Saudi Arabia to lower oil prices, the houston boom is over

In the area I live in, there's nowhere else to build unless you go further west. You have people wanting to live close to work (5 minutes or so) and close to good schools; particularly as traffic seems to be only getting worse. These homes aren't sitting on the market for more than a week. Most are sold within a few days of the day the for sale sign goes up. Many for more than the asking price. A good number are torn down and replaced with new structures.

I can't speak for all areas of Houston...but the homes on the side of town where are lot of this development has taken place, the homes are around 50 years old. They've never gone down significantly at all...they've plateaued during the tougher times.

 

Ok, that I don't get. I don't know the Pearland area well...though I wasn't too far from there at a basketball tourney in Manvel last night. I don't know what is driving that out there.

 

I feel like I've already seen the housing market slow down (exclusively inside the loop). They don't seem to be flying off HAR as fast, you see more homes with price reductions, prices aren't rising.... but I do see new builders still raising prices by $10,000 every few weeks. Mostly it's the speed of the sales that I feel is changing. Data might say something different though, but again, I just keep an eye out on a few spots inside the loop.

 

One more thing...the Exxon campus in the Woodlands hasn't even opened up yet, has it? That's about 10,000 jobs moving in to that area, alone.

 

That also has to do with the time of year we are in. Home sales slow during the holidays and new year.

 

Hines? they could still pull back on block 69 I think.

I'm trying to think of who has that many projects going on the office development side.

Is BHP still going through with another tower?

Skanska is committed to their downtown tower now.

 

Up here we are in a bubble. It's not just Exxon and Southwestern Energy, but a couple other companies had major relo's that haven't hit the area yet and still will as the relo's were cost reductions from other states. Exxon was 15k jobs transferred in last I checked and the other companies totaled a few thousand.

The Katy area is more project engineering with shorter term space and home growth (e.g. not relo). Thus, it's time to evacuate Katy. OR they will just feel the effects a bit more sharply than the woodlands.

 

Disagree, because there's been so much development on the West side of town, generally....and living in Katy is more affordable than living east of highway 6.

Chevron is moving its chemical HQ to the Grand Parkway, where they bought 100 some odd acres back this summer. BP is in Westlake campus...Conoco and Shell are off Dairy Ashford. Air Liquide just relocated their corporate HQ to Memorial City...where Cabot Oil had already moved to recently.

 

but these were all existing jobs.

Air Liquide is moving from the Galleria. Most of it's base already lives in West Houston. I've seen the scatter maps by zip code which are very standard when making the decision to move.

Cabot was in the energy corridor and moved buildings. BP has always been there. Conoco will be leaving behind a very bigt block in the Westlake campus when their new buildings are ready.

The key difference max is the net new jobs to houston formed by relo. In ways, Katy was more prosperous because the net new jobs created were still being sourced from Houston.

In the woodlands, many of the moves (which don't truly happen until 2015) have heavy relo contingencies. These relo's are coming in regardess. Their offices are closing in home towns.

 

Not the Chevron project off the Grand Parkway.

And I understand they're relocations...but they're not relocations out of town. They're recent relocations in the area...they're not going anywhere anytime soon.

The point is there are a substantial number of corporate HQ's and major offices on the west side of Houston and now sliding into Katy. That will continue to support Katy residential real estate for a long time.

 

I dont' think we're too far off in our asssessments. I agree with the long term support. But demand numbers will drop as employers slow their expansions.

Not saying that results in huge declines. (concessions come first)


And frankly, the realtors I've spoken with who are active in both markets have already indicated they've seen a turndown in katy but not in the woodlands.

 

The Westchase area is seeing a decent amount of development so that will impact Katy as well.


Back on topic, my employer saw this coming so they hedged 65% (up from 50% in 2013) of their oil production at $91 a barrell through 2015. They were actually a year early because the increase from 50 to 65 occured in 2014.

Companies like Anadarko and Murphy Oil will have a tougher time in this down period bc they have little to no hedging.


The service companies will eventually be hit hard once their contracts are up bc capital spend will decrease big time later next year.

 

max, this supports my point to an extent.

http://www.bizjournals.com/houston/...l&utm_source=linkedin.com&utm_campaign=buffer

Office rents are soaring in Houston as demand outpaces supply.
Rental rates on combined Class A and B space in the Bayou City averaged $27.28 per square foot in the third quarter, according to Transwestern. That's an increase of 3.6 percent from year-end 2013.
However, Houston's office rent increases varied widely – from 0 percent to 14.6 percent – depending on the submarket and product class.
Class B offices in The Woodlands saw the highest rent increase at 14.6 percent, according to Transwestern. Average Class B rents in this north Houston suburb jumped from $23.38 per square foot in 2013 to $26.80 per square foot in the third quarter of 2014.
As Exxon Mobil Corp. (NYSE: XOM) builds out its new corporate campus near The Woodlands, it is attracting ancillary businesses to the area and driving greater demand and therefore higher rents for existing and new office space.
Class A properties in the Greenway Plaza area saw the second highest rent increases at 13.7 percent, according to Transwestern. Asking Class A rents inside the Interstate 610 loop climbed from $32.11 per square foot in 2013 to $36.50 per square foot in the third quarter of 2014.
Rents are going up in Greenway Plaza and downtown as existing buildings are renovated and new buildings are erected. Greenway Plaza underwent a $5 million renovation project this year, and was able to land several new major clients, including Mitsubishi Heavy Industries America Inc.
These are the Houston submarkets that saw the highest office rent hikes, according to Transwestern:
The Woodlands (Class B): 14.6 percent increase; $26.80 per square foot
Greenway Plaza (Class A): 13.7 percent; $36.50
Northwest (Class B): 10.4 percent; $19.25
Downtown (Class A): 9.9 percent; $42.10
Energy Corridor (Class B): 8.5 percent; $22.78
Northwest (Class A): 7.5 percent; $26.47
Downtown (Class B): 7.1 percent; $27.84
Westchase (Class B): 5.7 percent; $20.87
Westchase (Class A): 5.5 percent; $37.31
Greenway Plaza (Class B): 5.3 percent; $24.97
Paul Takahashi covers residential and multifamily commercial real estate for the Houston Business Journal.

 

From my own personal experience...direct experience and very recent...those numbers above for Energy Corridor are significantly lower than reality.

Assuming Energy Corridor extends as far east as the beltway on I-10.

 

EC stops at Dairy Ashford. There's a new submarket out in Katy now.

I think we both get the fundamentals though

Retail follows rooftops, rooftops follow job creation, job creation follows office leases, office leases have a direct correlation with the price of oil (98% confidence)

 

Agreed.

I'm seeing B class space at $27.50-29/sq ft between 6 and the Beltway along I-10. And they're getting that.

 

assuming you're quoting grossed up rates, but I completely believe it. With Opex increasing to around $15.00/SF in that area and base NNN rents well over $30 on a NNN basis for class a space, most firms don't want to/can't get board approval to pull the trigger on class A space.

Plus, firms like murphy oil (lower class a), Jacobs, mustang engineering, AECOM, URS, and several other Engineering firms had ditched their traditional b quality space to move up to Class A while they were in tough competition for engineering talent.

Now that the demand has begun to quell, the firms in the market are looking at the quality B spaces at what you can see, are significantly discounted rates over A.

I miss real estate. I could talk about this stuff all day long.

 

I wish I could buy a small-medium house in WestU/Bellaire area but everything nice is >600-800K+

 

Ok, for sure some old timers in Marathon are being forced into retirements.
Can't speak for other places though.

 

Bellaire in/near the loop is the part of Houston that went up the most % in value over the past 2-3 years or so. You go too far west or south though and you're in carcosa.