5 emerging trends in Houston real estate amid downturn
Tim Dosch, David Marshall and Tom Dosch have an unique view of Houston’s real estate market.
As land brokers with ARA Newmark’s Houston office, the team represents buyers and sellers from a wide variety of real estate sectors, from single-family and multifamily housing to retail and commercial.
I had a chance to sit down and chat with the Dosch brothers and Marshall to discuss five emerging trends in Houston’s real estate market amid the oil slump. Here’s what I found:
People are still moving to Houston, fueling demand for housing despite the downturn in oil prices. Despite the oil slump, 159,000 people moved to Houston between July 2014 and July 2015, according to new data from the U.S. Census. A lot of this population growth has been fueled by Houston’s growing medical, petrochemical and shipping sectors, said Tom Dosch, executive managing director with ARA Newmark. While there’s an oversupply of apartments in many popular submarkets, there’s a continued need for new housing
to support Houston’s growing population, he added. “Companies may not take office space and buyers may cut back on shopping, but people always need a place to live,” said Tim Dosch, executive managing director with ARA Newmark.
Financing is getting tougher for new construction projects amid the oil slump. Developers, who typically use a combination of equity and debt to finance their projects, must now raise more capital to secure construction loans from banks. During the energy boom, banks typically required developers to put up 25 percent equity to secure a loan. Now it takes a lot more equity — as much as 50 percent — to finance a deal. As a result, many developers are now turning to foreign capital from Asia, Europe and South America to finance local projects. As developers fight for financing, location has become paramount for developers looking to convince investors. “Everyone wants a ‘main and main’ location,” Tim Dosch said.
Amid the oil slump, multifamily developers are often losing land deals to self-storage companies, who can charge Class A-level rents per square foot. Within the last 30 days, ARA Newmark has brokered two self-storage deals — one near The Woodlands and one inside Houston — that were originally under contract by apartment developers, said Tom Dosch. These apartment developers were unable to secure financing,so the land deal fell through and self-storage companies swooped in. “These guys were able to step in and close it quickly,” Tom Dosch said.
Condominiums used to be a “four letter word” in Houston real estate after the Great Recession, Tim Dosch said. But as land has gotten more expensive and large acreage sites more difficult to find in urban neighborhoods, developers are turning from building townhomes to building mid-rise condominiums. This new wave of condo projects are typically four to six stories with between 20 to 40 units. ARA Newmark is brokering a deal with Atlanta-based Stolz Partners, who is planning to build the Giorgetti luxury condominium project in Upper Kirby. As Baby Boomers retire and sell their suburban homes, condos are becoming an attractive option for developers, said David Marshall, executive managing director of ARA Newmark.
As Baby Boomers retire, developers are also looking to get into the active-adult space. These age- restricted communities and apartments are catered to residents ages 55 years and older. ARA Newmark is working with a few developers looking to launch active-adult apartments in Houston. “Institutional equity really likes those deals,” Tim Dosch said. “Developers are seeing a new opportunity and are moving into that space.”
Paul Takahashi – Reporter
Houston Business Journal