KC Conway Houston Trends Presentation 2013

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KC Conway Houston Trends Presentation 2013

  1. 1. What’s imPORTant in 2013? Reading of the Crystal Ball TRENDS 2013K.C. Conway, MAI, CRE January 29, 2013Exec. Managing Dir. R.E. AnalyticsColliers InternationalKC.Conway@Colliers.com
  2. 2. Let’s Start with a Review of 2012 Report Card on KC’s 2012 Predictions ... 4 out of 5 or 80%.  U.S. GDP would Grow by 1.5% - 2%  Home Prices to bottom-out in 2012  Warehouse to be a Star Performerr  Overall CMBS DQT to surpass 10% X Cap Rate Compression would end. 2
  3. 3. For 2013, read the letters in KC’s Eco. Alphabet Soup.Look for direction outside Governmental data in places like NAHB, ONEI… MSA-level Job Gr. TX MSAs = 20% of Top 20 (Houston #2) NAHB Improved Mkt Index Housing Recovery is real. TX has most MSAs on NAHB IMI with 18 (FL is #2)ONEI – On Numbers Eco Index by Am Biz Journals. Quantify “Recovering MSAs” TX key 4 MSAs ranked in top 20 & Houston is #3 Rail Time Indicators Company 10(q)s by Association of Am. Rail Roads Earnings reports are a Journal of Commerce Dodge Pipeline treasure trove of info. New Construction Why FED doesn’t use in Beige An easy/cheap way to keep up Book is a mystery to me. with Ind’l, Ports, etc. (Familiarize yourself with new supply to jobs ratios) MF is 8-9 jobs : 1 new MF TX ratio in 2012 = 9.2:1 3
  4. 4. TX and Houston by the Numbers / Rankings#1 is such a lonely number, so Houston is 1,2,3,8… Still room for improvement#1 State on NAHB IMI, and Foreign Tr. Zone Imports & Exports. #2 in 2012 MSA-level job growth#3 ranking in latest On Numbers Economic Index & #5 by AFIRE. #8 in TEU container cargo in N.Am., but “Most Irreplaceable” port by Colliers. 4
  5. 5. Those kind of numbers explain why Houston is AFIRE!Note: 4 of the 5 U.S. cities are all key port markets; & Ind’l R.E. #2 prfd property 5
  6. 6. MSA-level Job GrowthTX MSAs hold 4 of the Top-20 Rankings 6
  7. 7. NAHB’s Improved Housing MarketsThe Recovery is Broad-Based – note the Gulf & East coast port MSAs A post 2007 peak of 201 MSAs make the Dec ‘12 list 7
  8. 8. Housing Recovery will stimulate sub-office, retail & warehouse demand NAHB/First American Improving Markets Index (IMI) Yr-End NAHB IMI Permits Growth Prices Growth Employment Growth Trough From Trough From Trough From • TX has most MSAs MSA Date Trough Date Trough Date Trough with 18. Houston hasBaton Rouge, LA* 01/31/09 1.4% 01/31/12 2.4% 02/28/10 1.5% most growth fromHouma, LA 03/31/10 4.2% 06/30/11 3.1% 06/30/11 6.5%Lafayette, LA 02/28/09 2.3% 10/31/11 2.3% 01/31/10 15.4% trough of large TXLake Charles, LA 04/30/11 2.2% 11/30/11 1.7% 11/30/10 3.3%Monroe, LA 03/31/09 2.4% 06/30/10 4.6% 09/30/09 3.2% MSAs.New Orleans, LA 11/30/05 0.5% 12/31/11 4.4% 02/28/10 1.9%Shreveport, LA 01/31/09 1.3% 12/31/11 5.1% 08/31/10 4.3% • FL ranks #2 among allBeaumont, TX 12/31/05 0.7% 12/31/11 2.4% 12/31/09 2.0%Brownsville, TX* 03/31/09 1.1% 05/31/11 3.3% 03/31/09 3.4% states with 15College Station, TX* 10/31/10 2.5% 09/30/10 6.1% 01/31/08 3.0%Corpus Christi, TX 01/31/11 3.3% 12/31/11 9.2% 11/30/09 6.3% • CA ranks #3 (14)Dallas, TX 03/31/09 2.1% 02/28/11 5.7% 12/31/09 5.9%Houston, TX 04/30/09 1.8% 08/31/11 9.7% 12/31/09 8.5%Killeen, TX* 01/31/09 1.9% 01/31/12 4.3% 12/31/07 4.7% • Recovery in housingLubbock, TXMcAllen, TX 09/30/11 01/31/09 7.4% 0.2% 09/30/11 11/30/10 2.8% 6.5% 09/30/10 12/31/07 3.9% 5.7% will drive renewedMidland, TX 04/30/09 2.4% 01/31/10 21.1% 08/31/09 20.6% demand for allOdessa, TX 02/28/09 29.3% 10/31/10 13.7% 08/31/09 23.2%San Angelo, TX 12/31/10 1.1% 04/30/11 9.5% 06/30/09 8.7% commercial R.E. typesSan Antonio, TX 04/30/11 2.6% 12/31/10 7.0% 09/30/09 5.1% in the suburbs (n’hoodTexarkana, TX* 08/31/11 5.3% 01/31/10 2.4% 10/31/09 6.7%Victoria, TX 09/30/10 6.2% 02/28/11 9.9% 11/30/09 4.8% retail, professionalWaco, TX 04/30/09 1.5% 11/30/10 2.9% 01/31/12 2.8% services & small-bay, multi-tenant indistrial by contractors, suppliers). 8
  9. 9. Recovering Markets – ONEI November Rankings Houston ranks #3 – TX has 4 of Top-20, and 6 in Top 65 (State with most in Top-10,25,50 ON NUMBERS ECONOMIC INDEX - January 2013 (Top 102 U.S. MSAs ranked by Am. Business Journal) Rank Overall Prior Rank Overall Prior Rank Overall Prior (Jan 13) MSA Scorre Rank (Jan 13) MSA Scorre Rank (Jan 13) MSA Scorre Rank 1 Oklahoma City 90.473 2 35 New Orleans 55.497 53 69 New York City 41.413 61 2 Austin 89.755 1 36 Charleston, S.C. 55.225 28 70 Orlando 41.14 72 3 Houston 82.627 3 37 San Francisco-Oakland 55.126 35 71 Allentown-Bethlehem, Pa.41.042 52 4 Columbus 78.765 4 38 Madison, Wis. 54.432 45 72 Dayton, Ohio 40.867 74 5 Tulsa 77.922 6 39 Raleigh 54.285 39 73 Memphis 40.57 81 6 Provo, Utah 76.908 10 40 Albany, N.Y. 54.086 38 74 Philadelphia 40.422 76 7 Honolulu 74.037 17 41 San Diego 54.086 42 75 Sacramento 40.397 67 8 Omaha 72.577 5 42 El Paso, Texas 53.963 50 76 Bridgeport-Stamford, Conn. 38.244 80 9 Pittsburgh 72.304 9 43 Cleveland 53.714 41 77 Atlanta 37.898 82 10 Des Moines, Iowa 71.561 8 44 Wichita, Kans. 53.021 47 78 Los Angeles 37.65 83 11 Denver 70.052 11 45 Grand Rapids, Mich. 52.997 26 79 Stockton, Calif. 37.551 73 12 Dallas-Fort Worth 69.805 14 46 Greenville, S.C. 52.65 29 80 Worcester, Mass. 37.501 69 13 Boston 69.606 12 47 Harrisburg, Pa. 51.932 48 81 Bakersfield, Calif. 37.18 66 14 Nashville 69.507 18 48 Birmingham 51.312 59 82 Springfield, Mass. 37.08 78 15 Salt Lake City 69.409 22 49 Boise, Idaho 50.893 44 83 Oxnard-Thousand Oaks, Calif. 34.357 97 16 Baton Rouge, La. 69.061 32 50 Buffalo 50.175 31 84 Miami-Fort Lauderdale 33.54 85 17 Little Rock, Ark. 68.541 7 51 Poughkeepsie, N.Y. 49.309 63 85 Augusta, Ga. 32.748 77 18 Ogden, Utah 68.195 16 52 Indianapolis 49.11 46 86 Detroit 32.724 88 19 San Antonio 67.775 21 53 Charlotte 49.086 55 87 Albuquerque 32.574 86 20 Louisville 67.156 13 54 Milwaukee 49.085 57 88 Virginia Beach-Norfolk 32.55 95 21 San Jose 66.785 15 55 Portland, Ore. 47.799 51 89 Bradenton-Sarasota, Fla. 31.956 89 22 Lancaster, Pa. 63.096 27 56 Rochester, N.Y. 47.725 54 90 Cape Coral-Fort Myers, Fla. 31.213 84 23 Cincinnati 62.75 23 57 Jackson, Miss. 46.807 58 91 Greensboro, N.C. 30.843 90 24 Washington 62.428 19 58 Syracuse, N.Y. 45.892 64 92 Lakeland, Fla. 30.842 87 25 Durham, N.C. 60.992 24 59 Richmond 45.546 65 93 Palm Bay-Melbourne, Fla. 30.322 92 26 Phoenix 59.308 36 60 Columbia, S.C. 45.496 43 94 Tampa-St. Petersburg 30.076 94 27 Scranton-Wilkes-Barre, Pa. 59.185 20 61 Toledo, Ohio 44.976 56 95 Hartford 29.061 93 28 Portland, Maine 58.516 25 62 McAllen-Edinburg, Texas 44.334 70 96 Chicago 28.887 98 29 Chattanooga, Tenn. 58.046 49 63 Youngstown, Ohio 43.294 79 97 Las Vegas 27.253 100r 30 St. Louis 57.452 34 64 Tucson 42.797 75 98 Jacksonville 26.907 91 31 Akron, Ohio 57.452 30 65 Baltimore 42.477 62 99 New Haven, Conn. 25.15 99 32 Seattle 57.131 33 66 Fresno, Calif. 42.204 71 100 Riverside-San Bernardino, Calif. 22.105 102 33 Minneapolis-St. Paul 56.735 40 67 Kansas City 41.833 60 101 Colorado Springs 21.213 101 9 34 Knoxville, Tenn. 56.042 37 68 Modesto, Calif. 41.634 68 102 Providence 20.694 96
  10. 10. Rail Time Indicators – Manufacturing & TradeForget ISM, Empire State Mfg Index & FED Mfg Surveys – go to the source! Q. Why did rail cars in storage rise at YE? 10 A. Impending ILA E-Coast port strike.
  11. 11. Dodge Pipeline – New Supply is Distr-Ctrs & Logistics Target Dates Ind’l U/C 2013 Construction Sq. Ft. Project Title City State Phase Cost ($ m) (000s) Completion Estrella Logistics Warehouse Distribution Center Phoenix AZ Underway 18.0 593 July-13 Coldwater Depot Logistics Office/ Warehouse Phase ITotal Sq Ft Under Construction at Yr-End 2012: Avondale AZ Underway 1,493 20.0 509 March-13 • 32.1 msf FedEx Warehouse Distribution Facility Chino Logistics Center Pacoima Chino CA CA Underway Underway 20.0 12.0 236 300 June-13 February-13 (not a lot) Whole Foods Market Distribution Center Richmond CA Underway 12.7 136 February-13Total Sq Ft Under Construction at Yr-End 2012: 1,547 United Natural Foods Refrigerated Warehouse (Design/Build) Aurora CO Underway 25.0 542 July-13 • 8 states=45% FedEx Ground Distribution Center South Windsor CT Underway 25.0 222 October-13 Dollar Tree Distribution Center Windsor CT Underway 57.0 1,001 May-13 of all constr. Publix Warehouse & Distribution Center @ LeeVista Orlando Center FL Underway 100.0 970 October-14Total Sq Ft Under Construction at Yr-End 2012: 1,337 GA #1 Tractor Supply Distribution Center (Design/Build)Macon Lowes Flatbed Distribution Center Rome GA GA Underway Underway 30.0 80.0 686 1,451 May-13 April-13 TN #2 PPG Pittsburgh Paints Warehouse Bldg at Southpark Home Depot Online Distribution Center Fairburn Mcdonough GA GA Underway Underway 30.0 91.1 300 1,000 April-13 April-13 IN #3Total Sq Ft Under Construction at Yr-End 2012: 3,437 Toro Distribution Center (Design/Build) Ankeny IA Underway 43.0 450 December-13 FedEx Distribution Center Grimes IA Underway 19.0 186 March-13 • 75% Build-to- FedEx Distribution Center Romeoville IL Underway 15.0 239 September-13Total Sq Ft Under Construction at Yr-End 2012: 1,270 suit or large Manufacturing/Distribution Building (PGP International) Evansville IN Underway 6.0 70 March-13 IDI World Connect Building 1 At Ameriplex Indianapolis IN Underway 25.0 795 December-12 new D-Ctr &Total Sq Ft Under Construction at Yr-End 2012: Coca Cola Distribution Facility (Pre-Engineered)(Design/Bld) MO Joplin 1,841 Underway 5.5 56 March-13 Logistics Ctr Rubbermaid Warehouse & Distribution Center Brimfield Township OH Underway 22.9 811 April-13 Volkswagen Passat Parts Warehouse Kingston TN Underway 40.0 400 March-13 Amazon Distribution Center Lebanon TN Underway 33.0 1,016 February-13 • No “Spec” Whirlpool Manufacturing and Distribution Facility Cleveland TN Underway 84.0 400 January-13Total Sq Ft Under Construction at Yr-End 2012: 1847 risk in Ind’l Refrigerated Distribution Warehouse (Design/Build) Denton TX Underway 20.0 450 March-13Total Sq Ft Under Construction at Yr-End 2012: 749 Family Dollar Distribution Center Saint George UT Underway 80.0 820 June-13 US total 2,132 32,112 ($ millions) SqFt 000s 11
  12. 12. What is the Crystal Ball indicating for 2013? Beware of Q1, but be prepared for a robust 2H2013. Industrial: GDP:Ports will remain an imPORTant story! Pulls back to 1% or less in 1H2013,Port Labor Strife not done – Feb 6, 2013. but Rebounds >2% in 2H2013 Leasing activity remains robust (No “Cash for Clunkers” or housing tax Dearth of new constr & assets for sale. credit artificial stimulants). Office: ICEE office MSAs still hot. Employment:Recovery in housing will add to Focus on Labor Participation suburban absorption. rate (63.6%), U-6 (14.4%), & ½ the 71.5msf of new office expect another year of 153k/mo. construction is Med Office job growth MF: U-3 could drop to 7% just onOverbuilding Risk is exaggerated workers losing Unempl. benefits.Too much in just a few MSAs (DC)TX is OK: 1 unit : 9.2 jobs in 2012 Housing: Interest Rates: The recovery is real! Get ‘eer done in 2013! NAHB IMI > 200 markets. 2nd U.S. Debt downgrade >50% US Census Housing Occupancy FED balance sheet @ 20% US GDP (50 MSAs 90% to 96%) Monitor commodity prices. 12
  13. 13. Colliers’ 2013 Industrial Warehouse Perspective 13
  14. 14. Colliers’ Yr-End 2012 Industrial Warehouse Perspective 14
  15. 15. r www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012 www.colliers.com/us/insights 15 CRE.org/Publications/rei_absdetail.cfm?lid=1897&lparent_id=1892
  16. 16. How well do you know the U.S. Ports? Colliers recognizes 10 ports 2X a year for distinction beyond sizer www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012 www.colliers.com/us/insights 16
  17. 17. 17
  18. 18. Intermodal, Intermodal, Intermodal … it meansIndustrial Now Turns Especially to Rail to Move Ocean Distribution Across Land 18
  19. 19. Office Space Trends Note: The old ratio (growth in office employment means X square feet of office absorption) is out the window. The open space architecture is moving the space per employee ratio from 1:300 to 1:250 to 1:200. That means a 20% growth in office employment = no net new absorption.Source: Colliers Atlanta 19
  20. 20. Colliers’ Yr-End 2012 Office Perspective 20
  21. 21. Office Space Trends: FIRE Vs ICEE markets Jan 23, 2013 Chicago fire: Building turns to ICE after fire. 21
  22. 22. The Multi-Family Perspective Construction Activity & Costs Vs Vacancy & Cap Rates.• Is new construction overheating? New Supply under construction or in lease-up approximates 2007 activity.• Are higher costs being rationalized by Cap Rate compression and unrealistic rent growth? The cost per unit of new construction has increased 40%. 22
  23. 23. The Multi-Family PerspectiveA recent record MF sale in Denver is a warning sign for hot MF MSAs. 23
  24. 24. Opportunities: Risks:• Housing – Monitor NAHB IMI. A • Congress/political dysfunction surprise stimulant to “small-space” leads to 2nd Debt Downgrade warehouse users, like building • ILA Port Strike Impacts East contractors & suppliers. & Gulf coasts ports February• Job Gr in secondary MSAs fueled 6, 2013; NW Grain ports in by ICEE sectors. Spring & West coast ports at Yr-End• Industrial – especially port & inland distribution MSAs where retailers • End of Bernanke Fed in 2013 are remaking their supply-chains. - Impact on interest rates & QE Thank You K.C. Conway, MAI, CRE Exec. Managing Director, R.E. Analytics Colliers International KC.Conway@Colliers.com

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