Much like Greece, or as I like to call the country, “the world’s 21-year old spoiled kid with a credit card problem”, I have been kicking the can down the road with the latest CRE Cliffnote update. Incidentally, in the past two months there has been a strong correlation between the number of CRE Cliffnotes and the number of Greece bailouts. There has not been the same correlation between the Greece vacation schedule (mandatory 8 weeks) and my vacation schedule.
With that, let’s get to it. I sincerely hope the following articles from the past month are of interest and value to you:
Texas is Tops
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+ Two Sentence Overview: Just a few stats: Texas has added more than 265K jobs since the recession (more than double any of the second place states). 37% of the jobs created since July of 2009 have come from Texas and the Lone Star State is one of only three states that has more jobs now than before the recession began. This deserves a third line: Texas has added 732K jobs in the past 10 years (no other state topped 100K in the same time).
+ One Sentence Takeaway: Tough to deny the correlations between the stats above and Texas having a lower net effective tax rate on businesses combined with a “Right to Work” emphasis. This only makes the secondary markets located in Texas stronger from a fundamental and capital markets standpoint.
…But even job growth in Texas is slowing
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+ Two Sentence Overview: The US produced a lackluster 54,000 jobs in May. Even Texas is slowing, having the lowest annual growth since November 2010 in May.
+ One Sentence Takeaway: Despite the companies of The Standard & Poor's 500-stock index sitting on more than $960 billion in cash, it seems companies in the US (and even in Texas) are still hesitant to convert cash into jobs in this current climate.
“Growing Smart”
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+ Two Sentence Overview: I like any combination of the words “company”, “growth” and “hiring” but it is clear that many companies will not immediately take on more space even as they increase revenues and resume hiring. As companies grow they will be focused on strategies to maximize space utilization, both in the amount of space needed per employee and in the effectiveness of the space.
+ One Sentence Takeaway: Even as jobs return to pre-recession levels (in 2013 or 2014) we cannot assume that those same job numbers will equate to the same amount of space demand due to a heavy emphasis on maximizing space utilization.
The New Workplace
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+ Two Sentence Overview: Good article about the drivers of office space design: 1) Branding (or “recruitment”) 2) Collaboration 3) Mobile Office 4) Technology. The culminating effect of these trends is leading to less SF per employee (this article states a decline from 250 PSF to 160 PSF).
+ One Sentence Takeaway: Recruitment is THE main driver for large Energy companies in Houston (the building/design that will help companies attract and retain top talent) which could mitigate the decline in SF per employee. I am particularly interested in how the Mobile Office will affect demand for office space in the future.
The Rise of the Gulf Coast
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+ Two Sentence Overview: Move over Atlantic and Pacific coasts, The Gulf Coast is the most economically vibrant of the three US coasts. The port of Houston increased 28.1% in foreign trade this year and the scheduled $5.25 billion widening of the Panama Canal in 2014 is going to be a game changer as the breadth of cargo ships able to make it to the port of Houston will increase dramatically.
+ One Sentence Takeaway: The friendly business environment in the Gulf coast relative to the unfavorable labor and regulatory constraints in the Atlantic and West coast ports is the main driver of the Gulf’s ascendency.
Capital ahead of fundamentals
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+ Two Sentence Overview: We all know there has been tremendous liquidity waiting on the sidelines ready to pounce on deals. The gentlemen in this video makes a strong argument that pricing is ahead of the fundamentals as both private and public money (US and international) are chasing the same stabilized core assets driving prices to frothy levels.
+ One Sentence Takeaway: Pent up demand has “bid up” pricing in markets (particular in the gateway markets), which could bode well for Houston as investors are pushed towards secondary markets and Texas cities in particular because of the strong job growth.
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