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Trends 2012 Houston Market Slides

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Patrick Duffy MCR
President | Houston
Chairman Colliers Retail Specialty Group
Direct +1 713 830 2112 | Mobile +1 727 460 3215
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Trends 2012 Houston Market Slides

  1. 1. TRENDS 2012COMMERCIAL REAL ESTATE MARKET UPDATE January 31, 2012
  2. 2. Houston’s Brag Book2011-2012 Headlines“Houston driving Texas growth, economist says” “Houston ranks as North America’s fastest-growing metro area”“Strong year for jobs in Houston” “Houston MSA personal income increased 5.5% in 2011”“Houston remains popular with foreign real estate investors” “Houston tops U.S. retail job growth”“High-end retail thriving in Houston” “Houston gains most retail trade jobs in U.S. since 2007 “
  3. 3. HOUSTON OFFICE HOUSTON OFFICE MARKET INDICATORS YE 2010 YE 2011 CITYWIDE NET ABSORPTION (SF) 476K 2.6M 79% of leases CITYWIDE AVERAGE VACANCY 16.0% 15.5% we tracked in CITYWIDE AVERAGE RENTAL RATE $23.08 $23.20 2011 were CLASS A RENTAL RATE CBD $35.00 $40.00 energy industry SUBURBAN $27.00 $31.00 CLASS A VACANCY tenants CBD 10.4% 14.3% SUBURBAN 17.5% 14.4%
  4. 4. HOUSTON OFFICE ABSORPTION, NEW SUPPLY & VACANCY RATES 3,000,000 17.0% 2,500,000 2,000,000 15.0% 1,500,000 13.0% 1,000,000 11.0% 500,000 9.0% 0 -500,000 7.0% -1,000,000 5.0% Net Absorption New Supply Vacancy
  5. 5. HOUSTON OFFICE Sales by Total $ (mil) Rolling 12-mo. Total Quarterly Vol. 4,500 4,000 3,500 3,000 2,500 2,000 1,500 Data Source: 1,000 500 0 Q1 08 Q1 09 Q1 10 Q1 11 Average Price ($) Per SF Average Cap Rate (Yield) Houston United States Houston United States300 11%250200 9%150 7%100 5% 50 0 3% Q1 08 Q1 09 Q1 10 Q1 11 Q1 08 Q1 09 Q1 10 Q1 11
  6. 6. HOUSTON INDUSTRIAL HOUSTON INDUSTRIAL MARKET INDICATORS YE 2010 YE 2011CITYWIDE NET ABSORPTION (SF) 4.8M 4.4M Build-to-suit and specCITYWIDE AVERAGE VACANCY (%) 6.2% 5.2% construction on the uptick asCITYWIDE AVERAGE RENTAL RATE ($) $5.33 $5.45 vacancyNEW SUPPLY DELIVERED (SF) 2.3M 1.7M decreases to 5.2%4Q UNDER CONSTRUCTION (SF) 200K 2.9M
  7. 7. HOUSTON INDUSTRIAL ABSORPTION, NEW SUPPLY & VACANCY RATES 6,000,000 8% 5,000,000 7% 6% 4,000,000 5% 3,000,000 4% 2,000,000 3% 1,000,000 2% 0 1% -1,000,000 0% Absorption New Supply Vacancy
  8. 8. HOUSTON INDUSTRIAL Sales by Total $ (mil) Rolling 12-mo. Total Quarterly Vol. 900 800 700 600 500 400 300 Data Source: 200 100 0 Q1 08 Q1 09 Q1 10 Q1 11 Average Price ($) Per SF Average Cap Rate (Yield) Houston United States Houston United States 80 11% 60 9% 40 7% 20 5% 0 3% Q1 08 Q1 09 Q1 10 Q1 11 Q1 08 Q1 09 Q1 10 Q1 11
  9. 9. HOUSTON RETAIL HOUSTON RETAIL MARKET INDICATORS YE 2010 YE 2011 RestaurantCITYWIDE NET ABSORPTION (SF) 2.8M 1.8M owners expandingCITYWIDE AVERAGE VACANCY (%) 8.0% 7.2% Houston footprintCITYWIDE AVERAGE RENTAL RATE ($) $14.85 $15.13NEW SUPPLY DELIVERED (SF) 393K 687K4Q UNDER CONSTRUCTION (SF) 231K 617K
  10. 10. HOUSTON RETAIL ABSORPTION, NEW SUPPLY & VACANCY RATES 6,000,000 12% 5,000,000 10% 4,000,000 8% 3,000,000 2,000,000 6% 1,000,000 4% 0 2% -1,000,000 -2,000,000 0% Absorption New Supply Vacancy
  11. 11. HOUSTON RETAIL Sales by Total $ (mil) Rolling 12-mo. Total Quarterly Vol. 2,500 2,000 1,500 1,000 Data Source: 500 0 Q1 08 Q1 09 Q1 10 Q1 11 Average Price ($) Per SF Average Cap Rate (Yield) Houston United States Houston United States250 11%200 9%150 7%100 50 5% 0 3% Q1 08 Q1 09 Q1 10 Q1 11 Q1 08 Q1 09 Q1 10 Q1 11
  12. 12. HOUSTON MULTI-FAMILY HOUSTON MULTI-FAMILY MARKET INDICATORS YE 2010 YE 2011 Class AUNITS ABSORBED 15,722 14,036 apartments had lowerCITYWIDE AVERAGE VACANCY (%) 14.1% 12.5% than averageCITYWIDE AVERAGE RENTAL RATE ($) vacancy of $723 $749 6.6% inUNITS DELIVERED 3,852 4,963 December 20114Q UNDER CONSTRUCTION 2,367 2,831
  13. 13. HOUSTON MULTI-FAMILY ABSORPTION, NEW SUPPLY & VACANCY RATES 25,000 18% 16% 20,000 14% 15,000 12% 10,000 10% 5,000 8% 6% 0 4% -5,000 2% -10,000 0% Units Absorbed Units Delivered Vacancy
  14. 14. HOUSTON MULTI-FAMILY Sales by Total $ (mil) Rolling 12-mo. Total Quarterly Vol. 3,500 3,000 2,500 2,000 1,500 1,000 Data Source: 500 0 Q1 08 Q1 09 Q1 10 Q1 11 Average Price ($) Per SF Average Cap Rate (Yield) Houston United States Houston United States120,000100,000 11%80,000 9%60,000 7%40,00020,000 5% 0 3% Q1 08 Q1 09 Q1 10 Q1 11 Q1 08 Q1 09 Q1 10 Q1 11
  15. 15. HOUSTON HOTEL HOUSTON HOTEL MARKET INDICATORS YE 2010 YE 2011TOTAL UNITS 72,111 74,450CITYWIDE AVERAGE VACANCY (%) 44.7% 42.0%CITYWIDE AVERAGE DAILY RATE ($) $88.66 $92.50UNITS DELIVERED 4,244 2,339
  16. 16. HOUSTON HOTEL SUPPLY & VACANCY RATES 80,000 50% 45% 70,000 40% 60,000 35% 50,000 30% 40,000 25% 20% 30,000 15% 20,000 10% 10,000 5% 0 0% Supply Vacancy
  17. 17. HOUSTON HOTEL Sales by Total $ (mil) Rolling 12-mo. Total Quarterly Vol. 1,400 1,200 1,000 800 600 400 Data Source: 200 0 Q1 08 Q1 09 Q1 10 Q1 11 Average Price ($) Per SF Average Cap Rate (Yield) Houston United States Houston United States250,000 11%200,000 9%150,000100,000 7% 50,000 5% 0 3% Q1 08 Q1 09 Q1 10 Q1 11 Q1 08 Q1 09 Q1 10 Q1 11
  18. 18. 2012 CONSTRUCTION COMMENTS General contractors and subcontractors actively pursuing new hires It is not uncommon to have at least one of the bidders decline (workload) Construction costs have not shown significant increases, but…. We are seeing subcontractor quotes holding their prices for as little as one week due to material volatility. Confirming that the market is still unpredictable, manufacturers are not stocking a number of standard construction items. We are still experiencing long delivery times on light fixtures and doors. In working with contractors that have a national presence, we continually hear “Thank God we’re in Houston!”
  19. 19. 2012 TRENDS  CONTINUED JOB GROWTH ESPECIALLY IN ENERGY  OCCUPANCY, ABSORPTION, AND RATES WILL INCREASE  CONSTRUCTION UPTICK IN ALL REAL ESTATE SECTORS  INCREASED DEMAND FOR LAND  VALUES WILL INCREASE NEAR TERM  OCCUPANCY COSTS WILL INCREASE NEAR & MID TERM

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