According to the O’Connor & Associates Third Quarter 2008 Houston Industrial Data Program, citywide occupancy for Houston area operating industrial facilities is 84.88% (Flex = 87.19%; Bulk = 85.86%; Manufacturing = 75.56%; Service = 81.56%; Distribution = 73.34%; R&D = 51.22%). This is up 1.25 percentage points from last quarter’s rate of 83.63% (Flex = 86.38%; Bulk = 85.60%; Manufacturing = 75.76%; Service = 83.22%; Distribution = 65.20%; R&D = 44.29%). The overall monthly rental rates decreased slightly to $0.45 per square foot (Flex = $0.48; Bulk = $0.40; Manufacturing = $0.36; Service = $0.56; Distribution = $0.41; R&D = $0.76).
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Note: The industrial facilities listed herein are followed by their representative identification number as they appear in the O’Connor & Associates IndustrialLink Online Data platform and are provided for subscriber cross-referencing. The property information contained within this database is updated on a monthly basis and accessible over the web (please contact us for more details).
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| Edited by Stuart Showers | Volume 23 Number 10 December 2008 |
Houston Real Estate Trends is widely read by brokers, developers and other industry professionals. The newsletter is $199 per year and covers significant transactions and economic and financial news for Multifamily, Retail, Office, Industrial, Single-family and Vacant land. Click on the following for more information:
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According to www.oconnordata.com, Fourth Quarter 2008 O’Connor & Associates data indicates that Greater Houston apartment market occupancy has dropped more than half a percentage point for the first time in 2008. Current occupancy is 88.56%, down 0.57% over third quarter 2008 and slightly down (0.22%) from fourth quarter 2007. Overall rents have continued to increase with current per square foot rates up 1.6% from fourth quarter 2007 ($0.852) to fourth quarter 2008 ($0.866) but relatively unchanged from the previous quarter ($0.861). All classes have enjoyed steady rate increases since forth quarter 2007, as Class A is up 1.6% from $1.139 to $1.157, Class B is up 0.9% from $0.823 to $0.830, Class C is up 1.1% from $0.699 to $0.707, and Class D is up 1.2% from $0.607 to $0.614. While rental rates have been increasing at a steady pace, the current financial outlook could begin to exert downward pressure on all classes. |
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Apartment Sales
- Inland American Communities (214-739-8184) purchased Villas At Shadow Creek (17690) from Davis Development Inc. (956-968-4571), a 264-unit Class A complex located at 2020 Business Center Dr. in Pearland (613E). The newly built complex is 98% leased with average rents at $0.99 per square foot. David Wylie of Apartment Realty Advisors brokered the deal.
- SCI Real Estate Investments (310-470-2600) purchased Kings Cove (17617) from Dinerstein (832-209-1200) a 192-unit Class A complex located at 4920 Magnolia in Kingwood (337A). The year-old complex is 93% leased with average rents at $1.10 per square foot. David Wylie of Apartment Realty Advisors represented the seller.
- West Parker 137, LLC (936-321-1078) purchased Pecan Shadows (1625) from Pecan Shadows, Ltd. (661-255-6303) a 137-unit Class C complex located at 480 W. Parker Rd. in north Houston (412Z). The 34-year-old complex is 85% leased with average rents at $0.70 per square foot. Jeff Eisenhardt of Hendricks & Partners represented the seller in the deal.
MLS home sales had the biggest year-to-year decline in October, as 4,962 used homes were sold according to the Houston Association of Realtors (HAR). Sales for October 2008 were down 21.6% from October 2007. The median price of a used single-family home sold in October was $142,000, down 2.7% from the same time last year, while the average home price was $194,607, which was down 1.6% from the October 2007 level. Note: MLS sales include primarily used home sales throughout the Houston region. Historical comparisons are offered solely for informational purposes and may not truly reflect growth in sales.
According to American MetroStudy, net sales of new homes increased 54% in October to 1,066 from 659 in September but down 34% from October 2007. Realtor co-op sales represented 61.0% of gross sales, down 3% from October of last year. Traffic decreased 34% from last year to 14,547 in October 2008. The inventory of completed speculative homes (1,955) is down 7% from last year. There are 1,915 spec homes under construction, which is down 13% from October 2007. Overall, the 3,870 specs (both completed and under construction) are down 10% from October 2007. Note: the 24 homebuilders in this survey account for approximately 60% of housing starts in Houston.
Nationwide sales of new single-family homes decreased in October to a seasonally adjusted annual rate of 433,000, 5.3% below the revised September sales rate of 457,000 and 41.1% below the October 2007 figure, according to a release by the U.S. Department of Commerce. The median sales price in October was $218,000. Privately owned housing starts were at a seasonally adjusted annual rate of 791,000 in October 2008, which is 4.5% below the revised September estimate, and 38.0% below the revised October 2007 rate. Privately owned housing completions were at a seasonally adjusted annual rate of 1,043,000 in October, 10.2% below the revised September figure and 25.6% below the revised October 2007 figure.
The National Association of Home Builders/Wells Fargo Housing Market Index, a monthly measure of builder confidence, fell to 14 in October, on a scale where any number greater than 50 indicates that builders view sales as more good than poor. The index measuring current sales of new single-family homes also fell to 14, the index measuring sales expectations for the coming six months had a nine-point loss to 19 and the index measuring the traffic of prospective buyers fell to 11.
According to the National Association of Realtors (NAR), 4,980,000 existing homes were sold in October 2008, down 3.1% from September sales and down 1.6% from the 5,060,000 homes sold in October 2007. The median sale price was $ 183,300, which represents a 11.3 decrease from sale prices last year.
The following chart illustrates historical used home sales.
Source: Houston Association of Realtors
- Kimball Hill (342-3318), the 17th-largest homebuilder in the Houston area last year says it will not start any new homes as it completes current starts already under construction. The homebuilder filed for bankruptcy in April and is now in the process of shuttering the business.
Permit Issuance
The City of Houston issued permits to build 200 private single-family houses and 8 private multifamily building in October. Demolition permits were issued for 105 private single-family houses and 28 multifamily structures. In addition, 211 permits were issued for privately owned non-residential construction totaling $286,195,650 and 30 permits were issued for public non-residential construction. Additions, alterations, and conversions totaled $231,428,302 for the private sector and $26,015,685 for the public sector.
Cost of Construction* |
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2006 |
2007 |
2008 |
| Month of October | $484,856,552 |
$538,796,865 |
$637,226,487 |
Year-to-Date |
$4,053,597,883 |
$4,692,736,972 |
$5,212,595,684 |
*The figures in this section include all categories of buildings and non-building structures
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According to the O’Connor & Associates Third Quarter 2008 Houston Office Data Program, citywide occupancy for Houston area multi-tenant office buildings is 85.51% (Class A = 90.49%; Class B = 82.30%; Class C = 79.84%; Class D = 77.09%). This is slightly lower than the second quarter 2008 citywide rate of 85.92% (Class A = 90.67%; Class B = 83.05%; Class C = 80.17%; Class D = 76.83%). The third quarter 2008 citywide annual multi-tenant office rental rate is $21.75 per square foot (Class A = $26.05; Class B = $19.23; Class C = $15.05; Class D = $12.38), which is down 6.9% from second quarter 2008 when rental rates stood at $23.37 citywide (Class A = $29.10; Class B = $19.68; Class C = $15.00; Class D = $12.34). Office Sales
Office Leases
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The following chart illustrates historical office occupancy rates.
According to the O’Connor & Associates Third Quarter 2008 Houston Retail Data Program, citywide occupancy for Houston area multi-tenant retail buildings is 84.64% (Regional = 86.82%; Community = 87.52%; Neighborhood = 83.35%; Strip = 80.53%). This is slightly lower (0.15 points) than the second quarter 2008 citywide rate of 84.77% (Regional = 86.97%; Community = 87.54%; Neighborhood = 83.54%; Strip = 80.63%). The citywide monthly multi-tenant retail rental rate is $1.60 per square foot (Regional = $2.87; Community = $1.58; Neighborhood = $1.20; Strip = $1.22). Overall rents are unchanged from the last quarter and only down $0.02 from last year’s figure. |
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The following chart illustrates historical retail occupancy rates.
Retail Sales
- Satya, Inc. (713-789-4443) purchased a Portfolio of seven retail properties from Kagan Edelman (713-748-2000), totaling 215,000-square-feet with locations throughout the Houston metro area. Four centers are located in north Houston, Cranbrook Plaza (609) located at 13331 Kuykendahl (372B), a 37,000-square-foot center with a 92% occupancy rate; Spring Creek Plaza (657) located at 6450 Louetta (330M), a 26,000-square-foot center with a 53% occupancy rate; Champions Forest (1122) located at 9035 Louetta (330N), a 24,000-square-foot center with a 76% occupancy rate; and Park 45 (44782) located at 927 Spring Cypress (292Q), a 21,000-square-foot center with a 66% occupancy rate. The others include Friendswood Village (2798) located at 607 FM 518 S. in southeast Houston (656D), a 41,000-square-foot center with an 84% occupancy rate; Bellcrest Shops (1744) located at 10600 Bellaire Blvd. in southwest Houston (529G), a 37,000-square-foot center with an 85% occupancy rate; and Williamsburg (1772) located at 1801 Mason Rd. in west Houston (485M), a 29,000-square-foot center with a 79% occupancy rate. The buyer was represented in-house, while the seller was represented b Rusty Tamlyn, Mike Parker and Trent Agnew of HFF.
- A joint venture with the entity name of WRI HR Venture Properties I, LLC has been arranged between Hines REIT (713-621-8000) and Weingarten Realty (713-866-6082) by the Dallas office of HFF. This partnership purchased a portfolio of 12 grocery anchored retail centers in five states from Weingarten Realty (713-866-6082). A subsidiary of Hines REIT will acquire 70% interest in the portfolio. Three of the centers are located in the Houston metro area with a total square footage of 547,238. The centers include Champions Village III (1082) located at 5203 FM 1960 W. in northwest Houston (370D), a 384,634-square-foot center with a 93% occupancy rate; Kingwood Shopping Center (378) located at 1113 Kingwood Dr. in northeast Houston (336A), a 127,523-square-foot center with a 87% occupancy rate; and Bellaire Boulevard Center (2066) located at 5130 Bellaire Blvd. in southwest Houston (531G), a fully occupied 35,081-square-foot center.
Retail Leases
- Chick-fil-A leased a 48,458 square foot PAD site at the The Shos at Stone Park (14732), a 200,000-square-foot retail center located at the corner of Beltway 8 and Wallisville Rd. in northeast Houston (457U) from Inwood Property, LLC (713-439-0788). Jeff Mallett of Mallett & Company represented the tenant, while Robert Bailey of NewQuest Properties represented the landlord.
- Office Max renewed their lease of 23,500 square feet at Commons @ Willowbrook (1091), a 458,000-square-foot center located at 7502 FM 1960 W. in west Houston (370E) from Valued Advisor Fund, LLC (312-819-4300). The 19-year-old center is 86% leased. The tenant was represented in-house, while Alex Makris and Jazz Hamilton of CB Richard Ellis represented the landlord.
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The following chart illustrates historical industrial occupancy rates.
Industrial Sales
- Hempstead 14620 Properties, LLC (281-888-5637) purchased 14620 Hempstead Rd. (5269), a 43,000-square-foot facility, located in north Houston (410W) from Drew Investments, LLC (713-461-2577). The 35-year-old facility is fully leased. Joshua Lass-Sughrue of Marcus & Millichap represented the buyer in the deal, while Justin Miller and Jerry Goldstein of Marcus & Millichap represented the seller.
- RuhRPumpen, Inc. (918-627-8400) purchased 10010 Gulf Frwy. (2014), a 30,000-square-foot facility, located in southeast Houston (575D) from PEL Real Estate Interests (713-944-9852). The 31-year-old facility is fully leased. Rob Stillwell and Jay Jenckes of Grubb & Ellis represented the seller in the deal.
- McAllister 2441 Properties, LLC (281-888-5637) purchased 2411 McAllister Rd. (4220), a 27,000-square-foot facility, located in north Houston (451U) from Drew Investments, LLC (713-461-2577). The 33-year-old facility is fully leased. Joshua Lass-Sughrue of Marcus & Millichap represented the buyer in the deal, while Justin Miller and Jerry Goldstein of Marcus & Millichap represented the seller.
- Breen road LP purchased 7123 Breen Rd. (5324), a 15,000-square-foot facility located in north Houston (411F) from Retsco, Inc. (281-931-7171). The 25-year-old facility is vacant. George Jones of CB Richard Ellis represented the buyer in the deal, while Coe Parker, Jon Farris, Kelley Parker, III and John Littman of Cushman & Wakefield represented the seller.
Industrial Leases
- SRS Acquisition Corporation leased 700 Reed Rd. (6638), a 53,000-square-foot facility located in southwest Houston (568H), from Pelec Development, LTD (713-515-0034). This 18-year-old facility is fully leased. Doug Nicholson and John Nicholson of Grubb & Ellis represented the tenant, while Ed Frantz of Cushman & Wakefield represented the landlord in the deal.
- Shred-it USA, Inc. leased 16,200 square feet at Techway SW Business Ctr. Bldg. IV (6513), a 94,000-square-foot facility located in southwest Houston (529U), from East Group Properties (601-354-3555). The newly built facility is 17% leased. David Cook, Jeff Peden and Graham Horton of Cushman & Wakefield represented the tenant, while John Stavinoha of Insite Commercial Real Estate represented the landlord.
- Building EMTS leased 5322 Ashbrook (3109), a 15,800-square-foot facility located in southwest Houston (531C), from H2T, LLC (713-490-1780). The 43-year-old facility is fully leased. The tenant was represented in-house, while Kelley Parker, III, John Littman and Coe Parker of Cushman & Wakefield represented the landlord in the deal.
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Vacant Land
- Arthur A. Presley, Jr. (713-680-8161) purchased 13.7 acres of land on I-10 and Trinity Bay in Anahuac from Sonya & J. G. Keeling (713-947-1881). Both the seller and buyer were represented Andrew Lockwood of Grubb & Ellis.
The total number of nonagricultural wage and salary jobs in the ten-county Houston area increased by 7,600 jobs to 2,634,900 in October 2008, according to the U.S. Department of Labor. This month’s total is 52,300 jobs more than the 2,582,600 jobs at this time last year. Of nonagricultural employers, the Service Provider sector posted the largest gain over the month at 7,000 jobs, followed by the Government with 6,200 jobs gained. Over the year, the Service Provider sector had the largest increase in employment, adding 40,600 jobs, followed by the Goods Producing sector, which added 11,700 jobs.
The following chart illustrates total non-agricultural employment in the Houston MSA.
Source: U.S. Department of Labor
Advance estimates reported by the U.S. Department of Commerce show that seasonally adjusted national retail and food services sales for October 2008 were $363.7 billion, a decrease of 2.8% from September and down 4.1% from October 2007. Retail trade sales in October were down 3.1% from September and were 5.0% below last year’s level.
Personal income increased $42.4 billion, or 0.3%, and Disposable Personal Income (DPI) increased $45.1 billion, or 0.4%, in October 2008, according to the Bureau of Economic Analysis. Personal Consumption Expenditures (PCE) decreased $102.8 billion, or 1.0% in October 2008. Meanwhile, the U.S. Department of Laborreports that the seasonally adjusted Consumer Price Index (CPI) for urban consumers decreased 1.0% in October 2008 but is 3.7% higher than in October 2007.
The latest Conference Board Survey indicates that the Consumer Confidence Index decreased to an all time low of 38.8 in October 2008, down 22.4 points from 61.4 in September. The index is an indicator of consumers’ overall assessment of current conditions, relative to a figure of 100 in 1985, the base year. The Index of Leading Economic Indicators decreased 0.8% in October. The index is an indicator of direction the economy is expected to take in coming months, relative to a figure of 100 in 1996, the base year.
According to the Federal Reserve, industrial production increased 1.3% in October 2008 from September 2008 and is down 4.1% over the October 2007 level. Output in the manufacturing sector increased 0.6% in October; output of utilities increased 0.4% over the month and output at mines increased 6.1%. The rate of industrial capacity utilization was 76.4% in October, which is unchanged from the previous month’s level but is 1.6 points higher compared to the previous year’s level.
Freddie Mac reports that the 30-year fixed-rate mortgage (FRM) averaged 6.20% in October 2008, which is 0.16 points up from September but down 0.18 points from one year ago. The average for the 15-year FRM averaged 5.89% in October 2008, which is up 0.25 points from September but down 0.15 points from October 2007.
The U.S. Department of Commerce reports that advance estimates of the real GDP, the output of goods and services produced by labor and property in the United States, decreased at an annual rate of 0.5% in the third quarter of 2008, this decrease is due reflected negative contributions from personal consumption expenditures (PCE), residential fixed investment, and equipment and software.
The U.S. Department of Commerce reports that construction spending during October 2008 was estimated at a seasonally adjusted annual rate of $1,072.6 billion, which is 1.2% below the revised September 2008 estimate. The current figure is 4.6% below the October 2007 estimate of $1,124.2 billion. Private residential construction was at a seasonally adjusted annual rate of $338.8 billion in October, 3.5% below the revised September estimate of $351.2 billion.
The Baker Hughes count of active domestic rotary rigs stands at 1,971 during the week ending October 31, 2008. The current rig count is up 11.99% from last year’s figure of 1,760 rigs. The rotary rig count is a census of the number of drilling rigs actually exploring for or developing oil or natural gas in the United States.
The National Restaurant Association’s Restaurant Performance Index (RPI) remained soft in October with a rating of 97.1. The index is a monthly composite index that tracks the health and outlook for the U.S. restaurant industry. This is up 0.4% from September’s lowest level on record of 96.7.
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Potpourri
According to the monthly Monster Worldwide, Inc. employment index, online job demand had a ten-point decrease in the month of October and remains down 20.0% from October 2007. Of 23 occupational categories only 1, the Education, Training, and Library category posted an increase over the month. Real estate, leisure and hospitality and retail trade industries register strongest monthly declines in online job availability, while opportunities in mining and utility industries show continued expansion.
According to the November 2008 Architecture Billings Index, developed by the American Institute of Architects, demand for non-residential construction plummeted to its lowest level since the survey began in 1995. October reported an index of 36.2 (any score above 50 indicates an increase in billings). The project inquiries index is 39.9.
Bridgewood Property Co. (713-623-6767) proposes the Village of the Woodlands, a 188 senior living residential community. The 250,000 square foot Class A complex will offer both independent and assisted living apartments.Please direct any questions regarding content in the Houston Real Estate Trends to Stuart Showers at 713-375-4356 or sshowers@poconnor.com.
O'Connor & Associates -- Your Key to Real Estate Success Corporate Office: 2200 North Loop W., Suite 200 Houston, TX 77018 1-800-856-7325 www.poconnor.com • www.oconnordata.com • www.oconnorcomps.com
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