TEXAS CITIES DOMINATE LIST OF TOP PERFORMERS RECON Real Estate Center Online News   |   Nov 13, 2009

LOS ANGELES (Milken Institute) – Texas metros, led by number one Austin–Round Rock, claimed four of the top five spots and nine of the top 16 in the 2009 Milken Institute/Greenstreet Real Estate Partners Best-Performing Cities Index.

Also making the list were Killeen–Temple–Fort Hood (2), McAllen-Edinburg-Mission (4), Houston–Sugar Land–Baytown (5), San Antonio (11), Fort Worth–Arlington (12), Dallas-Plano-Irving (13), El Paso (14) and Corpus Christi (16).

Austin–Round Rock was the first metro to ever be ranked number one twice on the index, the last time being in 2000.

But it doesn't stop there. Nine other Texas metros made the top 25 out of the 124 smallest metros that were studied.

Those were Midland (1), Longview (2), Tyler (4), Odessa (5), College Station–Bryan (14), Texarkana (17), Waco (18), Laredo (20) and Abilene (21).

Leaders in this year’s index, which ranks U.S. metros based on their ability to create and sustain jobs, are all metros that succeeded in avoiding the worst of economic declines driven by falling housing markets and job losses in manufacturing and global trade.

Regional economic factors also strongly influenced the rankings this year, with the oil and gas sector, technology and alternative energy providing stability among metros in Texas, North Carolina, Washington and Louisiana.

Another factor helping Texas metros move up in the rankings is the state’s favorable business climate and its ability to attract jobs and corporations away from higher-cost states.

HOUSTON GETS FRESHII

HOUSTON (Houston Business Journal) – Local health nuts will soon have a few new options for satisfying their fresh-food cravings.

Third Coast Produce has signed a franchise agreement for over 20 Freshii restaurants in the Houston area. Freshii specializes in healthy meals and snacks.

The first few Houston locations are expected to open in early 2010.

ANNUAL REPORT GIVEAWAY CONTINUES

COLLEGE STATION (Real Estate Center) – RECON readers sprang into action as soon as Tuesday's annual report giveaway was announced. Although more than 230 readers made a go for the prize, we had our ten winners within 20 minutes.

Congrats to Kyle A. Hunt, Doug Scott, Emily Brown, R. Scott Megahan, Rusty Chiles, Britt Gardner, Dana L. Monson, Yvonne Hoffmann, Kristin D. Morgan and Carolyn Monroe. Your annual reports are on their way.

The answer to Tuesday's question — which Texas industry had the greatest employment growth rate from September 2008 to September 2009? — was education and health services.

Today's question: What Real Estate Center staff member is a highly decorated Vietnam veteran, according to Communications Director David Jones in this week's Real Estate Red Zone podcast?
Send your responses to bpope@mays.tamu.edu. Don't forget to include your mailing address.

Of course, you can also purchase a copy of our annual report (which includes a calendar) while supplies last. They are available for $4.95 through our online store.

WATER RUSHING FROM CALDWELL TO MANOR

TRAVIS COUNTY (Austin Business Journal) – Commissioners have approved a $40 million bond issuance for River Valley Industrial Development Corp., which will oversee the construction of a 52-mile pipeline transporting water from Caldwell County to Manor.

The pipeline will deliver 500,000 gallons a day to Manor and have a capacity to transport 18 million gallons of potable water. Municipalities around the pipeline will be able to purchase water from it as well.

Additionally, the pipeline is expected to help spur and support development along SH 130.
Officials say 95 percent of the land needed for the pipeline has been purchased, and they do not expect problems purchasing the remaining property.

ETHICALLY SPEAKING

COLLEGE STATION (Real Estate Center) – Mays Business School professor Dr. Elizabeth Umphress talks about the importance of strong ethics in real estate on the latest episode of the Real Estate Red Zone podcast.

Also, Real Estate Center Communications Director David Jones joins host Bryan Pope for a rundown on the latest Center news, and Edie Craig takes listeners through the latest real estate happenings from around the state.

To subscribe to the free podcast, just click on the RSS feed found on the podcast page. The podcast is also listed in iTunes. And don't forget to tell your friends about it.

WASTEWATER TREATMENT PLANT CONTRACT AWARDED

CORPUS CHRISTI (Corpus Christi Caller-Times) – A $50 million contract as been awarded to Minnesota-based Graham Construction Services to build a new wastewater treatment plant on the city's north side.

A competitive bidding process brought the plant’s construction costs down $29 million from the city’s original estimate.

The New Broadway Wastewater Treatment Plant will be built in the Hillcrest Neighborhood next to the current, 1936-built facility.

Construction will begin late this year or in early 2010 and be completed in two phases over the next 36 months. The old plant will be closed and demolished for further construction of the new facility after its activation.

GOOD NEWS FOR MANUFACTURED HOUSING

FORT WORTH (Fort Worth Business Press) – While all other sectors of residential real estate have suffered over the past few months, the manufactured housing market has thrived.

The sector has a trend of performing better in a down market, according to Marcus and Millichap Real Estate Investment Services.

Some 30 percent of the households in Texas cannot afford a home over $70,000, which is a plus for the manufactured home business, says Dr. Jim Gaines, research economist at the Real Estate Center at Texas A&M University.

The average price for a manufactured home is $46,000, compared with $162,300 for a site-built house, excluding land, according to the Manufactured Housing Institute.

“Manufactured homes are set to do well,” Gaines says.

Texas, Florida and North Carolina lead the market in volume of manufactured home communities, 60 percent of which are in southern states.

According to a September report released by JLT & Associates, a market research company specializing in the manufactured housing industry, Texas has 170 such communities. Twenty-seven of those are in Tarrant County.

TRIGATE PURCHASES FORECLOSED OFFICE

RICHARDSON (Dallas Morning News) – TriGate Capital has purchased a 200,000-sf Telecom Corridor office building out of foreclosure.

Texas Capital Bank leases 40 percent of the 1985 eight-story building, and TriGate has hired Stream Realty Partners to find tenants for the remaining space.

The building is at 2350 Lakeside Blvd. in the Greenway office park, just east of North Central Expwy.

RECORD FORECLOSURE POSTINGS

DALLAS (Dallas Morning News, San Antonio Express-News, Austin Business Journal) – San Antonio and Dallas–Fort Worth experienced a record-setting year of home foreclosure listings.

December’s surge in DFW home foreclosure filings pushes the area’s year-end total over 61,000, up 23 percent from the 2008 total, according to Addison-based Foreclosure Listing Service.

More than 5,200 North Texas homes are posted in foreclosure for December, an increase of 30 percent from a year ago.

RexReport.com reports that San Antonio’s total foreclosure postings in 2009 are up 42 percent from 2008. With nearly 16,000 properties in some stage of foreclosure over the year, the Alamo City hasn’t seen a number that high in two decades.

Over 1,400 homes are listed for the December auction, a 40 percent increase from December 2008.
Meanwhile, foreclosures across Texas fell 10.7 percent to 11,798 postings in October from the previous month, but were 19.2 percent higher than October 2008 numbers, according to RealtyTrac Inc.
Texas has the 23rd highest foreclosure rate in the nation.

HOSPITAL FOR ALVIN

ALVIN (Houston Business Journal) – This small town south of Houston will receive a $50 million Christus Health hospital and $10 million medical office building developed by Rowland Cos.

The buildings will sit on 23 acres near FM 528 and the SH 35 bypass. The land is currently being purchased from Palicio Gate LP.

Phase one of the project includes a 26-bed, 60,000-sf hospital and 40,000-sf medical office building. Depending on demand, the hospital could expand to 230,000 sf, and a second 90,000-sf medical office building could be added.

SA RETAIL RENTS FALL

SAN ANTONIO (San Antonio Express-News) – After slight increases in retail rents in the first two quarters of 2009, asking annual rents fell 42 cents per sf to $17.91 in the third quarter, according to NAI REOC Partners.

That marks a decrease of 8 cents from this time last year.

Average vacancy, which remains greater than 14 percent, is driving rents down, says Ty West, NAI REOC vice president.

San Antonio recorded 45,228 sf of positive net absorption for the third quarter and 314,849 sf for the year.

Less than 250,000 sf of new retail space is expected to finish construction by the end of the year.

RECESSION'S IMPACT ON HOUSTON OFFICE MARKET

HOUSTON (Marcus & Millichap) – Although oil prices have rebounded to a level that should sustain operations in most energy companies, the national recession is weighing on office operations in Houston, according to a fourth-quarter Office Research Report by Marcus & Millichap.

The abundance of Fortune 500 headquarters in the area, in particular, is resulting in significant layoffs in the professional and business services segment.

Other findings from the report:
• The rate of job losses is expected to fall dramatically in the next few months. Nonetheless, payrolls are forecast to be thinned by 76,000 positions this year, a 2.9 percent decline. Office-using employment is projected to decrease 4 percent, or by 22,300 jobs.
• Builders are expected to complete 4.2 million sf of office space in 2009.
• As the recession weighs on office properties in the Houston metro, vacancy is projected to rise to 15.7 percent by year end, 300 basis points above the rate at the close of last year.

• Asking rents are forecasted to fall 1.4 percent this year to $23.93 per sf while effective rents retreat 3.7 percent to $19.91 per sf. In 2010, office rents are expected to recede further because of sluggish economic growth.

243 ACRES ANNEXED

WICHITA FALLS (Times Record News) – The city council voted Tuesday to annex 243 acres effective next month.

The annexation addresses land generally east of Allendale Rd. and south of Kell Blvd., including property owned by the North Texas Rural Rail Transportation District and Pitts Sand and Gravel Inc., as well as what was the Saint-Gobain Vetrotex property.

AUSTIN OFFICE VACANCIES UP

AUSTIN (Marcus & Millichap) – Recent overbuilding and employers’ thinning space requirements have widened the Austin office supply/demand imbalance in recent months, driving metrowide vacancy close to 20 percent for the first time since 2004, according to a fourth-quarter Office Research Report by Marcus & Millichap.

Despite projections for further weakening into the first half of 2010, this downturn will likely be shallower than the tech bust earlier in the decade, as job losses are expected to ease through the end of this year.

“Buyers will remain cautious when approaching deals and continue to hold out for price corrections, given projections for further fundamental weakening,” says J. Michael Watson, regional manager of the Austin office of Marcus & Millichap.

Following are some of the most significant findings from the report:
• Hiring is projected to pick up by year end. In 2009, employers are forecasted to reduce payrolls in Austin by 6,000 positions, a 0.8 percent decline. Office-using businesses are expected to eliminate 700 jobs.
• Office construction will drop off significantly this year as developers are on pace to bring only 650,000 sf online, down from 2008, when 2.7 million sf was added to stock.
• Although office development activity will slow in 2009, contracting demand and oversupply issues are expected to push up metrowide vacancy 200 basis points to 20.8 percent. Last year, vacancy increased 430 basis points.
• This year, more moderate tenant demand will prompt owners to reduce rental rates in an attempt to stabilize operations. Asking rents are forecast to decrease 3.7 percent to $25.29 per sf, and effective rents will end the year at $20.59 per sf, a 7.5 percent annual drop.

BACK TO SCHOOL FOR AUSTIN REALTORS

AUSTIN (Austin Business Journal) – The Austin Institute of Real Estate will hold a two-day course to inform Realtors about the city’s Energy Conservation Audit and Disclosure ordinance.

The course will cover topics such as preventing energy loss, and it will explain how the audit works and its impact on real estate business.

It will be offered Nov. 21 and 22 at 8828 Research Blvd. Cost is $175 per person, which includes course materials.