March 8, 2019 Comments (0) Views: 634 Houston-Galveston, Texas News

Institutional Investors Have a Sharp Eye on Houston

by Melissa Baer

Houston’s capital markets outlook is optimistic.

That was the key takeaway from speakers on the session, “Money Keeps Rolling In: Capital Markets at Work,” at Connect Houston’s recent conference. An impressive assembly of investors touting assets under management in the tens of billions discussed their investment strategies, preferred market sectors and opportunities to watch.

“The one thing that is occurring in Houston is the fact there is investment activity here, and a lot of that interest is coming from institutional investors,” said moderator Steve Pumper, executive managing partner at Transwestern. He noted that Houston reached $17 billion in new investments in 2018, ranking the city number six in the country in overall asset sales.

Investors Weigh In
Carrington Brown, executive director for the Texas and Colorado region at USAA Real Estate, is bullish on Houston. “For me, as an acquisitions person, I believe this area is one of the few markets where we can still buy and there’s no tapping the breaks. We just have to find the opportunities to deploy capital,” he said.

With no surprise, the industrial sector remains the metro’s bright spot, and investment giant Nuveen Real Estate is keeping a close eye on all opportunities. “Industrial is a primary market that we’re targeting,” said Brad Simpkins, senior director and portfolio manager. In December, TH Real Estate, an affiliate of Nuveen, closed the TH Real Estate U.S. Strategic Industrial Fund I with a total capital raise exceeding $330 million.

Similarly, AEW Capital is heavily invested in industrial. “We have been spending most of our time in industrial in both acquisitions and developments,” said Mike Dopler, director. “We’re strong in Houston industrial for a number of reasons, with the port being the first. It’s the biggest export port in the country.”

Dopler said the benefit the Port of Houston has over the port in Los Angeles is that in Houston, “cargo comes in and instead of the ship leaving empty, it goes back with something else on it.” He believes this will be a significant driver for many opportunities, including Big Box growth.

Market Dislocations
Turning to a less-optimistic sector, the office market was described as soft by most of the panelists, who are taking a wait-and-see attitude in the hopes things turn around. “Right now, we prefer to focus on the big assets we have here, rather than look to add acquisitions in the office space,” Dopler said. Tuba Malinowski, managing director at Stockbridge Capital Partners said, her company “is on the sidelines for office until we see some of the shadow vacancy absorbed.”

Described as the contrarian of the group, Brown sees the Houston office market as an opportunity. “We’ve had great success at Springwoods and have a lineup of buyers,” he said. “I think this is a positive sign of other investors that may be coming to park capital in Houston.”

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