Monday, January 21, 2008

Update on the Houston and Texas economy

Came across this interesting report ("Texas is Feeling Heat from the Housing Slump") from Wachovia profiling the Texas economy (hat tip to Hugh). A graph on page one profiles the major Texas Triangle cities since 2001, with Houston and San Antonio as big winners - mainly because we took almost no hit from the tech crash. Both Austin and Dallas tanked hard after the tech crash, but both have bounced back - Austin particularly strongly.
Houston also saw growth pick up a little earlier than the rest of the state. Strong global economic growth boosted demand for all types of energy products and set off a boom in the energy business. The technology sector also came back relatively solidly and healthcare continues to be a major growth engine. Job growth in the Houston area consistently ranks near the top of any major metropolitan area in the country and recent data from the Bureau of Labor Statistics suggests that gains have been slightly understated.
Page 10 focuses on Houston. Some key excerpts:
Houston is currently one the nation’s strongest job markets, with hiring up across nearly every industry. Growth in business and professional services, especially those related to energy exploration and development, remains exceptionally strong. The region’s vital health care industry is also seeing solid gains, leading to expansions at several area hospitals. ...

Population growth surged in 2006, reflecting an influx of new residents from New Orleans. Growth should return to its preexisting trend in coming years.

Home prices are rising modestly and remain a relative bargain compared to most other major business centers. But not even Houston’s robust economy can escape the effects of the housing slump. Sales and new construction have softened recently, although sales are holding up better than most other areas. ...

Nearly 4.7 million square feet of office space have been absorbed through the first nine months of this year. With little speculative space coming online, office vacancy rates have fallen to just 10.5 percent in downtown Houston and 12.1 percent in the suburbs. Strong demand for space has sent rents dramatically higher, particularly in the downtown area. Growing trade through the Port of Houston is driving gains in wholesale trade and distribution. Demand for industrial space remains exceptionally strong, particularly for well located, large industrial centers. Retail expansions are fueling demand for shopping centers, although the pace of expansions is slowing.
Impressive, but imagine the new downtown towers that would be under construction if Enron hadn't imploded. It alone cleared two buildings, not including all the other energy trading firms that crashed in their wake. They're bouncing back now, but downtown certainly would have evolved differently if they hadn't gone away in the first place...

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10 Comments:

At 9:27 AM, January 22, 2008, Anonymous kjb434 said...

Well, a 46 story building in downtown is to begin construction slated for completion in 2011 where the Montague Hotel was just imploded.

The Memorial Hospitals headquarters in Memorial City will add some non-healthcare related office space. More will be built around the hospital and Mall.

Suburban office space will be expanding rapidly too. The site development team at my office has several large suburban office campuses under design.

 
At 11:45 AM, January 22, 2008, Anonymous Anonymous said...

kjb434,

What will the 46-story building be? Office space? Residential? Mixed? I'm not familiar with it.

Also, I there was an article in the Chronicle about the huge boom in construction for office space in the Medical Center - so much so, that it will have almost the same amount of space as downtown by 2015. I wonder if downtown will start to see a building boom for office space (instead of for condos, a soccer stadium, and "mixed-use").

 
At 12:34 PM, January 22, 2008, Blogger Brian Shelley said...

Anon,

There is a link to HAIF or Houston Architecture Information Forums on the front page of this blog. If ever you want to know anything about virtually any large scale project going up in Houston check out that site. They are as nerdy about buildings as we are about land use regulations.

 
At 1:32 PM, January 22, 2008, Anonymous kjb434 said...

The 46 story building is office space being developed by Hines (a developer of many large office project in Houston).

 
At 5:12 AM, January 23, 2008, Blogger Christof said...

Downtown seems to be seeing a spurt of office buildings. There's the Hines building on Main already mentioned, the Houston Pavilions project going up (with entertainment/retail on the lower floors but office above), a new office building announced next to Discover Green, and several other projects being considered.

 
At 8:16 AM, January 23, 2008, Blogger Tory Gattis said...

I agree downtown is looking strong now. Just noting how much stronger it would be if we hadn't had the post-Enron dip to re-absorb. These developments might have happened several years ago, and we would have been seeing wave #2 now.

 
At 9:51 AM, January 23, 2008, Anonymous Mike said...

If the ca. 2000 skyscraper boom had kept going, the land in front of George R. Brown might have been too expensive to build the park. As it stands, new building projects are flocking to align themselves around this green amenity. Maybe the delay was good in that skyscraper developers here are slowly learning the value of public spaces and streetscapes, and aren't just creating dark street canyons like thirty years ago.

 
At 7:55 AM, January 24, 2008, Anonymous Anonymous said...

Houston should be careful. There are areas of the United States that historically suffer from an overinflated sense of self importance. If Houston continues to succeed outsiders will get jealous and upset.

 
At 8:11 AM, January 24, 2008, Anonymous kjb434 said...

They should already be upset. Our economy is weathering what other major metros may be feeling.

The reality is that US economy is still moving quite well even though the stock mark corrected a little bit (it wasn't as bad as '87).

What other metros should be jealous is that our housing/mortgage industry is much more flexible with inventory.

 
At 5:25 PM, January 24, 2008, Anonymous Neal said...

I've worked in downtown for the past 14 years. The oil and gas industry is seeing a tidal wave of money pouring into it.

My company is leasing out three more floors out in the building we are in. We are even taking space on the ground floor. Rumor is that we are going to move since the facilities may not be enough for us when the lease is up in three more years.

I've spent the past two weeks doing little more than moving the IT equipment of many geologists and geophysists who comprise my user groups. The hiring in the oil and gas industry just keeps going on and on. If I were to tell you the the size, price, and the electrical power and cooling requirements of the workstations that we are building for these guys, it would make your jaws drop. My supervisor and I will be putting together a bleeding edge GPGPU cluster to supplement our 2,000 node seismic processing cluster over the next few weeks.

New hires with a Masters in Geology or Geophyisics are being offered $80,000+ per year right out of school, along with $20,000 signing bonuses. Meanwhile, the Houston Chronicle reported this past weekend that $7 billion in refinery expansions are in progress in Port Arthur and Beaumont and another $8 billion are in the works. That is a window as to what is happening in the oil patch right now.

Neal

 

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