Though it still has more than its fair share of critics, evidence continues to mount that the American property market is firmly in recovery. Many experts advise looking for cities and sectors that are recovering ahead of the pace, and one such market/sector combo is the Houston office market.
The Houston economy generated 95,800 new jobs in the 12-month period ending October 31, 2012, the second highest number in the nation. The market had an unemployment rate of 6.2% as of October 31, 2012, down from 7.7% in October 2011 and compared to the national rate of 7.9% in October 2012, according to the US Bureau of Labor Statistics and Delta Associates.
One particularly exciting aspect of the surging office market is construction, with many new developments planned for the months ahead. According to a fourth quarter 2012 Delta Associates/Transwestern office market report, 4.6 million square feet of office space was under construction or undergoing renovation at the end of 2012, up from 3.6 million square feet in Q3 2012 and 1.4 million square feet at the end of 2011. Space under construction at year-end 2012 was 39.9% pre-leased compared to 47.2% at year-end 2011.
The report higlighted professional/business services as well as energy-related firms as driving leasing in the marketplace, fuelling a drop in the city vacancy rate down to 10.6% and a 4.8% increase in rents to end 2012. On top of that net absorption of office space in the city increased from 860,000 square feet in Q3 to 1.4 million square feet in Q4, with both Class A and Class B space performing well in this. For all of 2012, the Houston metro had 4.2 million square feet of net office absorption, compared to the 3.8 million square feet absorbed in 2011.
Sales of office buildings in Houston returned to peak levels faster than in other major markets in the US, according to the Delta/Transwestern report, again, thanks largely to the energy industry. "The surge in hydraulic fracturing activities gives local energy companies the confidence and incentive to expand their workforces, which translates into greater interest in Houston's office assets," according to the Delta/Transwestern report.
- Tuesday 15 January 2013