- The document summarizes real estate market conditions in Houston in 2014. It shows that job and population growth fueled demand across property sectors. Office, industrial, retail, and multifamily saw absorption and rent growth while vacancies declined. Construction levels remained high as developers worked to meet demand. Overall, the Houston commercial real estate market remained strong in 2014.
3. Confidential – Colliers International 2014
2012 – Dr. Ray Perryman, the Perryman Group:
“For every oilfield job created – two jobs are created in Houston”
-100,000
-50,000
0
50,000
100,000
150,000
2009 2010 2011 2012 2013 2014
Houston-Sugar Land-Baytown
Annual Job Growth
JOBS
7. Confidential – Colliers International 2014
Average
Class A
Vacancy:
9.5%
HOUSTON OFFICE
Class A Submarket Vacancy
8. Confidential – Colliers International 2014
Average
Class B
Vacancy:
13.4%
HOUSTON OFFICE
Class B Submarket Vacancy
9. Confidential – Colliers International 2014
MARKET INDICATORS
YE 2013 YE 2014
CITYWIDE NET ABSORPTION (SF) 2.9M 6.8M
CITYWIDE AVERAGE VACANCY 12.0% 11.5%
CITYWIDE AVERAGE RENTAL
RATE
$25.97 $26.79
CLASS A RENTAL RATE
CBD $38.16 $42.01
SUBURBAN $30.80 $31.61
CLASS A VACANCY
CBD 10.7% 8.6%
SUBURBAN 9.2% 9.8%
At the close of Q4,
17.1M SF of new office
development was under
construction, more than
any other U.S. metro.
Market Metro U/C
Houston, TX 17,134,157
San Jose - Silicon Valley 8,086,492
Dallas, TX 6,873,662
Washington DC 6,168,610
Seattle/Puget Sound, WA 5,983,892
San Francisco, CA 5,161,899
Toronto, ON 5,088,689
Calgary, AB 4,950,500
Boston, MA 4,558,156
New York, NY - Midtown South
Manhattan 4,170,000
HOUSTON OFFICE – 212.9M SF
10. Confidential – Colliers International 2014
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
16.0%
$16.00
$18.00
$20.00
$22.00
$24.00
$26.00
$28.00
Houston Average Rent Houston Average Vacancy
HOUSTON OFFICE – 212.9M SF
11. Confidential – Colliers International 2014
Average Cap Rate (Yield)Average Price ($) Per SF
Sales by Total $ (mil)
0
1,000
2,000
3,000
4,000
5,000
6,000
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14
Rolling 12-mo. Total Quarterly Vol.
0
50
100
150
200
250
300
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14
Houston United States
4%
5%
6%
7%
8%
9%
10%
11%
12%
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14
Houston United States
Data Source:
HOUSTON OFFICE – 212.9M SF
12. Confidential – Colliers International 2014
Average Industrial
Vacancy:
4.9%
HOUSTON INDUSTRIAL
Submarket Vacancy
13. Confidential – Colliers International 2014
HOUSTON INDUSTRIAL MARKET INDICATORS
YE 2013 YE 2014
CITYWIDE NET ABSORPTION (SF) 7.4M 10.2M
CITYWIDE AVERAGE VACANCY (%) 5.3% 4.8%
CITYWIDE AVERAGE RENTAL RATE ($) $5.96 $6.20
NEW SUPPLY DELIVERED (SF) 8.0M 8.7M
4Q UNDER CONSTRUCTION (SF) 4.4M 8.0M
8.7M SF of
new inventory
delivered in
2014, 6.2M SF
was spec
construction!
HOUSTON INDUSTRIAL – 496.1M SF
14. Confidential – Colliers International 2014
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
$5.00
$5.20
$5.40
$5.60
$5.80
$6.00
$6.20
$6.40
$6.60
Houston Average Rent Houston Average Vacancy
HOUSTON INDUSTRIAL – 496.1M SF
15. Confidential – Colliers International 2014
Sales by Total $ (mil)
Data Source:
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14
Rolling 12-mo. Total Quarterly Vol.
Average Cap Rate (Yield)Average Price ($) Per SF
$0
$10
$20
$30
$40
$50
$60
$70
$80
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14
Houston United States
2%
4%
6%
8%
10%
12%
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14
Houston United States
HOUSTON INDUSTRIAL – 496.1M SF
16. Confidential – Colliers International 2014
HOUSTON RETAIL MARKET INDICATORS
YE 2013 YE 2014
CITYWIDE NET ABSORPTION (SF) 3.4M 3.2M
CITYWIDE AVERAGE VACANCY (%) 6.6% 6.1%
CITYWIDE AVERAGE RENTAL RATE ($) Statistically Irrelevant
NEW SUPPLY DELIVERED (SF) 1.9M 1.9M
4Q UNDER CONSTRUCTION (SF) 1.0M 2.2M
Houston’s Strong
Economy Helps
Push Retail
Vacancy Rate to
Historic Low
HOUSTON RETAIL – 269.9M SF
17. Confidential – Colliers International 2014
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
Houston Average Vacancy
HOUSTON RETAIL – 269.9M SF
18. Confidential – Colliers International 2014
Sales by Total $ (mil)
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14
Rolling 12-mo. Total Quarterly Vol.
Average Cap Rate (Yield)Average Price ($) Per SF
0
50
100
150
200
250
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14
Houston United States
4%
5%
6%
7%
8%
9%
10%
11%
12%
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14
Houston United States
Data Source:
HOUSTON RETAIL – 269.9M SF
20. Confidential – Colliers International 2014
HOUSTON MULTI-FAMILY MARKET INDICATORS
YE 2013 YE 2014
UNITS ABSORBED 16,248 16,432
CITYWIDE AVERAGE VACANCY (%) 9.5% 8.9%
CITYWIDE AVERAGE RENTAL RATE ($) $857 $923
UNITS DELIVERED 12,186 18,305
4Q UNDER CONSTRUCTION 20,479 27,787
The average
monthly rent
increased 8.1% in
2014.
HOUSTON MULTI-FAMILY –
588.8K Units
21. Confidential – Colliers International 2014
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
$600
$700
$800
$900
$1,000
Houston Average Rent Houston Average Vacancy
HOUSTON MULTI-FAMILY –
588.8K Units
22. Confidential – Colliers International 2014
Data Source:
Average Cap Rate (Yield)Average Price ($) Per Unit
Sales by Total $ (mil)
0
1,000
2,000
3,000
4,000
5,000
6,000
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14
Rolling 12-mo. Total Quarterly Vol.
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14
Houston United States
4%
5%
6%
7%
8%
9%
10%
11%
12%
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14
Houston United States
HOUSTON MULTI-FAMILY –
588.8K Units
23. Confidential – Colliers International 2014
• Starts up 9.4% over
2013 (29,905)
• Closings (New) 27,647
• Months Supply – 7.3
Near historic lows.
• “Lot supply constraints
are stopping builders
from ramping up more
quickly”
Source:
Metrostudy / Hanley Wood
Median Home Prices
SINGLE FAMILY
24. Confidential – Colliers International 2014
• Consultants continue to struggle to keep up with demand. The duration
of design and construction documentation on projects has not
improved.
• Work under contract/construction by General Contractors continues to
drive a demand for skilled personnel. However a number of new
projects HAVE been put on hold we see real concern on backlog.
• The Subcontractor community has little or no excess capacity to
accommodate present workloads causing construction schedules to
lengthen.
• Labor and material costs continue to escalate but there are some signs
of leveling off of price increases.
• Long lead delivery times for critical path material and equipment
continues to drive completion dates.
CONSTRUCTION COMMENTS
25. Confidential – Colliers International 2014
Office
Retail
Hotel
Industrial
Apartment
Phase I
Recovery
Phase II
Expansion
Phase IV
Recession
Phase III
Oversupply
Rent
Increasing
Rents
Decreasing
Above Long-Term
Avg. Occupancy
Below Long-Term
Avg. Occupancy
Houston
Q4 2014
SELL
HOLD
BUY
U.S. Commercial Real Estate
Market Cycle