The greater Houston area will be considered for industrial, retail and office investments. Houston continues to be in an expansion mode for our targeted product types, fueled by a booming energy industry and improved economic diversification through high‐tech, medical and finance sectors. Energy still makes up half of the local economy, but is no longer dependent on the operational side of the business. Today’s Houston is a white‐collar, energy‐logistics town with international diversification. Overall, we believe strength in the energy, trade/transportation, education and health services sectors will sustain healthy growth in Houston for multiple years.
The industrial market is strong with a 4.7% vacancy rate, increasing rental rates, and 1M SF of absorption through 2Q13. Speculative development has increased, with 5.6M SF under construction (1.41% of total supply). The Port of Houston is the world’s sixth‐largest port and ranks first in the U.S. in total volume of foreign tonnage, which will further be enhanced following completion of the Panama Canal expansion. Expanded shipping activity in this gateway market along with proximity to a strong population base for consumer goods will only increase demand for our preferred product of warehouse and distribution facilities.
Growth in the retail sector is anticipated to increase due to a healthy housing market, rapidly growing population, and increased consumer confidence and spending. Houston’s low housing prices translate into stretching a paycheck the furthest. The ratio of the median home price to median annual household income is only 2.9, ranking first in the nation. As a result, the local population spends more than the national average, $56,764 per household compared to $48,588 nationally. Additionally, between July 2011 and July 2012, Harris County experienced the largest increase in raw population of any county in the U.S., adding 80,000 residents. Home sales volumes increased 27% from April 2012 to April 2013. We anticipate retail vacancy to decrease and rents to grow with the acceleration of job creation and population. We will focus on retail opportunities in West Houston and surrounding communities such as Richmond/Sugarland, The Woodlands/Conroe, Cypress and Pearland.
Additionally, RTA will pursue office properties. Currently, Houston has the third lowest vacancy rate among major metro areas. That ranking is likely to increase since Houston experienced the largest employment increase in the U.S. with 111,200 new jobs between April 2012 and April 2013. The unemployment rate now stands at 5.9% compared to the national average of 7.6%. A competitive business climate and low cost of living will keep Houston’s office demand high and we anticipate the overall vacancy to stabilize near 10% over the next two years. Select target office