February 14, 2018
The final panel of the recent Connect Houston conference, “Taking the Temperature of Houston: New Development or Asset Absorption Across Property Types,” examined the good, the not-so-good, and the downright frustrating of Houston development. Moderated by Colliers International’s Patrick Duffy, panelists discussed everything from Hurricane Harvey, to county incentives (or lack thereof), to Houston’s deletion from the Amazon H2Q list.
Said Duffy: “What’s interesting is 96% of Houston didn’t flood,” adding that the CNNs and other national networks focused on the areas that did. Still, the post-Harvey impact is that “flood rules are changing, which will impact development,” Duffy noted.
On the multifamily side, Hunt Mortgage Group’s Tony Talamas indicated that Fannie Mae and Freddie Mac are changing underwriting standards in Houston, and not just because of flooded properties. “Not just refinance, but acquisitions. Properties that weren’t impacted by the flood, but that had a nice bump in rents or occupancies,” Talamas commented. “The questions they’re asking is if those bumps are sustainable going forward.” Buyers also need to ask themselves the question, he added.
Still, despite the fact that 5,000 units were taken offline because of Harvey, 40,000 units have been absorbed since the storm. “Buyers are salivating to close deals here,” said David Luther, with Marcus & Millichap. “They’re seeing opportunities to buy housing, post-Harvey, as fundamentals are improving.”
Moving on, none of the panelists were surprised that Houston was axed from consideration for Amazon’s next headquarters. “It was kind of a joke,” said Howard Hughes Corp.’s Paul Layne. “Houston never had a chance.” The reason, he went on to say, is that Houston lacked the basic things that companies such as Amazon want, such as mass transportation or education.
Also lacking, according to Signorelli Cos.’ Thomas Wittenberg, were any kind of incentives from Harris County. “We had a proposal for Amazon on the table, but didn’t get anything from Harris County,” he said. He went on to say that there are many positives about the Houston metro, and “if the area didn’t work for Amazon, that’s fine. We’ll tackle the educational issue, but mass transportation, we can’t. With 11,000 square miles of area, we’re dealing with sprawl, and we’ll always have that hurdle.”
“The majority of The Woodlands is in Montgomery County, and they’re good to work with,” Layne said. As a result, Howard Hughes was able to attract companies from California and Kansas City and relocate them in The Woodlands, with the county willing to do a 10-year tax abatement. “If Houston wants to be in the game, they have to figure that out,” Layne said. He added that it’s up to the real estate community, especially the younger members, to become more involved with municipal groups. “We need leadership,” he added. “We need to figure out how to get those incentives done.”
Still, that hasn’t prevented Howard Hughes from developing communities outside of Harris County. And those communities feature walkable environments. “In The Woodlands, we developed Hughes Landing,” he said. “We did it because we wanted everyone to rent an apartment there, and walk to wherever they need to on a daily basis.”
Luther also pointed out that new markets are being created along the Grand Parkway development. “H-E-B wouldn’t be going there unless there were rooftops,” he said, talking about the grocery store at Grand Parkway and Fry Road. The concern, however, are the smaller retailers, and whether they can afford the retail space popping up in the area.
Even with the challenges facing the Bayou City, Duffy was glad to point up the positives, which include a sound industrial and retail market and the Houston Medical Center. Furthermore, the global economy is picking up, which is good news for Houston. “I think we can all agree, coming out of the downturn, that things are looking pretty good,” Duffy added.
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