As part of its ongoing Breakfast Forum series, BoyarMiller gathered industry experts for a panel discussion on what's ahead 2014 for Houston's Commercial Real Estate Markets. Speakers included: Will Holder with Trendmaker Homes; Jay Sears with NewQuest Properties; Jonathan Brinsden with Midway; and Welcome Wilson, Jr. with GSL Welcome Group.

1. The Houston Commercial
Real Estate Markets:
What’s Ahead for 2014
Breakfast Forum
www.boyarmiller.com
December 5, 2013

2. Land Development,
Homebuildng &
Multi-Family Markets
Will Holder
Trendmaker Homes
www.boyarmiller.com

3. If Change is good,
then this must be
great!

4. The pendulum always
moves fastest in the
middle.

5. We are in a period
when the pendulum is
moving very quickly!

6. “I think I may have
liked the recession
better?”

7. Evolving MPC
Sales Leaders

13. Changing School District Perceptions

14. Super Low Existing Home Supply

16. Lot Bidding by Land Developers

19. More Builder Owned Land

21. Longer Outlook on Deals

22. Lots of New Builders/Brands and
Acquisitions and Mergers
• Toll Brothers
• Shea Homes
• MI Homes
• Sitterle Homes
• Megatel Homes

23. Challenged System-wide Capacity

24. Human Talent Shortages
Including executives,
employees, trades and
craftsmen

25. Repurposing Land

26. 1706 Calumet

29. Market Study-The Villages of Timbergrove
Target Market Area and Competition

30. The Development-The Villages Of Timbergrove
Recreation Center
Dog Park
Welcome Center
Splash Pad
Fitness Park
Detention Pond
Entry Fence and Gates
Landscape of Recreation Center
Landscape Around Pond
Street Trees At Entry. Intersections, and Around Pond

31. Two Demographic Bubbles

33. Federal
Regulation
Challenges

34. Evidence of Surface Connectivity for Texas Gulf Coast
Depressional Wetlands
Bradford P. Wilcox & Dex D. Dean & John S. Jacob &Andrew Sipocz
Department of Ecosystem Science and Management,
Texas A&M University
This study provides the kind of documentation called for
by Justice Kennedy in the Rapanos decision. It demonstrates a
“substantial” nexus between headwater depressional wetlands
on the Pleistocene Texas Coastal Plain and navigable waters of
the U.S.—a nexus that is not speculative but is the result of
scientific observation. While further study is warranted and
needed, this study… suggest that unless demonstrated
otherwise, depressional headwater wetlands—at least on the
Upper Texas Gulf Coastal Plain as a class—should be
considered as hydrologically connected to navigable waters of
the U.S. and thus may play a critical role in the maintenance of
the aquatic and biological integrity of U.S. waters in this region.

35. “Galveston BayKeeper is
evaluating legal options to protect
prairie-pothole wetlands on the
Upper Gulf Coast of Texas.”

36. At issue is the nature of the
connection between these wetlands
and “traditional navigable waters,”
such as Armand Bayou. The fear is
that the U.S. Army Corps of Engineers
will acquiesce to developer
contentions that headwater prairiepothole wetlands, such as these, are
essentially closed depressions with no
significant nexus to traditionally
navigable waters.

37. Galveston BayKeeper contends, as
academic research has shown, that
these wetlands are hydrologically
connected to traditionally navigable
waters, and that the aquatic integrity
of these navigable waters is
dependent on the nature of the
headwater wetlands.

38. What’s staying
the same?

39. Houston is still a spec
home market.

40. School perception still
drives home demand!

41. Houston is still a
supply rich market.

44. Jobs Are Driving
Home Demand
Not Low Interest Rates

46. Houston’s new
home value, quality,
complexity and
finish is still the best
in America!

47. Retail Market
Jay K. Sears
NewQuest Properties
www.boyarmiller.com

48. Annual Job Growth

49. U.S. Consumer Sentiment Index
Source: www.sca.ir.umich.edu “Surveys of consumers Thomson Reuters University of Michigan”

50. Retail Trade Sales
Source: U.S. Census

51. Holiday Sales
Forecast
Online / Mobile Shopping
 NRF expects sales in the months
of November and December to
marginally increase 3.9% to
$602.1 billion.
 Online and mobile continue to be
a leading area of growth for
retailers.
 Retailers are expected to hire
between 720,000 to 780,000
seasonal workers.
 In this economy savvy, costconscious consumers go to the
web to do their research and get
the best bang for their bucks.
 13% year-over-year increase
from 2011.
 The forecast is higher than the
10-year average holiday sales
growth of 3.3%.
 Shop.org released its 2013
online holiday sales forecast,
expecting sales in November
and December to grow between
13-15% over last holiday season
to as much as $82 billion.
 In addition to researching with
their peers are saying online
about products and gifts this
holiday season, consumers will
use the buy online pick-up in
store option, retailers’ aps and
mobile website.
Seasonal Employment
 Retailers operate more than 3.6
million U.S. establishments that
support one in four U.S. jobs –
42 million working Americans.
 The U.S. Department of
Commerce announced that final
Q4 2013 e-commerce sales
increased 15.5%.
Source: www.nrf.com “NRF Forecasts Marginal Sales Gain This Holiday Season”

52. Best Buy Annual Sales
Best Buy Quarterly Comparable Store Sales - Continuing Operations
Fiscal Years 2011-2014
January Fiscal Year-End
Enterprise Comparable Store Sales
Fiscal Year
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Year
Fiscal 2014
(1.3%)
(0.6%)
0.3%
Fiscal 2013
(5.2%)
(3.3%)
(5.1%)
(1.4%)
(3.5%)
Fiscal 2012*
(3.1%)
(3.8%)
(0.3%)
(1.0%)
(1.9%)
Fiscal 2011*
5.1%
0.7%
(2.8%)
(5.0%)
(1.2%)
Domestic Comparable Store Sales
Fiscal Year
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Year
Fiscal 2014
(1.1%)
(0.4%)
1.7%
Fiscal 2013
(3.7%)
(1.6%)
(4.0%)
0.9%
(1.7%)
Fiscal 2012*
(3.8%)
(4.1%)
0.1%
(1.1%)
(2.1%)
Fiscal 2011*
4.7%
0.0%
(3.9%)
(5.2%)
(1.7%)
International Comparable Store Sales
Fiscal Year
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Year
Fiscal 2014
(2.8%)
(1.8%)
(6.4%)
Fiscal 2013
(13.4%)
(11.3%)
(10.3%)
(12.6%)
(12.0%)
Fiscal 2012*
0.7%
(2.2%)
(2.0%)
(0.5%)
(1.0%)
Fiscal 2011*
7.7%
5.2%
3.3%
(3.6%)
2.0%
Source: www.investors.BestBuy.com

53. Kroger 2nd Quarter Highlights
Reports Record Second Quarter Earnings Per Share
 Kroger's adjusted earnings per diluted share was a record $0.60
for the quarter.
 Identical supermarket sales growth, without fuel, was 3.2% in
the third quarter.
 Achieved 39(th) consecutive quarter of positive identical
supermarket sales
Source: www.ir.kroger.com “Quarterly Results”

54. Population Growth
Houston MSA Population Growth
7,000,000
6,754,896
6,800,000
6,593,498
6,600,000
6,435,268
6,400,000
Population
6,280,138
6,200,000
6,000,000
6,127,645
5,946,800
5,800,000
5,600,000
5,400,000
2010
2011
2012
2013
Years
2014
2015
Source: State of Texas – Texas Department of State Health Services

56. Houston’s Retail Market

57. New Shopping Centers in 2013

at Fry & Grand Parkway

at Northpark & U.S. 59

at Kuykendhal & FM 2920

at Loop 306 & Hwy 105

in Sugar Land

in Sugar Land

58. Grocery Anchored Developments Openings 2013
2013 Store
Openings
Houston – area
Market Leaders
25.0% market share
24.8% market share
22.2 % market share
Source: www.bizjournals.com/houston – “The Business
Journal Interview with Bill Breetz of Kroger”

59. Planned Grocery Anchored Developments 2014 & Future
2014 & Beyond
Store Openings
Houston – area
Market Leaders
25.0% market share
24.8% market share
22.2 % market share
Source: www.bizjournals.com/houston – “The Business
Journal Interview with Bill Breetz of Kroger”

60. New Shopping Centers Project s Planned
Project / Anchor
Developer
Location
Projected Opening
Tanglewood Court
Fountainview & San Felipe
2014
Spring Marketplace
Rayford & Kuykendahl
1st Qtr 2014
Post Oak & San Felipe
Spring 2014
Barker Cypress & Tuckerton
2nd Qtr 2014
Blvd. Place
Towne Lake
Vintage Marketplace
Louetta & Cutten Rd
Summer 2014
Spring Town Center
Kuykendahl & FM 2920
FM 518 & Pearland Pkwy
South Shore Blvd. & Hwy 96
June 2014
Spring 2014
2014

61. New Shopping Centers Projects Planned
Project / Anchor
Developer
Location
Projected Opening
FM 1960 & Townsend
2014
I-10 & Grand Parkway
2014
Grand 10 Center
Creekside Park Village Center
Kuykendahl & Creekside
September 2014
Hughes Landing
Lake Front and Lake Woodlands
2015
Clear Lake City Blvd & El Dorado
2015
Near 610 & Westheimer
2015
Clear Lake Marketplace
River Oaks District
Green Street
formerly Houston Pavilions
1201 Fannin Street
Renovations are in
progress

62. New to Houston’s Market
•
•
•
•
•
•
•
•
•
New concept
Opened first store in
Sugar land at 13833
Southwest Freeway at
Sugar Creek Blvd on July
17
Under construction
Grand Katy location
opening February 2014
Now Open Sugarland
location at Hwy 59 &
University
4 new stores opening
Village Plaza at Bunker
Hill – Spring 2014
The Woodlands Mall –
September 2014
Willbrook Mall – Fall
2014
Baybrook Square –
Spring 2015
•
•
•
•
•
•
•
•
•
•
•
North Carolina based
gourmet grocery store
4 new stores former Rice
Epicurean locations
Now Open
• Phoenix based healthy
foods/ organic grocery
store
• 4 stores now open
New Concept
About 7,500 sq. ft. –
10,000 sq. ft.
Sells products that cost
no more than $5
Grocery anchored
•
•
•
•
•
New wireless concept
subsidiary of AT&T
Prepaid service
Looking for 1,000 –
1,800 sq. ft.
20 planned stores
•
•
•
•
• Limited assortment
grocery with over 1,000
stores nationwide
• 13 new stores in Houston
out of 30 planned
•
5,000 sq. ft. Petco store
Grocery anchored &
Urban markets
No live animals
Organic foods
•
•
•
New pet store concept
Looking for 7,000 –
9,000 sq. ft.
•
•
•
New pet store concept
Chicago based
All-natural food and
treats
Dallas based liquor store
28,000 sq. ft.
Opened 2 stores in
Houston (Humble and
Westoaks)
Plans to open 1 more in
2013 and another in
2014.
•
•
•
New Palladium Theatres
22 stadium-style theaters
Located on The Grand
Pkwy near Long Meadow
Farms
Now Open
•
•
•
8 screen
560 seat luxury theater
Located at Westheimer
and Westcreek Ln
Open 2014
•
•
•
•
California base specialty
Grocery
3 stores now open
4th store to open in Katy
at LaCenterra with
12,500 sq. ft.

63. Houston Sales Comps 2013

64. FOR LEASING: CALL 281-477-4300
Spring Town Center
Chambers Town Center
NEC & SEC of FM 2920 & Kuykendahl
Houston, Texas
SEC of I-10 & Hwy 146
Baytown, Texas
SWC & SEC of FM 1463 & Spring Green
Katy, Texas
Project Size:
Project Size:
Project Size:
300,000 SF Walmart-anchored power
center with pad sites 17,500 SF of multitenant retail and junior anchor space
available
286,074 SF Grocery Anchored shopping
center located in the explosive growth
area of west Katy.
This project is
surrounded by the high end home
developments of The Reserve at Katy
(Toll Brothers with homes from the 400’s
to 800’s) Woodcreek Reserve (Homes
from 260’s to over $1 million). Over 1,000
new homes are projected to close in the
next 12 months within a 1 mile radius of
this center.
Anchors:
Retail:
Pad Sites:
425,157 SF
153,845 SF
32 Total; 5 Available
Tenants:
Tenants:
NOW OPEN:
12 Screens
COMING SOON:
28,350 S.F.
Shops At Katy Reserve

67. Office Market / Multi-Use
Development
Jonathan Brinsden
Midway
www.boyarmiller.com

68. BoyarMiller
Houston Commercial Real Estate Markets
What’s Ahead for 2014

69. Big Picture
 Houston’s Economy Continues To Outperform
 The Energy Business Has Changed
 Houston Is A Great Place To Work &
LIVE
 The Office Worker Is Different
 Third Coast/“Core” Investment Market
midwaycompanies.com |

70. Current Market
midwaycompanies.com |

71. New Developments
midwaycompanies.com |

72. New Developments – Owner/User
midwaycompanies.com |

73. New Developments – Under Construction
midwaycompanies.com |

74. New Developments – Build to Suit
midwaycompanies.com |

75. New Development
Total Non Build to Suit
5,400,000
Total Build to Suit
6,100,000
Total Under Construction
11,500,000
Total Pre-Leased
8,500,000
74%
midwaycompanies.com |

76. Houston Supply, Demand and Vacancy
midwaycompanies.com |

77. Houston Supply, Demand and Vacancy
midwaycompanies.com |

78. Mixed-Use
midwaycompanies.com |

79. midwaycompanies.com |

80. Industrial Market
Welcome W. Wilson, Jr.
GSL Welcome Group
www.boyarmiller.com

81. HOUSTON WEATHER

82. We ARE the Machine

83. HOUSTON: THE PARAGON CITY

84. HOUSTON INDUSTRIAL MARKET TOTALS
2012
2013
 506 million SF
 1.977 million SF
under construction
 521 million SF
 5.366 million SF
under construction

85. VACANCY RATES
Vacancy by Product Type
Warehouse/Distribution
4.9%
Flex Projects
9.4%
Houston Overall Vacancy Rate
5.3%

86. www.colliers.com/houston

87. LARGEST PROJECT
RECENTLY COMPLETED
 420,000 SF
BTS
 Warehouse
and
Distribution
Center
 250
Additional
Employees
Igloo Distribution Warehouse

88. GOYA FOODS, INC.
400,000 SF Operations and
Manufacturing Center

89. KATY GRAND PARKWAY

90. SALES ACTIVITY
Q3 2013
Total Sales:
$146M
No. of Properties:
24
Average $/SF:
$46.36
Average Cap Rate:
7.67%

92. TEXAS’ BIGGEST CITY
AND THE LARGEST
IN THE
SOUTH!!

93. EXXON/QATAR UPDATE
Deal signed in May 2013
between Exxon Mobil Corp. and
Qatar Petroleum International

94. CORPORATE CAMPUSES

95. AMERICA’S GROWTH
CORRIDORS

96. THE PANAMA CANAL &
THE HOUSTON SHIP CHANNEL

97. E.T. ISN’T PHONING HOME,
HE’S FUELING UP…

98. THE “SHALE” REVOLUTION
Driving
Energy
&
Producing
Jobs

99. HOUSTON…
The Gateway City!!!