Real Estate Round-up
Hope for heaven in '11 (because 2010 may be hell)
The expectations for the Houston real estate market aren’t high for 2010. This year will be one of those times to survive and wait for a better future.
“'Heaven in ’11 is what people are hoping for," says Sanford Criner, executive vice president of the CB Richard Ellis real estate firm. That’s because 2010 will be “a year to forget.”
In Houston’s office market, look for more foreclosures, more vacancies and a rougher ride for downtown’s skyscrapers.
Downtown towers could be banged around a bit in 2010. Shell Oil and Devon Energy appear to be in a major shrinkage mode and could be putting a lot of empty space back on the market, Criner says. And two new office towers are under construction in downtown— by Hines and Trammell Crow — adding more supply while demand is declining.
The underlying problem with the Houston office building situation is the city’s job losses over the last couple of years. Houston lost over 90,000 jobs in 2009. And that was happening while a lot of new office buildings were being completed in the suburbs. Job losses and opening new office buildings are a bad mixture.
The economy should be better in 2010 and the city may add a small number of jobs this year.
However, companies are being very cautious when it comes to hiring more employees and leasing more office space. So it may take awhile for things to improve in the Houston office market. On the positive side, new construction has nearly come to a halt, giving things time to come back into better balance.
Shopping Centers Softer
Shopping center owners will be facing continuing vacancies in the year ahead. Consumer spending is softer because of unemployment and more conservative buying habits by many Americans. That means retailers are cautious and slow to expand. And financing for new stores is harder to get. But the retailers that can pull off an expansion now or renew a lease are going to be able to negotiate some very favorable terms.
It’s not going to stay bad forever, though. Houston is better off than many places and strong population growth makes Houston an attractive place for investors who want to buy shopping centers. The Grubb & Ellis Investment Opportunity Monitor ranks Houston as the second-best place in the nation for buying a retail property, behind only Los Angeles.
Home sales have been improving several months in a row in Houston, according to statistics from the Houston Association of Realtors. This indicates that the worst is over for the local housing market. The median home price was up 8.7 percent over last year. The inventory of homes for sale has been shrinking. And the continuation of federal tax credits will be pumping up the market.
Foreclosures have been falling in Houston. For the year, foreclosures were down five percent from 2008. Foreclosed homes put downward pressure on prices, so this decline in foreclosures signals that a firmer market is on the way.
Home building has hit bottom in Houston and improvement is in the cards for 2010. Builders have recently stepped up the home starts in some parts of the suburbs in preparation for 2010. Cinco Ranch, a master planned community in Katy, posted a 15 percent sales increase, with home builders selling 892 homes in 2009. It was the best year for new-home sales in Cinco Ranch since 2006. So there were some bright spots out there. The MetroStudy firm is projecting a slight increase for Houston home builders in 2010.
Residential real estate is closer to a full recovery than commercial real estate. On the national level – and Houston is included in that picture – the road for commercial real estate will be bumpy in 2010 before a recovery takes hold in 2011 and real strength surges in 2012, says Dr. Mark Dotzour, chief economist at the Texas A&M Real Estate Center.
Ralph Bivins, former president of the National Association of Real Estate Editors, is editor-in-chief of RealtyNewsReport.com.