July 2016 Commercial Markets In This Issue Commercial Markets Retail Office Industrial Multifamily Housing Trends Single Family Housing Lot Supply & New Home Data % 10% 8% 6% 4% 2% 0% Retail 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 $20 $18 $16 $14 $12 $10 continues to decrease since hitting its peak in Q1 2015. Before vacancy peaked it was stable from 2013 to 2015. Rents have declined for consecutive quarters. Statistics Inventory 323,411,249 SF NNN Rent $15.17 5.57% Golf Investment Trends NNN Rent Overall National Cap Rate Unemployment Rates Right of Way: I45 Pierce Elevated 30% 25% 20% 15% 10% 2007 Q1 2008 Q1 2009 Q1 Office 2010 Q1 Class A Office Gross Rent Class A Total 2012 Q1 2013 Q1 2014 Q1 2015 Q1 $36 $33 $30 $27 $24 $21 $18 $15 Class B Office Gross Rent Class B Total The office market continues to see an increase in vacancy with Class B having the highest vacancy. For the past two years, the office market had seen a small fluctuation in rent prices until late 2015. Since late 2015 prices have experienced a declining trend. Statistics Net Absorption: 509,542 SF Class A : 18% Class A Rate: $35.16 Class B : 20% Class B Rate: $21.27 Page 1
Houston Office Sr. Managing Director Gerald Teel, MAI, CRE, SGA (832) 3692555 gteel@valbridge.com Sr. Managing Director Chris Lantz, MAI (832) 369 2559 clantz@valbridge.com Sr. Managing Director Multifamily Tim Treadway, MAI, CCIM (832) 369 2556 ttreadway@valbridge.com 1 15.00% 12.00% 3.00% 0.00% Flex NNN Rent Flex Industrial 2007 Q2 2008 Q3 2009 Q4 2012 Q2 2013 Q3 2014 Q4 $12.00 $11.00 $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 Warehouse NNN Rent Warehouse The industrial market had another decline in vacancy continuing since Q3 2014. When looking at the flex market it has continued to decline in rent since Q2 2015. However, the warehouse market continued to be stable with consecutive quarters of the same rent price. Looking at the recent trends flex space is more volatile with changes in the economy affecting its vacancy and rents. Statistics Inventory: 447,565 SF Flex : 5.06% Flex Rate: $8.00$10.00 Warehouse : 5.72%. Warehouse Rate: $6.31 Managing Director Golf/ Subdivision Jack Taylor, MAI, CCIM (832) 369 2560 jtaylor@valbridge.com Director Right of Way Jason Mushinski, MAI (832) 369 2554 jmushinski@valbridge.com Director Litigation Joshua Wood, MAI (832) 369 2543 jwood@valbridge.com 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Multifamily $1,150 $1,000 $850 $700 $550 $400 Multifamily saw an increase in effective rent per unit from 2007 until 2015. Effective rents from 2015 to Q1 2016 flattened out or slightly decreased. Recent statistical growth is primarily due to introduction of new product and not same store rent increases. A substantial amount of product has been added with more still under construction. This will test the depth of the market in 2016. However, vacancy continued its decline since Q2 2015. Director Institutional Valuation Paul Gilliam, MAI (512) 270 4780 pgilliam@valbridge.com 2007 Q2 2008 Q3 2009 Q4 2012 Q2 2013 Q3 2014 Q4 Effective Rent Per Unit Statistics Occupancy: 91.50% Effective Rent: $990 Effective Avg. Rent/SF: $1.12 Average Sq. Ft.: 882 Page 2
Advisors is one of the largest commercial property valuation and advisory services firms in the U.S. Valbridge has 188 MAIs, 67 office locations and 650+ staff across the nation. Each Valbridge office is led by an appraiser who holds the MAI designation of the Appraisal Institute. Advisors Houston is led by nine MAI designated members of the Appraisal Institute representing more than 180 years of combined real estate experience. Advisors Houston provides appraisals, consulting, market studies and feasibility analyses within the Houston MSA. Housing Trends 6,000 # of Home Sales 4,000 # of Lots Single Family Housing Sales 10,000 8,000 2,000 Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 # of Home Sales Average Price Lot Supply & New Home 80,000 60,000 40,000 20,000 Vacant Developed Lots Developed Lot Starts New Home Closings Months of Supply (Vacant Lots) 50.0 40.0 30.0 20.0 10.0 Months of Supply (Developed Lots) $310,000 $300,000 $290,000 $280,000 $270,000 $260,000 $250,000 Months of Supply Home Price According to the Houston Association of Realtors, the numbers of home sales and housing prices have seen an increase since the beginning of 2016. For April 2016, we have an average housing price of $278,544 and a total of 7,583 homes sold. Houston continues to see growth in the number of vacant developed lots and months of supply (vacant lots and developed lots). The market appears to have stabilized for the time being with starts declining by 2.3% but sales increasing by 1% through 1Q 2016. Page 3
Follow Us On Social Media Follow Us on Twitter Like Us on Facebook Follow Us on LinkedIn Golf Investment Trends % 1 14.00% 12.00% 4.00% 2.00% 0.00% Golf InvestmentTrends 2010 2011 2012 2013 2014 2015 Cap Rates Income Growth Rate Gross Income Multiplier Discount Rate 1.8 1.7 1.6 1.5 Multiplier 1.4 1.3 1.2 1.1 Expense Growth Rate Golf courses have seen declining cap rates since 2010 and have an indicated current average cap rate of 10.60%. Over this period there has been an increase in the income growth rate and expense growth rate, despite the recent decline in values. Over the last 5 years the golf course supply has declined by an average of 150 courses per year as the market continues a correction to the oversupply created by over building in the early 2000 s. Cap Rates National National Cap Rate Markets Learn more about Our Office & Request a Consultation /Houston CAP Rate 7.00% 5.00% 1Q'10 1Q'11 1Q'12 1Q'13 1Q'14 1Q'15 1Q'16 Apartment Warehouse Date CBD Office Suburban Office Strip Shopping Center Flex/R&D Page 4
Data Sources Colliers CoStar Group, Inc. Cushman & Wakefield Houston Association of Realtors IH45 North and More JLL Marcus & Millichap Newmark Grubb Knight Frank PMRG PWC Situs Real Estate Research Corporation The Society of Golf Appraisers Transwestern Texas Department of Transportation Texas Labor Market Information Texas Workforce Commission Advisors Some figures are interpolated and estimated due to variances between the reports. Prepared by: Lance Johnson (832) 3692550 ljohnson@valbridge.com Unemployment Rates Unemployment Rate Unemployment Rate Houston 7.00% 5.00% 4.00% 3.00% Jan11 Jun11 Nov11 Apr12 Sep12 Feb13 Jul13 Dec13 May14 Oct14 Right of Way: I45 Pierce Elevated Mar15 Houston MSA Texas U.S. Aug15 Jan16 According to the Texas Workforce Commission, the April 2016 unemployment rate for the Houston MSA was at 4.8%. This percentage is currently higher than the U.S. average (4.7%) and Texas average (4.2%). This is primarily attributed to the downturn in the energy sector and decline in construction for the Houston MSA. Redesign of I45 around Downtown Houston Removal of Pierce elevated Project is estimated at $6 Billion 28Lanes at I10 segment north of downtown The construction start date has not been set by TXDOT and there is no current funding at this time, the project is in a very preliminary phase. Page 5