HOUSTON, Nov. 14, 2014 /PRNewswire/ -- Transwestern today announces the 14th annual Houston TrendLines® event was held Nov. 13 at the River Oaks Country Club in partnership with its research affiliate, Delta Associates, and their sponsors, Chicago Title Commercial, D.E. Harvey Builders, JPMorgan Chase & Co., Kirksey Architecture, Amegy Bank and Locke Lord LLP.
More than 500 people attended the event in which Delta Associates Executive Vice President Sandy Paul gave an economic overview highlighting forward-looking trends and opportunities in the Houston commercial real estate market. A summary of economic, property-type-specific and investment sales trends presented are detailed below.
Ben Stein served as this year's keynote speaker. Stein is one of the most famous economics teachers in America, partly due to his comedic role as the droning teacher in Ferris Bueller's Day Off, which has been ranked as one of the 50 most famous scenes in movie history. Off the silver screen, Stein has a bachelor's degree with honors in economics from Columbia University, studied graduate-level economics at Yale University and is a graduate of Yale Law School. He has served as a trade regulation lawyer for the Federal Trade Commission, a speech writer for both Presidents Nixon and Ford, a columnist and editorial writer for The Wall Street Journal and a teacher of law and economics at the University of California, Santa Cruz and Pepperdine University.
"TrendLines® allows us to share our analysis of the driving forces behind Houston's success to our key clients and relationships while comparing it to other top-tier markets and forecast trends that will impact the commercial real estate market in Houston," said Kevin Roberts, Transwestern's Southwest President. "We are pleased to bring in forward-thinking leaders to provide valuable insight into many of America's important issues. We are extremely honored to have Mr. Stein participate in this 14th annual TrendLines® event to broaden and enhance the overall experience for our clients."
Guests of the event received a copy of the 14th edition of the TrendLines® publication, Redefining Expectations in a Gateway Market, which distills the trends of 2014 and sheds light on issues affecting the region's future economy and commercial real estate industry in 2015 and beyond.
The Houston metro area continued to experience strong economic conditions throughout 2014. Houston's payroll employment rose by 4.3 percent during the 12 months ending in September, the largest percentage increase among major metros in the nation and well above the national growth rate of 1.9 percent. The 12-month employment growth of 119,400 jobs through September 2014 is the third highest in the U.S. among large metros. The three most impactful drivers for job growth over the past year are energy, construction and engineering services. However, Houston's employment growth is broad, and economic indicators point to continued growth across all major sectors in the period ahead. Delta expects job growth to total approximately 102,400 jobs in 2014 and remain in the 80,000 to 95,000 jobs per year range in 2015 and 2016, well above the long-term average.
The Office Market
Houston's office market is expected to sustain its positive momentum in the period ahead with the robust job market and vibrant economy driving growth. While the development pipeline is significant, Transwestern expects the high level of demand in Houston to translate into positive absorption as these projects deliver. It's anticipated that the overall vacancy rate for all classes of space will increase over the next two years, rising to the low-11 percent range. This accounts for space still vacant at delivery and the effects of the flight to quality on Class B and C space. Rents should continue rising modestly through 2014 and 2015, especially for Class A product.
The Industrial Market
For the period ahead, Transwestern expects continued strong performance from the Houston industrial market. The overall vacancy rate will likely edge up into the low-5 percent range over the next 12 months, as strong demand continues and more new supply is delivered. The development pipeline is expected to continue at this level given the market's strong demand and low vacancy rate. The Houston industrial market is one of the healthiest in the U.S. and one of the best-positioned for future rent growth, given its low vacancy rate and strengthening demand drivers, particularly in the warehouse/distribution sector.
The Houston metro recorded $2.6 billion in office investment sales transactions through third quarter 2014. Although this sales volume is tracking below 2013, investor interest in Houston remains at high levels as lucrative market conditions, driven by one of the nation's strongest local economies, continue to fuel a greater interest in Houston office assets. The Houston industrial market achieved a sales volume of $786 million through the third quarter of 2014, also behind the 2013 pace. The fundamentals of Houston's industrial market suggest increasing sales in the period ahead as Houston is now considered a gateway city by the investor community, and many investment funds have allocated capital ready to invest.
The Multifamily Market
Houston remains an attractive market for multifamily investment with its long-term job market success and the nation's sixth-lowest median age of housing inventory. Houston has absorbed 14,760 units during the first three quarters of 2014, and rental rates have increased 7.1 percent during the past 12 months. With the enduring velocity of job creation, Houston will likely continue to experience success across all multifamily asset classes. Metro population growth is expected to remain steady in the years ahead, supporting strong demand for rental units and helping keep vacancy in check as new supply delivers.
The Retail Market
Houston's retail market continues to gain momentum and further growth is anticipated in the period ahead, making investment - especially in grocery-anchored centers - very attractive. Retail and restaurant tenants are flocking to urban infill locations as metro job growth has caused a ramp up in residential construction. Mixed-use projects such as the River Oaks District development and Uptown Park redevelopment are further defining the live-work-play dynamic in the Houston market.
ABOUT DELTA ASSOCIATES
Delta Associates, the research affiliate of Transwestern, is a firm of experienced professionals offering consulting, valuation and data services to the commercial real estate industry for over 30 years. For more information, please visit DeltaAssociates.com and follow us on Twitter: @DeltaAssociates.
Transwestern is a privately held real estate firm specializing in agency leasing, property and facilities management, tenant advisory, capital markets, research and sustainability. The fully integrated global enterprise leverages competencies in office, industrial, retail, multifamily and healthcare properties to add value for investors, owners and occupiers of real estate. As a member of the Transwestern family of companies, the firm capitalizes on market insights and operational expertise of independent affiliates specializing in development, real estate investment management and research. Transwestern has 34 U.S. offices and assists clients through more than 180 offices in 38 countries as part of a strategic alliance with Paris-based BNP Paribas Real Estate. For more information, please visit transwestern.com and follow us on Twitter: @Transwestern and @TranswesternHOU.