Approximately 2 million square feet of office space is currently under construction, as a robust building boom that began in 2013 finally tapers off, GlobeSt.com learns.

“The office market has been Houston's most troubled sector of commercial real estate in 2017,” said Mark Sikes, principal of Deal Sikes & Associates. “Experts agree that the office market hit bottom in 2017. Leasing activity will improve, the supply of sublease space will shrink and recovery is underway. Overall, there is justification for renewed optimism throughout the Houston real estate market as we move into a new year.”

Moving past the multifamily and office markets, JLL examines the industrial and retail markets in recent reports. Specifically, the firm reports that downstream activity has added demand to an already-tight industrial market.

Construction activity is decreasing in metros across North America, but submarkets closely aligned with the downstream sector are reporting sustained demand and supply increases. One case in point is 1.4 million square feet under construction in the Southeast industrial submarket, JLL says. (In comparison, the next highest submarket has just 393,280 square feet under construction).

The only chink in Houston's industrial armor is single-tenant crane-ready buildings, which typically support the upstream sector. This product type is experiencing relatively high availability, JLL reports.

In the retail market, deliveries outpace net absorption for the first time since 2012. Leasing activity decreased as some retailers seemed to take a pause. The exceptions are restaurants, boutique fitness and service-based retail, which are still expanding across the metro.

Post Hurricane Harvey, multifamily is also providing increased competition for retail development sites, driving further integration of the two sectors, GlobeSt.com learns.

Retail total vacancy and availability are up to 5.6% and 7.7% respectively–both well below long-term averages and third quarter net absorption is 192,911 square feet, says JLL. The construction pipeline contains 3.85 million square feet.

The lowest total vacancy can be found in the Northeast submarket with 4.1% vacancy, while the lowest total availability is in the Inner loop at 5.5%. The highest third quarter positive net absorption is in the Southeast submarket at 189,399 square feet. The highest year-to-date positive net absorption is in the North submarket at more than 1 million square feet. The Southwest submarket has the most retail space under construction with 1.1 million square feet, according to JLL.

HOUSTON—Improving job growth, stabilization in energy prices and restraint in construction will contribute to an upswing in Houston real estate values in 2018, according to Deal Sikes & Associates, a Houston-based real estate valuation and consulting firm. The multifamily market reported strong gains in leasing as displaced flooding victims leased apartments. The oversupply in the apartment market has virtually vanished, supporting a platform for improved multifamily valuations.

“Although there will be exceptions, many Houston properties–both commercial and residential–are poised to rise in value in 2018,” said Matthew Deal, principal at Deal Sikes & Associates. “Construction remains at moderate levels, while Hurricane Harvey trimmed the inventory. The market is tightening as the economy improves and this points to rising prices in the year ahead.”

The US Energy Information Administration forecasts that West Texas Intermediate crude will be priced at an average of $51 per barrel in 2018, continuing a stabilization of energy pricing that prevailed in much of 2017.

“The stabilization of energy prices provides a solid base for the Houston office market and real estate in general. Major investors and institutional buyers returned to Houston real estate in 2017, setting the stage for more acquisitions as confidence grows,” Deal said. “Economists forecast improving job growth in 2018, with perhaps as many as 70,000 new jobs created. Many factors indicate that 2018 could be a year of significant gains in real estate values, perhaps as much as 10% for some properties in certain sectors.”

Approximately 2 million square feet of office space is currently under construction, as a robust building boom that began in 2013 finally tapers off, GlobeSt.com learns.

“The office market has been Houston's most troubled sector of commercial real estate in 2017,” said Mark Sikes, principal of Deal Sikes & Associates. “Experts agree that the office market hit bottom in 2017. Leasing activity will improve, the supply of sublease space will shrink and recovery is underway. Overall, there is justification for renewed optimism throughout the Houston real estate market as we move into a new year.”

Moving past the multifamily and office markets, JLL examines the industrial and retail markets in recent reports. Specifically, the firm reports that downstream activity has added demand to an already-tight industrial market.

Construction activity is decreasing in metros across North America, but submarkets closely aligned with the downstream sector are reporting sustained demand and supply increases. One case in point is 1.4 million square feet under construction in the Southeast industrial submarket, JLL says. (In comparison, the next highest submarket has just 393,280 square feet under construction).

The only chink in Houston's industrial armor is single-tenant crane-ready buildings, which typically support the upstream sector. This product type is experiencing relatively high availability, JLL reports.

In the retail market, deliveries outpace net absorption for the first time since 2012. Leasing activity decreased as some retailers seemed to take a pause. The exceptions are restaurants, boutique fitness and service-based retail, which are still expanding across the metro.

Post Hurricane Harvey, multifamily is also providing increased competition for retail development sites, driving further integration of the two sectors, GlobeSt.com learns.

Retail total vacancy and availability are up to 5.6% and 7.7% respectively–both well below long-term averages and third quarter net absorption is 192,911 square feet, says JLL. The construction pipeline contains 3.85 million square feet.

The lowest total vacancy can be found in the Northeast submarket with 4.1% vacancy, while the lowest total availability is in the Inner loop at 5.5%. The highest third quarter positive net absorption is in the Southeast submarket at 189,399 square feet. The highest year-to-date positive net absorption is in the North submarket at more than 1 million square feet. The Southwest submarket has the most retail space under construction with 1.1 million square feet, according to JLL.