TRENDS 2015 - Houston Slides

Confidential – Colliers International 2014

JOBS


2012 – Dr. Ray Perryman, the Perryman Group: “For every oilfield job created – two jobs are created in Houston”

-100,000

-50,000

0

50,000

100,000

150,000

2009 2010 2011 2012 2013 2014

Houston-Sugar Land-Baytown Annual Job Growth

JOBS


JOBS


$50

SHALE PLAY BREAKEVEN

Presenter

Presentation Notes

Context Slide - @ $80 per barrel many of the shale plays still pro-forma out but everyone gets nervous


OPEC “BREAK EVEN”


Average Class A

Vacancy:

9.5%

HOUSTON OFFICE Class A Submarket Vacancy


Average Class B

Vacancy:

13.4%

HOUSTON OFFICE Class B Submarket Vacancy


MARKET INDICATORS YE 2013 YE 2014

CITYWIDE NET ABSORPTION (SF) 2.9M 6.8M

CITYWIDE AVERAGE VACANCY 12.0% 11.5%

CITYWIDE AVERAGE RENTAL RATE $25.97 $26.79

CLASS A RENTAL RATE

CBD $38.16 $42.01

SUBURBAN $30.80 $31.61

CLASS A VACANCY

CBD 10.7% 8.6%

SUBURBAN 9.2% 9.8%

At the close of Q4, 17.1M SF of new office development was under construction, more than any other U.S. metro.

Market Metro U/C

Houston, TX 17,134,157

San Jose - Silicon Valley 8,086,492

Dallas, TX 6,873,662

Washington DC 6,168,610

Seattle/Puget Sound, WA 5,983,892

San Francisco, CA 5,161,899

Toronto, ON 5,088,689

Calgary, AB 4,950,500

Boston, MA 4,558,156 New York, NY - Midtown South Manhattan 4,170,000

HOUSTON OFFICE – 212.9M SF


10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

$16.00

$18.00

$20.00

$22.00

$24.00

$26.00

$28.00

Houston Average Rent Houston Average Vacancy



Average Cap Rate (Yield) Average Price ($) Per SF

Sales by Total $ (mil)

0

1,000

2,000

3,000

4,000

5,000

6,000

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14

Rolling 12-mo. Total Quarterly Vol.

0

50

100

150

200

250

300

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14

Houston United States

4%5%6%7%8%9%

10%11%12%

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14


Data Source:


http://www.rcanalytics.com/


Average Industrial Vacancy:

4.9%

HOUSTON INDUSTRIAL Submarket Vacancy


HOUSTON INDUSTRIAL MARKET INDICATORS

YE 2013 YE 2014


CITYWIDE AVERAGE VACANCY (%) 5.3% 4.8%

CITYWIDE AVERAGE RENTAL RATE ($) $5.96 $6.20

NEW SUPPLY DELIVERED (SF) 8.0M 8.7M

4Q UNDER CONSTRUCTION (SF) 4.4M 8.0M

8.7M SF of

new inventory

delivered in

2014, 6.2M SF

was spec

construction!

HOUSTON INDUSTRIAL – 496.1M SF


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

$5.00

$5.20

$5.40

$5.60

$5.80

$6.00

$6.20

$6.40

$6.60Houston Average Rent Houston Average Vacancy




Data Source:

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14



$0$10$20$30$40$50$60$70$80

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14


2%

4%

6%

8%

10%

12%

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14





HOUSTON RETAIL MARKET INDICATORS

YE 2013 YE 2014



CITYWIDE AVERAGE RENTAL RATE ($) Statistically Irrelevant

NEW SUPPLY DELIVERED (SF) 1.9M 1.9M

4Q UNDER CONSTRUCTION (SF) 1.0M 2.2M

Houston’s Strong

Economy Helps

Push Retail

Vacancy Rate to

Historic Low

HOUSTON RETAIL – 269.9M SF


0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Houston Average Vacancy




0200400600800

1,0001,2001,4001,6001,800

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14



0

50

100

150

200

250

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14


4%5%6%7%8%9%

10%11%12%

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14


Data Source:




Current Multi-Family Projects Under Construction


HOUSTON MULTI-FAMILY MARKET INDICATORS

YE 2013 YE 2014

UNITS ABSORBED 16,248 16,432


CITYWIDE AVERAGE RENTAL RATE ($) $857 $923

UNITS DELIVERED 12,186 18,305

4Q UNDER CONSTRUCTION 20,479 27,787

The average

monthly rent

increased 8.1% in

2014.

HOUSTON MULTI-FAMILY – 588.8K Units


6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

$600

$700

$800

$900

$1,000

Houston Average Rent Houston Average Vacancy



Data Source:

Average Cap Rate (Yield) Average Price ($) Per Unit


0

1,000

2,000

3,000

4,000

5,000

6,000

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14


020,00040,00060,00080,000

100,000120,000140,000

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14


4%5%6%7%8%9%

10%11%12%

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14





• Starts up 9.4% over 2013 (29,905)

• Closings (New) 27,647

• Months Supply – 7.3 Near historic lows.

• “Lot supply constraints are stopping builders from ramping up more quickly”

Source: Metrostudy / Hanley Wood

Median Home Prices

SINGLE FAMILY


• Consultants continue to struggle to keep up with demand. The duration of design and construction documentation on projects has not improved.

• Work under contract/construction by General Contractors continues to drive a demand for skilled personnel. However a number of new projects HAVE been put on hold we see real concern on backlog.

• The Subcontractor community has little or no excess capacity to accommodate present workloads causing construction schedules to lengthen.

• Labor and material costs continue to escalate but there are some signs of leveling off of price increases.

• Long lead delivery times for critical path material and equipment continues to drive completion dates.

CONSTRUCTION COMMENTS


Office

Retail

Hotel

Industrial

Apartment

Phase I Recovery

Phase II Expansion

Phase IV Recession

Phase III Oversupply

Rent Increasing

Rents Decreasing

Above Long-Term Avg. Occupancy

Below Long-Term Avg. Occupancy

Houston Q4 2014 SELL

HOLD

BUY

U.S. Commercial Real Estate Market Cycle

Thank you, have a great 2015.

Documents

TRENDS 2015 - Houston Slides