A panel of the company’s experts — Jon Silberman, Dan Boyles, Gray Gilbert, Jim Tainter, Andrew Pappas and Jason Gaines — held forth on a variety of topics during NAI Partners’ Q4 2017 Houston Press Breakfast.

Jon Silberman, Managing Partner, on the company:

“We’ve seen our model—the people that do the work also owning the company—continue to gain traction, as evidenced by our recent rise to 5th-largest Houston-Based Commercial Real Estate Firm per the HBJ. We are now the largest independently-owned CRE firm in the city. The more the publicly traded companies in our industry become increasingly globally-focused, the more opportunity that’s created for us.”

“Our recently released NAI Partners Sublease Index is a significant indicator of the health of the marketplace. Obviously as the Sublease Index shrinks—it’s now down to 15%—the more we’ll continue to see positive indicators in the Houston office market.”

Dan Boyles, Partner, on the office market:

“Our conversations with our clients have been increasingly positive, though there’s still a bit of a way to go before we feel comfortable saying we’re fully out of the woods in the Houston office market.”

“Certain segments of the market remain hot—coworking, executive suites and healthcare continue to see a lot of activity, though as everyone knows, it still comes back to oil and gas at the end of the day. Still, we finally turned a corner with positive absorption in the fourth quarter of 2017, and many of us feel that we’re at least out of the ICU and into recovery.”

Andrew Pappas, SVP, NAI Investment Fund:

“We just sold the Investment Fund’s original acquisition, 12600 N Featherwood Drive in Southeast Houston near Hobby. The Fund bought the property in 2016 at 76% occupancy, and leased it to 94% in a very challenging office market. It’s the first exit for Fund I, and the return on investment for our investors exceeded our expectations.”

“We also recently closed Fund II—which originally sought to raise $9 million and is officially oversubscribed—and we are looking forward to building a strong $40 million-plus portfolio of office, industrial and retail properties throughout Houston, Austin, San Antonio and Dallas.”

Gray Gilbert, Partner, on the industrial market:

“The boundaries of Houston industrial keep expanding, and we’re seeing bigger spec construction than ever before—Best Buy’s building a 500,000-sq.-ft. facility. Land constraints are probably the biggest factor inhibiting big boxes from building distribution centers in the city limits, which is partially why you’re seeing the industrial market expand well beyond Beltway 8.”

Jason Gaines, SVP, Retail Services:

“Retail is at almost full absorption. That market indicator, alongside significantly less retail construction being delivered in 2017, has helped result in historically low vacancy and continuingly increasing rental rates.”

“Houston definitely has a stigma about two-story retail. If I were to survey my clients right now, 75% would say no thanks, while 25% would consider giving it a chance.”

“When it comes to mixed-use, it can go one of two ways: a developer can go big retail at the expense of the tenants, or focus mostly on the residential component with retail as an afterthought. Unfortunately, the latter tends to result in things like residents parking in spaces that are supposed to be for the retail tenants and their customers only. The most successful mixed-use cases tend to be things like Whole Foods at BLVD Place, where the project was essentially built around their needs—as a result, it’s one of the more seamless in-and-out experiences at any grocery store in the city.”

Jim Tainter, Managing Director, Landlord Services:

“We’re continuing to hear from our landlord clients and those in the market that they are looking for opportunities to drive value. Thankfully we’ve been able to help them in that regard, having recently notched the most-active property in the South Main/Med Center submarket in 2017 with 2656 South Loop West, and continuing to expand our leasing portfolio and also growing our Office Project Leasing team.”

Jon Silberman on the Houston Economy:

“Houston is going to continue to have difficulty doing things like attracting the Amazons of the world until we have an infrastructure plan in place. And not being able to lure the world’s biggest corporations will restrict Houston’s ability to grow. While the high-speed train to Dallas isn’t a bad idea, I’d rather see that $18 billion go toward a plan to address our infrastructure problems that would allay the fears of companies considering our city. Right now, if we’re counting on big corporations moving to Houston as a driver of economic growth, Amazon’s decision to pass us over should be a wake-up call.”

General Economic/Market/Retail Trends

Due to Houston’s overreliance on cars and worsening-by-the-day traffic problems, we’re starting to see an increase in on-demand businesses:

  • On-demand physicians are becoming increasingly prevalent.
  • There is a 24-hour, on-demand notary service that exists and will drive to your house.
  • In the last two months, a new on-demand delivery service has sprung up for craft beer aficionados—Hop Drop—which promises fresh craft beer straight from the breweries in under an hour.

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