The Texas Tea: Too Many Black Swans
A derecho hit Houston last week — another black swan event that, like the pandemic, struck at the heart of the commercial real estate industry.
We had little to no warning, it was much worse than we originally anticipated, and we’re still picking up the pieces.
Naturally, every conversation with Houston sources this week has started with, “I hope you stayed safe,” or “How did you fare?” While most people made it through unscathed, some remain in sweltering heat without power, and many people and commercial buildings incurred significant property damage. Our hearts are heavy for those who lost their lives or loved ones.
The Downtown Houston office market has suffered through perceptions of relatively high vacancy rates for years now, but this storm brought a significant reminder that thousands of people are there working every day. Many hunkered down in their office buildings to ride out the hurricane-equivalent storm. Now, they may have to wait months to return.
We are six days out from the storm, but most agree that this is a recovery process that will take months. As a proud Houstonian, I’ll be there to document the short- and long-term impact on our commercial real estate.
If you’d like to share your story about the storm or damage to your commercial property, my inbox is open.
— Maddy McCarty, Bisnow Houston Reporter
What's The Big Deal?
Dallas’ industrial market scored a big win last month when Google signed a 1M SF lease for a distribution center in Northlake 35 Logistics Park, a six-building industrial campus north of Fort Worth. The tech giant began its covert mission to build out the space by filing a permit with the state under the code name Project Beast. Sources exclusively confirmed the identity of the tenant to Bisnow and said the company’s lease kicked off in April. How Google plans to use the facility remains unclear.
The Best Of Bisnow
- End Of An Era: Donald R. Horton, founder of D.R. Horton, died suddenly last week at the age of 74. Horton started the firm’s first predecessor company in 1978 in Fort Worth, eventually launching D.R. Horton in 1991 and scaling it to become one of the top homebuilding firms in the nation. Executive Vice Chairman David Auld was appointed to take over the late founder’s position as executive chairman.
- On The Road Again: Subaru of America is ditching its Illinois digs and joining a league of companies opting to move operations to the Dallas area. A 200K SF expansion of an existing Coppell campus that will house sales and marketing, customer advocacy and distribution operations is expected to be complete by the end of this year.
- Mitigate Now, Repair Later: While Houstonians are still reeling from the storm last week, commercial property managers and owners should know they are responsible for notifying their insurance carriers of their loss and mitigating further damage. With early economic toll estimates coming in between $5B and $7B, the time to act is now. They should also make simultaneous plans for hurricane season, which is right around the corner.
- Desperate Measures: DallasNews Corp. will downsize by nearly 90% when it moves its print operations out of an owner-occupied facility in Plano in favor of a 67K SF building in Carrollton. The move is just the latest in a series of drastic cost-cutting measures amid a loss of advertisers and waning circulation that has plagued countless newspapers.
- Cracking The Condo Code: While economic indicators might suggest it is a bad time to build luxury housing in Houston, condo developers have found a target audience that can’t get enough. Empty nesters who want a simplified lifestyle are fueling stiff competition for new condos in the Space City, where supply is not as plentiful as some might think despite numerous new developments.
Best Of The Rest
- Taming Costs: Residents of Austin will now have access to cheaper housing following city council approval of smaller lot sizes for new home builds, The Texas Tribune reports. The measure also allows apartments to be built closer to single-family homes and greenlights denser development along the city’s planned rail lines. The moves are expected to alleviate the city’s widely publicized affordability crisis.
- Future Forward: Telecom giant Ericsson is pouring $50M into its 300K SF Dallas-area 5G Smart Factory to boost manufacturing of products that will help more people access 5G networks, according to The Dallas Morning News. The investment will allow the company to expand its innovation hub, which will advance the facility’s research and design efforts.
- Galleria Gussy-Up: Houston’s Galleria mall is getting a multimillion-dollar facelift. Community Impact reports that owner Simon Property Group plans major upgrades to both the interior and exterior, including new lighting and 155K SF of new flooring. The revamp comes just seven years after the mall’s last major renovation, which included upgrades to its luxury wing.
- Doubling Down: A more than $531M investment in a Toyota manufacturing plant in San Antonio will add 500K SF to the company’s citywide footprint and create more than 400 new jobs, the San Antonio Business Journal reported. The effort, code-named Project Iceberg, comes with a 10-year, 100% tax abatement valued at about $14.9M.
- Kicked Off Millionaire’s Row: Texas’ overheated housing market has gone cold, making it one of just three states with with fewer “million-dollar cities” than a year ago, according to Axios, which pointed to home values falling below $1M in once-fiery markets like Sunset Valley and Volente near Austin as “another sign of the metro's backslide from the pandemic housing boom.” The outlet blames slackening competition amid a rebound in the supply of homes for sale.
Quote Of The Week
“There wasn’t a single market study that we could have done that would have told us that we could pull off this project.”
Howard Hughes Houston Region President Jim Carman on the city’s hot luxury condo market and its Ritz-Carlton Residences project.
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So how's the Tea? As we brew up next week's edition, send us your feedback, including what kind of content you'd find valuable in this newsletter. And don't forget, we love news tips.
Katharine Carlon, Central U.S. Editor: katharine.carlon@bisnow.com
Olivia Lueckemeyer, Dallas-Fort Worth Reporter: olivia.lueckemeyer@bisnow.com
Maddy McCarty, Houston Reporter: maddy.mccarty@bisnow.com
