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Houston’s Monthly Metrics: September

The following article originally appeared in the September newsletter to clients of Kiley Advisors, LLC for the purpose of providing the latest leading indicators and industry issues to those clients.  Reprinted with permission.

The Houston construction market is firing on all cylinders.  In addition to the hot market segments such as office and light industrial, now k-12 and healthcare are gaining momentum as well.  With the Affordable Care Act somewhat more “known”, the delayed construction of many medical facilities is now being planned or is underway.  Under the direction of their leader Dr. Robbins at the Texas Medical Center, Houston is poised to become one of the leading research parks in the world.

In the school market, there seems to be a strong resurgence.  On the heels of Cypress-Fairbanks ISD passing their massive $1.2 billion bond in May, Katy ISD has announced plans for a $748 million bond and Fort Bend ISD for a $495 million bond, both to be on the ballots this November.  In addition, Klein and Conroe are rumored to be joining the ballot as well.  Should these bonds all pass, that could bring in more than $3 billion this year to be spent over the next 3-5 years for new school buildings, renovations and additions.  When you add in the other school districts, including HISD, the k-12 market is finally looking good again.

CBRE’s third quarter preview shows continued growth in the Houston markets with retail and light industrial both continuing to have positive metrics.  In looking at the office market, there are currently over 100 proposed office projects being tracked, of which CBRE has targeted 38 they expect to be built.  This is in addition to the 47 projects under construction in the second quarter, the majority being delivered in 2015.  If the rumored layoffs from one of the big oilfield companies are true, there could be a temporary cool down of the office market until that space is absorbed.

The Architecture Billings Index (ABI) had a strong rebound in July, with all their indices turning positive.  This signifies that the rest of the nation has pulled out of the recession and is catching up to the prosperity Houston has been experiencing.  The City of Houston permits continue to outpace 2013 (by over 40% as of July) with no signs of slowing.  If these numbers hold, that would put Houston on pace for about $5.7 billion in non-residential permits, and nearly $2.8 billion in residential permits for a total of roughly $8.5 billion.  $8.5 billion would be over 45% higher than 2008’s $5.7 billion, the highest year for permits since we began tracking them in 2002.  As you may have noticed, that would mean this year’s non-residential permits would equal all the permits of 2008.  Let’s hope the momentum stays.


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