Investors scoping for returns in real estate seem to have their hearts set on the Lone Star state — Houston in particular.
Houston ranked as the No. 4 city in the U.S. — fifth globally — in terms of real estate investment dollars overall in 2012. Over the past 18 months, the Houston buyer pool has gained steam, witnessing $8.8 billion of investment, up 32% from 2011, said a recent report by Jones Lang LaSalle.
The Houston market continues to draw an array of foreign and domestic capital sources. The 2012 employment boost saw gains of nearly 4% above its previous peak and approximately 100,000 new jobs were added from October 2011 to October 2012.
Experts believe that further expansion in healthcare, distribution facilities and energy services are indicators of long-term fertility in the market.
"We will continue to see strong interest from the equity and debt markets to place capital in Houston. The low interest rates and attractive debt structures will drive transactions in the year ahead, and all property types will benefit from increased liquidity in the market," said Tom Fish, managing director of real estate investment banking at Jones Lang LaSalle’s Capital Markets.
Fish added, "Real estate fundamentals will continue to be sound as supply and demand are in check."
Moving forward, the multifamily market is likely to see up to 8,000 new deliveries in 2013, nearly three times that of 2012. According to the report by Jones Lang LaSalle, Houston’s increase in new renter households will lead the country well into 2017. Office space, hotels, retail and leasing will all be factors contributing to the city’s continued growth throughout the year.
"The Houston office market is a value play still for investors, relative to the coasts. Sales activity is expected to remain solid in 2013 and beyond as institutional grade investors continue to canvass the Houston skyline for sound investment choices with stable returns on investment," added Rudy Hubbard, managing director of Jones Lang LaSalle’s Capital Markets.
Houston is expected to house 9.4-million-square-feet of leases throughout the rest of the year and into 2014. Louis Rosenthal, senior vice president of Jones Lang LaSalle, says the company expects solid leasing activity, decreasing the amount of vacant space.
"Vacancy is approximately 8% and is expected to decline in conjunction with increasing crude oil prices, growing employment figures, and no new product delivered for the central business district," Rosenthal added.