Yesterday before a crowd of 1,000 business leaders at the Hyatt Regency Downtown, Barton Smith said he believes there is "staying power" to the economic recovery now underway. The city's seasonally adjusted job growth is about 1.6% right now, said the economics professor as he predicted the trend should continue through year's end.
Houston's office market could drop below 15% vacancy in two to four years if annual job growth matches the forecast of 30,000 to 50,000 new positions and construction is kept in check or toes the line by matching predictions that less than two million sf will deliver annually through 2006. The 178-million-sf inventory is now 16.6% empty.
"The office market has probably received the most negative press over the past couple of years because of what the Enron debacle did to the downtown market," Smith said. "However, this market has seen a significant decrease in new supply, which will help it get back to normal more rapidly than the apartment market."
But, Smith said, Houston's multifamily market is another story altogether. Rising interest rates will actually help the beleaguered apartment market by stemming the exodus of renters to homeowners. Smith's concern is the addition of 12,000 more units per year to an existing supply of 466,700 units. That, he said, is undermining the market's chance for recovery.
"This market failed to heed our warning last year of the dangers of excessive new construction and will now pay the price for most of the rest of this decade. Only if new supply were to totally end, might this market have a chance to return to normal within three or four years, but I don't expect that to happen," Smith said.
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