Stock Office Inventory Increases Substantially

Holland says Austin and Houston have the fastest rate of growth in each office market.

HOUSTON—Supply and demand are perhaps the most basic concepts from economics which form the foundation of market dynamics in commercial real estate. Supply is the quantity of a product offered by a market, such as office space in the Houston market. Stock inventory measures the actual realized supply of the CRE product in square feet of building space. Growth in the supply of office space is changing across Texas in light of Houston, Austin, Dallas/Fort Worth and San Antonio markets each being in the top 10 fastest growing cities in 2015, according to NAI Partners . Dallas and Houston have large population sizes of 7 and 6.6 million people, respectively, while Austin and San Antonio have smaller populations of about 2 and 2.4 million people. Population size and office stock inventory for Houston, Austin, Dallas/Fort Worth and San Antonio from 1999 to 2016 are indexed to values of 2006 to facilitate comparisons in time and among cities in NAI’s report. Consistent with population growth, stock inventory of office space has increased substantially across the four Texas cities. Specifically, the four markets have increased by 15% to 31% since 2006, but with some striking differences occur among the four cities that were not prevalent with population growth. While population change since 2006 was greatest for Austin, San Antonio shows the greatest increase in office space since 2006 at 31%. Despite having the largest population size, Dallas office space increased the least since 2006, but still a substantial 15%, says NAI Partners. With a 25% increase since 2006, Austin and Houston show the strongest rate of growth in office space with substantial increases occurring in both markets in 2014 and 2015. In summary, these analyses support office CRE increasing with population growth, and strengthening CRE in Texas, despite some economic woes in recent times with oil commodity prices. J. Nathaniel Holland , Ph.D., chief research and data scientist, NAI Partners tells GlobeSt.com: “Sometimes the raw numbers can be deceiving to the naked eye, without more thorough statistical analysis, such as with the growth of office markets among Texas cities. By indexing stock inventory, we see that while Dallas has the largest overall market, Austin and Houston have the fastest rate of growth in their office markets.”