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Tuesday, December 18, 2018

Influential Trends Shape Commercial Real Estate in Houston during 2018

By Rand Stephens (Houston)

Houston has made the year of 2018 as the year of resilience, opportunity, and growth. After more than 12 months following Harvey, major economic drivers such as energy, the Texas Medical Center and NASA remain steady and strong. Houston’s population is surging as people from all over the country (Houston ranks No. 2 in the nation for largest number of new residents – 94,417 as stated by most recent Census estimates.), and the world, are flocking to H-town, where housing prices are affordable, and jobs are aplenty. According to data from Greater Houston Partnership, 117,800 new jobs were added to the Houston metro area this year. Several contributing factors deserve to be recognized for making 2018 a great year for Houston’s commercial real estate market.

Oil & Gas continues to make a comeback

Houston, indeed, has a diverse economy, but let’s be honest, the success (or failure) of the oil and gas industry has a ripple effect on nearly every business sector in the greater metro area. In the commercial real estate sector, the energy industry has the biggest effect on the office market. With stability in the energy industry, 2018 was a positive year for the office sector. However, there is still a considerable hangover of available space that will take some time to burn-off, but 2018 finally saw an improvement in the overall office market after a three-year decline. There was also increased offshore energy exploration this year, which really generates jobs that fill office buildings. However, for a full recovery in the office market, particularly in Houston’s Energy Corridor, there needs to be more robust revitalization in offshore exploration.

Flight-to-Quality Soars

This was a year that many firms and companies made the move from older heritage buildings to newer modern buildings. Tenants increased their demand for higher quality spaces with amenity-rich work environments. This flight to quality is happening despite the highest vacancy rate in 20 years. People are scratching their heads as to why companies are choosing to locate to new class A+ buildings that are charging rents often double the cost of older generation class A buildings. The reason is that Class A+ buildings are much more efficient and allow companies space layouts using up to 50% less space per employee. So, tenants can upgrade at the same cost per employee. This is a positive trend for Class A+ development as evidenced by Hines’ announcement of their new downtown building on Texas Avenue. Flight to quality ignited a spark that increased momentum for Class A office space in 2018.

Industrial Strength

The industrial market is the strongest commercial real estate sector in Houston. E-commerce suppliers spent most of 2018 meeting the expectations of their growing consumer base which resulted in an increase of leasing activity. For example, big box retailers such as Best Buy and Conn’s HomePlus both expanded their space to satisfy increased customer demand. Port Houston also contributed to the industrial sector’s stronghold, as a boost of petrochemical activity occurred in the southeast. The fundamentals of Houston’s industrial market had a solid year and are consistent with the performance of the market nationally.

The year of 2018 did not bring the commercial real estate industry any major surprises. As expected, the energy industry bottomed out with a healthy recovery, our local economy is strong and Houston’s commercial real estate sectors are doing well. What can we expect next year? Forecast and predictions for 2019 will be revealed in January’s blog.

(Rand Stephens is a Principal of Avison Young and Managing Director of the company’s Houston office.)

Monday, December 17, 2018

Two Easy Things to Do Over the Holidays to Boost your Health (and help fight climate change)

By Amy Erixon, Toronto

         Donate your extra food.

2   Eat more fruits and vegetables. 

Doing these two things will not only make you feel great, but surprisingly, these are the most accessible and effective methods to reduce your personal carbon footprint and greenhouse gas emissions.   No kidding.  Your mom was right.  We can all do this. 

I used to listen to carols while trimming the tree, but in recent years, my multi-task activity of choice is searching the internet for inspirational podcasts, videos and courseware to learn how I can do more to move the needle on the issues that matter most to me.  Importantly, I nearly always discover something easy to share to help make the world a better, healthier, more equitable place. 

In a recent TED talk by Chad Frischmann, drawing from the NY times bestselling book he wrote with Paul Hawken entitled “Drawdown: The Most Comprehensive Plan Ever Proposed to Reverse Global Warming”, he outlines the top 20 steps, from the 100 most substantive solutions available to us today or in the near-term future.  Surprisingly, in the top 20 only 5 relate to energy, while 8 relate to the food system, including the 3rd and 4th most impactful, which are easy to do, save money, and don’t disrupt any jobs. 

In case you doubt whether such straightforward steps can really make a difference, the chart on the left shows the top 20 ways to reduce CO2 emissions over the period from 2020 to 2050, compared to a 2014 baseline.  The unit of measure is gigatons.  For reference, globally we are currently emitting 40 gigatons of CO2 annually, of which 25% is being absorbed by our oceans, leading to dangerous ocean acidification.  These 20 steps have the potential to reduce emissions by 740.83 gigatons, which represents 18 years worth of annual emissions over the next 30 years.  Just reducing food waste and eating more plants has the potential to eliminate emissions by more than 10% (136.64 gigatons, or just under 3.5 years).   This does not require becoming a vegetarian, rather the model assumes reduction in growth of meat consumption by 50% over the period.  For information about the methodology underlying the food recommendations, go to

Experts estimate that up to 35% of food in high-income countries is disposed of as waste.   Lower income countries cannot contribute much to this dimension.  Again, the drawdown methodology assumes that half of the increase in food waste is eliminated or composted (which reduces by 70% the harmful environmental impact, and delivers numerous additional benefits, including enriching soil, increasing crop productivity and stabilizing runoff, diminishing the harmful effects of torrential storms).   My community (Mississauga) has a both a comprehensive recycling and food and yard waste compositing program.  Based on personal experience, participating in those programs has made me far more aware of my consumption (and waste) profile.  In order to drive composting and reduce Great Lake algae blooms and other harmful ecological effects, new in-sink garbage disposals have been banned.   While this was an abrupt behavior change at first, after about one or two weeks, composting habits became a no-brainer.   If this solution set appeals to you, and your community has not commenced a composting program, the EPA has a handy on-line how-to guide complete with a directory of local resources to get started. 

In the spirit of giving during the Holidays, I wish you all health and happiness.

 The entire talk, and introduction to the Drawdown Project can be accessed at: 

Wednesday, December 12, 2018

CRE executives see their future roles as more strategic, data-driven

By Brian Bellew (Chicago)

Global real estate executives gather for Avison Young’s inaugural North American CRE Forum.

Commercial real estate (CRE) executives believe their roles will change dramatically in the future.

Executives who attended Avison Young’s inaugural North American CRE Forum expect their roles to become increasingly strategic and financially focused.  Specifically, they predict that more analytically focused skills will increase in importance relative to some traditional property-related abilities.

According to a survey of forum participants, more than 90% of CRE executives also believe that data analysis will be the key skill sought when they are recruiting for their teams, while 72% predict that business planning and reporting expertise will be crucial for future job performance. Overall, the CRE leaders who attended the forum believe that being able to use data intelligently will be positive for CRE staff compensation.

More than 80% of forum participants expect that new technologies will reduce their teams’ workflows, allowing professionals to focus more on cross-functional collaboration as well as operational/predictive analysis that will increase the agility of their businesses. Lastly, these leaders predict that maximizing, and investing in, emerging technologies will become a shared responsibility between property owners and tenants.

The forum, held November 8 in Rosemont, IL, included executives from across a wide range of industries, including energy, financial services, healthcare and telecommunications.

Two industry experts, Amy Erixon, a Principal of Avison Young and Managing Director of Investment Management; and technology consultant Frank Adelman discussed the impact of emerging technologies on corporate real estate. The CRE Forum also included a panel discussion and roundtable dialogues/reports from the assembled group of more than 30 professionals.

For more information regarding the North American CRE Forum, please contact Brian Bellew at

(Brian Bellew is a Principal of Avison Young and the firm’s Managing Director of Enterprise Solutions. He is based in Chicago.)

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