Designated as a “beta world city,” Houston is currently the largest city in the state of Texas and fourth largest in the United States. As reported by the latest U.S. Census estimate (2010), Houston has a population of 2.1 million within an area of 600 square miles. Additionally, in concert with its city rankings, Houston is the seat of Harris County and economic center of the Houston-Sugar Land-Baytown metropolitan area (“Greater Houston”), a 10-county area located along the Texas Gulf Coast.
Houston’s economy boasts a broad diversity led by its energy, manufacturing, aeronautics, transportation and health care sectors, as well as being defined as a leading center for oilfield equipment creation. Only New York City is home to more Fortune 500 headquarters within its city limits.
Houston is recognized worldwide because of its energy sector, particularly oil and natural gas, and is considered by many experts to be the energy capital of the world. Five of the six non state-owned energy companies maintain a base of operations in Houston, including Chevron, ConocoPhillips, Exxon-Mobil, Shell Oil (U.S. subsidiary of Royal Dutch Shell) and BP.
Additionally, more than 5,000 energy-related firms consider Houston home, including headquarter locations for energy-related companies such as the Marathon Oil Corporation, Schlumberger, Halliburton, Apache Corporation and Citgo. To quantify, Houston’s office market currently totals approximately 270 million square feet, with approximately one-third of this product situated in the Central Business District and Galleria/West Loop submarkets. In addition to these two submarkets, many energy-related companies call the Energy Corridor submarket their home.
The retail sector has started to turn the corner from the fallout witnessed between 2008 and 2010 despite sluggish job growth and low consumer spending levels. Compared with the retail boom in the early 2000s, the revival is modest, but has allowed the market to begin absorbing over-built space and, correspondingly, helped reduce vacancy levels and resulted in many major retailers planning future expansion. To further assist the turnaround, restaurant leasing remains strong, increasingly expanding anchor positions in many retail centers.
Thanks to its broad diversity, and a healthy market that continues to hold vacancy levels in the single digits, Houston’s industrial real estate sector encompasses approximately 500 million square feet of flex and office/warehouse inventory. That total includes more than 130 million square feet in the Northwest submarket, Houston’s primary distribution hub, which ranks regularly in the top five nationwide. In addition, roughly 80 million square feet directly services the Port of Houston, which regularly ranks first in the U.S. in international waterborne tonnage handled and second in total cargo tonnage handled.
Houston continues to be one of the most active investment markets in the United States, attracting more and more international capital. Stabilized core assets with long-term tenancy are trading at historically-high capitalization rates and are setting pricing records on a price-per-square-foot basis for the entire Southwest Region. Investor types in the market today are from all categories including international and domestic REITs, pension funds and private capital. Strong investor interest will continue in the future due to Houston being regarded as the “job creation capital” of the United States.
Avison Young’s Houston office was established in June 2010 by two industry veterans and continues to expand rapidly through the addition of well-respected and positioned professionals. The Houston office is well suited for energy-related partnerships with the company’s Alberta operations (Calgary and Edmonton), and continues to establish bonds with Avison Young’s offices throughout the U.S. and Canada.