Salient to Investors:
Real Capital Analytics said non-US firms bought the most Houston office buildings in the past 3 years, spending 4 times more than US REITs, which ranked second. In 2012, Houston made the top five global cities surveyed by the Association of Foreign Investors in Real Estate for the first time dating back to 1994.
Greg Kraus at Invesco said Houston has gained broad acceptance as a top-tier market reflecting job growth, more gas refineries, more oil out of the Port of Houston, and a true international feeling. Kraus said institutions have long memories of volatility, and Houston was a poster child for preconceived notions established in the 1980s of boom-bust, and US tax rules that motivated recklessness and helped create the 1980s S&L crisis no longer exist.
Real Capital said sales of offices in Houston rose 32 percent in 2012 to the highest in five years and versus the 21 percent increase nationally. Real Capital said office buildings made up 45 percent of investment by foreign buyers since 2007.
Jim Fetgatter at the foreign real estate investors association said energy-related job growth is the main draw for overseas capital. Houston ranked 5th after New York, London, San Francisco and Washington.
Dan Fasulo at Real Capital said Houston’s energy story is so compelling, and the big, smart money that knows that industry are all there – it is cheaper than New York or San Francisco and you can get better immediate returns.
In 2012 the average Houston cap rate was 7.4 percent versus 7.1 percent rate for all the US and 5.1 percent for New York, the most expensive domestic market.
Donald Wise at Metzler Realty Advisors said Houston has risen to the top of the pile as investors look for good current returns with reasonable appreciation – it is a good place for knowledge workers to live, and energy production is much broader than it was 30 years ago. Wise said the promising outlook has helped Houston overcome a history of excessive building.
Barton Smith at the University of Houston said new methods for extracting oil and gas has deepened Houston’s status as the US energy capital as the world’s biggest oil companies expand there.
Green Street Advisors said Houston is firmly in the low-barrier camp, and with improving local fundamentals, supply is creeping back into the picture. Green Street said Houston is a top US market, with a labor outlook expected to be robust for at least the next few years.
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