REDNews September 2012 : Page 36

HOUSTON COMMERCIAL BUZZ OFFICE / MEDICAL / RETAIL LEASE SOUTHEAST TEX AS Forecast: Multi-Family... Ray Hankamer Hankamer & Assoc, Broker Houston Contributing Writer R ESTAURANT / R ETAIL / M EDICAL O FFICE -F OR L EASE 2416 W. H OLCOMBE Th e following “bullet points” taken from O’Connor & Associates Apartment Forecast with Chris Curry-HFF, and David Luther-Marcus & Millichap. Th ey presented a composite picture of the multi-family market in Houston : • Houston is not a great place to be right now if you are an apartment renter • Houston is #1 in the U.S. in job creation: #1 out of the recession; #1 in fastest growing wages; #1 in in-bound U-Haul rentals • Look at the out of state license plates all around; people are moving to Houston looking for opportunity • In spite of growing demand, multi-family units under construction currently are at 11,000, while they were 21,000 in 2009, and averaged 15,000 per year over the past three years • Landlord rent concessions are going away, and renewal rents are being bumped 12-15% by landlords ($175-$350 per month not unusual) • Some renters are gritting teeth and paying, and some are moving down the ladder from Class A to Class B to Class C, creating demand at all levels-Occupancy in Class A is at 89% and rising • Slower development is attributable to longer lead times in inner city (longer approval process), where land costs are high and developers must go to podium/mid/high-rise construction • Construction costs are going up as the Oil Patch is competing for labor, and building materials costs are on the rise • We are drifting back towards being a “renter nation” as opposed to a home-owning nation-nationwide ownership has fallen from 68% to 62%, and some home buyers are leery of holding mortgages now • “Houston is hot and has never been hotter” (in the multi-family segment), with growing demand and construction necessary to meet the demand lagging • Investors see Houston now as a much diversifi ed economy compared to the past, and investor demand for “value-added” acquisitions is heating up • Investors want to see how upgrades such as countertops, hardware, appliances, etc. will bump rents…thereby bumping NOI and overall project value • Turnaround deals where buyer can spend $1-3,000 per unit on upgrades, bump rents, lease up, and then hold – or sell – are attracting investors from FL, CA, NY, and from local and statewide investors • Some buyers are not spending anything on upgrading their new purchases, but simply holding steady as the “aff ordable alternative,” as higher rents force some renters to lower Class projects • Sellers are pondering if this is the time to sell, since interest rates rising would take away from today’s values; also temptation is to sell now with capital gains tax rate at 15%, versus possible higher rate in the future • With expensive gasoline, people want to be near their jobs-so far there is a lack of construction in the suburbs • Houston has had 23 consecutive months of positive absorption • During last 12 months half of buyers of multi-family projects were from out of state-the 12 months preceding that 30% of buyers were from out of state-the presumption being that Texas investors bought turnaround properties, upgraded, and are fl ipping to out of state and institutional buyers • Not all of Houston area submarkets equally hot-best are inner Loop 610, Galleria, Katy, Sugar Land, Energy Corridor x 5,966 SF R ESTAURANT / R ETAIL / M EDICAL O FFICE B LDG x S TAND -A LONE 2 ND G ENERATION B UILT -OUT R ESTAURANT o W ALK -IN COOLER , FREEZER , NUMEROUS HOODS , 2,500 GAL . GREASE TRAP – ALL IN -PLACE x 48 P ARKING S PACES ON SITE + ADDT ’ L 40 S PACES AVAIL ( NIGHTS & WEEKENDS ) x L OCATED ON W. H OLCOMBE , BETWEEN K IRBY & G REENBRIAR x M EDICAL C ENTER , W EST U NIVERSITY , S OUTHSIDE P LACE , A RYSHIRE , T HE V ILLAGE x P YLON S IGNAGE O N -S ITE x C ITY OF H OUSTON -U NRESTRICTED S COTT R UBENSTEIN 713-799-1676 RETAIL SALE www.pipelinerealty.com www.pipelinerealty.com *UHHQEHUJ &RPSDQ\ &#1c;&#1c;5LFKPRQG$YHQXH&#0f;6XLWH
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&#1a;  36 SEPTEMBER 2012

Pipeline Realty Company
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