in the energy sector and a strong housing market, (up 4.1% year-to-date through November), Houston’s economy is expected to continue outperforming the national economy over the next twelve to eighteen months. ABSORPTION, NEW SUPPLY & VACANCY RATES JOB GROWTH & UNEMPLOYMENT (Seasonally Adjusted) 3,000,000 17.0%UNEMPLOYMENT 11/10 11/11 2,500,000HOUSTON 8.7% 7.8% 2,000,000 15.0%TEXAS 8.3% 8.1% 1,500,000 13.0%U.S. 9.8% 8.6% 1,000,000 11.0% 500,000 ANNUAL 9.0%JOB GROWTH CHANGE 11/11 0HOUSTON 3.4% 20.2k -500,000 7.0%TEXAS 2.2% 46.4k -1,000,000 5.0%U.S. 1.0% 120.0k Net Absorption New Supply VacancyAccelerating success.
RESEARCH & FORECAST REPORT | Q4 2011 | HOUSTON COMMERCIAL REAL ESTATE SNAPSHOTINDUSTRIAL Colliers International2.9M SF in Houston’s Industrial Construction Pipeline - 1.8M SF is Spec StatisticsDevelopment Revenues:Houston’s industrial market fundamentals continue to strengthen with over 1.5M SF of positive $1.5 Billionnet absorption in the fourth quarter, pushing year-end absorption to 4.4M SF. Houston’s Countries:industrial vacancy continues to decrease, averaging 5.2% in the fourth quarter, 40 basis points 61(bps) less than the previous quarter, and 100 bps below the 6.2% recorded in the same quarter Offices:last year. Houston’s overall average quoted industrial rental rate increased from $5.41 to $5.45 512per SF NNN between quarters increasing by 2.3% on a year-over-year basis from $5.33 per SF Professionals & Staff:NNN. 2011 leasing activity reached 13.1M SF with the help of large lease transactions. 12,509 Brokers:For several years, developers have shown restraint due to the economic downturn; however, 4,387construction activity increased in 2011. Houston’s industrial market currently has 2.9M SF in the Square Feet Managed:construction pipeline and delivered 1.7M SF in 2011. Much of the increased activity in the first 979 Million*half of the year was driven by build-to-suit projects for companies expanding in and relocating to Lease/Sale Transactions:the Houston market, however, the fourth quarter saw a significant increase in spec development 73,972representing 1.8M SF of the 2.9M under construction. As Houston’s available industrial Total Transaction Value:inventory shrinks, we believe the demand for new projects will continue to increase, both build- $59.6 Billionto-suit and spec development. (Based on 2010 results.)RETAIL *The combination of Colliers International and FirstService results in 2.2 BillionHouston’s Retail Market Quarterly Absorption Boosted by Year-End Push under management (2nd largest in the world).Houston’s retail market continued to improve in the fourth quarter of 2011 with positive netabsorption and lower vacancy rates. The citywide average vacancy rate stood at 7.2%, downfrom 8.0% at this time last year. Although year-over-year absorption decreased, quarterlyabsorption increased significantly to 810,000 SF of positive net absorption from 175,000 SF in3Q 2011. Developers increased development in 2011 delivering 625,000 SF of new retail spacecompared to 393,000 in 2010. There are several large projects in the planning stages to bedeveloped in 2012 and 617,000 SF currently in the construction pipeline.According to numbers released by the U.S. Bureau of Labor Statistics Houston added 5,900retail jobs over the past year, a 2.3% growth rate. The area’s population is growing faster thanany other U.S. city fueled by the energy and medical industries. In October, a report by The Lisa R. BridgesBusiness Journals’ On Numbers, reported Houston’s total personal income (TPI) grew by an Director of Market Researchannual rate of 5.69% between 2000 and 2010, the highest growth rate seen by the country’s 75 Houstonmajor metros. It is evident that many Houstonians are getting regular retail therapy and we Direct +1 713 830 2125believe this sector will continue to grow in 2012. Fax +1 713 830 2118 email@example.com INDUSTRIAL MARKET INDICATORS RETAIL MARKET INDICATORS Colliers International YE10 YE11 YE10 YE11 1300 Post Oak Boulevard CITYWIDE NET ABSORPTION CITYWIDE NET ABSORPTION Suite 200 (SF) 4.8M 4.4M (SF) 2.8M 1.8M Houston, TX 77056 United States CITYWIDE AVERAGE CITYWIDE AVERAGE www.colliers.com VACANCY 6.2% 5.2% VACANCY 8.0% 7.2% CITYWIDE AVERAGE RENTAL CITYWIDE AVERAGE RENTAL RATE $5.33 $5.45 RATE $14.85 $15.13 DELIVERIES (SF) 2.2M 1.7M DELIVERIES (SF) 393K 625K Accelerating success. UNDER CONSTRUCTION (SF) 207K 2.9M UNDER CONSTRUCTION (SF) 231K 617KFor complete reports, please visit www.colliers.com/houston COLLIERS INTERNATIONAL | P. 2