Larry Bird would say, no. So, I’m not bragging about nailing my predictions for Houston in 2015! I was also dead-on with my 2014 predictions.
Below is a reconciliation of my 2015 Houston market predictions:
- There will not be a recovery in oil prices in 2015.We had a couple of false recoveries during the year which gave the Houston economy some hope, but we ended the year at $35/bbl.
- Job growth in Houston will be positive but down considerably from the last several years.As of November 2015 Houston had positive job growth of 23,700. It looks like Houston will finish with 15,000 new jobs after the dust settles compared to 100,000 jobs in 2014. As I predicted, the petrochemical and medical industries carried the day and offset the job losses from the upstream energy industry.
- Occupancy rates in the office and the industrial markets will decline but not enough to impact rental rates significantly.
The occupancy rate for the office market has declined by 3.2% from 89.6% to 86.4%. The industrial market had a nominal decline in occupancy from 95.7% to 95.4%. This includes vacant sublease space.Rental rates in office have remained flat and have gone up in industrial.
- Leasing volume will decline in 2015.
Office leasing volume was off 44% and off 37.8% in industrial.
- Sublease space will increase significantly. Sublease space in the office market increased 72.2% from 4.5M square feet to 7.7M square feet and in the industrial market sublease space increased 58.4% from 1.7M square feet to 2.7M square feet.(For a more comprehensive look at the sublease market, the recently released Houston Office Sublease Report is available for download by clicking here.)
- The vultures will be circling, but there won’t be blood in the streets with respect to real estate.
Well, it is debatable whether the vultures were circling, but there was no blood in the streets. As I have been saying all along, real estate assets have been responsibly capitalized since 2008 mitigating the risk of negative cash flow in the inevitable economic downturn.This is definitely what has happened in Houston evidenced by a very flat year in sales volume in the office market. However, the industrial market had a robust year of sales with all-time record prices from a price per square foot standpoint. Record breaking price per square foot for industrial buildings was not an obvious phenomena for 2015 particularly with a declining upstream energy industry.
- The Texans will make it to the play-offs!
This was my riskiest and most fun prediction. After the first 7 games, no one would have believed that the Texans would make it to the play-offs let alone win their division. As the late Yogi Berra said, “it ain’t over ‘til it’s over”.Hold tight because my 2016 predictions will be out soon.