HOUSTON – (By Michelle Leigh Smith for Realty News Report) – As crews set up shimmering silver holiday trees and lights along Post Oak Boulevard, NAI Partners opened its quarterly breakfast in Uptown Houston with a vivid snapshot of a market where land prices are approaching $50,000 per acre.
NAI’s commercial real estate specialists reviewed trends across property types and highlighted a strong land market and a booming warehouse sector, while retail shows a solid recovery. Office leasing is progressing more cautiously as companies reassess their space needs in the Covid era.
Makris: Land Market Is Hot
“Land market projections driven by residential development are often $30,000–$35,000 an acre, much higher than the $25,000 we were seeing pre-Covid,” says Alex Makris, NAI’s senior vice president of Land Development. “We’re seeing new projects at nearly every scale, from 20 acres to 20,000 acres, appearing around the city’s outskirts. Demand now extends from The Heights and Spring Branch outward to support single-family development. Buyers and developers are looking for land in Waller, Fulshear, Brookshire, Montgomery County and Mont Belvieu. On the industrial side, developers are seeking tracts to convert into business parks farther out because shovel-ready lots are scarce in suburban markets. I’m not sure where the musical chairs will stop, but it’s an exciting ride.”
Gaines: Retail Rebounding to Pre-Covid Levels
“We’re nearly back to pre-Covid levels,” says Jason Gaines, Senior Vice President of Retail Services and Team Lead at NAI Partners. “Retail took an immediate hit—within two months we saw tenants struggle in sectors like daycare, restaurants and other impacted retail. Now many savvy retailers are entering the market. Current challenges are more related to labor shortages and delayed equipment packages. Some clients are pushing projects out three to six months while waiting for steel prices to ease. Medical and dental practices are moving more quickly, but labor and equipment bottlenecks are causing frustrating delays. With roughly 100,000 people moving to the region each month, that’s 100,000 more sets of needs.”
“We’re seeing much more thoughtful approaches to retail than ever,” Gaines adds. “Developers are creating centers that better serve community needs. For example, The Shops at Ventana Lakes in Katy—located at 23111 Stockdick School Road near Peak Road and across from Paetow High School—features outdoor patios and multiple drive-through lanes for coffee, tacos and quick breakfasts. These amenities serve the changing demands of the surrounding population. The high school nearby has an enrollment of about 3,100 and resembles a community college in size.”
“In the past, I might have been instructed to lay out two rectangles and proceed, but this is much different,” he says.
Restaurants are reinventing operations to adapt. “One Chick-fil-A in Irvine, California now provides three lanes, including a lane dedicated to an automated system for fulfilment of DoorDash and Uber Eats orders. We’re also seeing the rise of rapid delivery services like Gopuff and 7NOW from 7-Eleven.”
Gaines points to confidence from national retailers: “Ross Dress for Less operates a 2 million-square-foot distribution center in West Houston. I’m working on two deals to open new Ross concepts within five miles of that facility. Ross’s presence is a strong vote of confidence in the market.”
Rushing: Houston’s Industrial Strength
Some of the most notable updates came from Holden Rushing, senior vice president of Industrial Services. “In the second quarter, demand outpaced supply by more than 9 million square feet,” Rushing reports. “In the third quarter, demand rose to 11.6 million square feet. Historically, quarterly demand averaged about 7 million square feet. E-commerce has driven significant distribution demand to Houston. Developers are looking farther out for land with utilities, and rents remain relatively high. The Port of Houston is posting record inbound container volumes and efficiently turning ships, while channel expansion and oil prices above $80 per barrel strengthen the manufacturing outlook. Houston is solidifying its role as a major national market.”
Boyles: Office Tenants Making Deliberate Decisions
NAI Partner Dan Boyles notes that office tenants are taking more time to evaluate their needs. “Depending on company size and employee counts, tenants are exploring how to adapt to new work patterns. That consideration has reduced footprints in some cases, though it’s not universal—some tenants are still planning expansions.”
Nov. 7, 2021 Realty News Report Copyright 2021
For more about Texas real estate, consider the book Houston 2020: America’s Boom Town – An Extreme Close Up by Ralph Bivins. Available in print and ebook editions.
File: Houston Real Estate Story
Photo Credit: Ralph Bivins, Realty News Report Copyright 2021