HOUSTON–The overall sentiment of those attending Thursday's RealShare Houston conference was that the local market is in the midst of an amazing story. Rising rental rates, constant population and job growth, and a healthy pipeline of new development all comes together to create a robust market that is likely to be sustainable for the next three to four years.
During the Institutional Capital Markets panel, moderator Steve Pumper, executive managing director at Transwestern, pointed out that last year Houston saw $4.8 billion in office sales, with the average price per square foot around $212. This figure spans 105 properties and about 26 million square feet.
And yet, with those figures on everyone's minds, several of the panelists admitted to not actively pursuing office deals in the Houston area and those that are find it a difficult market for acquisitions.
“We are seeing across the board that it is tough slugging out there,” Brad Simpkins, senior director of asset management for TIAA-CREF, told attendees. “It is hard to find a good deal. You cant let any stone go unturned.”
Part of that difficulty stems from what panelist called a tale of two cities between class A and class B office space. Many tenants are no longer interested in locating within older assets that lack amenities and the infrastructure of a newer, better class space.
“We view the tenant's needs, and changes are so significant to what was built in the mid 1980s and 1990s, that we are going to avoid anything that wasn't built in the last 15 years,” said David Nielsen, senior vice president of investments for Bentall Kennedy.
Michael Dopler, vice president of acquisitions for AEW Capital Management agreed, stating that especially in the Energy Corridor he sees a real flight to quality, and while class A space will continue to lease up, class B will be tricky.
Those in the market are watching what Shorenstein does with 800 Bell to see if that full-property renovation to take the class B space into the class A space will be effective.
“That could be the new play book that people utilize,” Simpkins said.
But while there are mixed emotions about the office sector, industrial is the new buzz word.
“Industrial is the new multifamily,” Pumper said, while Brad Davey, vice president of Clarion Partners called it the 'industry darling.'
Panelist, Bruce Petersen, executive managing director of real estate investment for USAA Real Estate Co. said his firm has been long on industrial. In 2012 they developed 4 buildings and sold all of them completely vacant in 2013. They have another four going up this year and while Petersen said he hopes they will be partly occupied when it comes time to sell he also added that you never know.
Even with the investor demand, it isn't easy to find assets to purchase.
“It is far and away the hardest asset class to get our hands on,” Simpkins said.
Stay tuned for more coverage on the other RealShare Houston conference panels.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
