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H-Town Man

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H-Town Man last won the day on November 2 2017

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  1. We are still hanging on to the crown of percentage growth since 2010 among large metro areas at 19.5%, although DFW is close behind 19.0%. Those are whopping increases though. We should see a 20% growth between 2010 and 2020 censuses. Will take another 33% increase to pull even with the Chicago metro. We were white hot the first half of the decade and then cooled with the energy downturn. Now the oil industry is looking at another contraction and we have flood issues to deal with. May be awhile before we see soaring growth again.
  2. I am hopeful that TMC3 can start this spring since it is medical. I don't have much hope for any other Houston project that hasn't broken ground yet.
  3. Trump sees oil prices as something that hurts the common man when they are high, and he has typically issued warnings to Saudi Arabia and O&G companies when oil crept above $60. This is part of his populist appeal. In terms of bailouts, I think any bailout or other government assistance to oil companies is politically toxic since they have such a bad guy image, especially with climate change. They have always relished their independence and free market spirit and this is just one of those times when that sword cuts the other way.
  4. No, that's not what I'm saying. What I'm saying is that the projects that started the past 2 years wouldn't have started if the O&G sector wasn't stable, regardless of whether it was O&G companies who eventually signed leases in those projects. If O&G was contracting, you would not have seen those projects start. To your point about the oil bust, some projects might have been "dreamt up" during the bust, but they didn't start at that time because market conditions were bad. They started later. Case in point - Hines bought the Houston Chronicle land as oil was collapsing, but waited a couple of years for the office market to right itself before pushing ahead with a project. They had initial plans for a project when they were buying the land but those plans were scrapped when it was apparent how far things were falling. Developers' decisions are tied to investment capital, which was frozen in Houston from 2015-2017 amid the carnage. New projects were not funded, buildings were not even purchased until late 2017 when things settled and the price of oil had somewhat recovered. Everyone waited to see what would happen. That is generally how it goes when a city's major industry is in turmoil.
  5. No Houston 19514, I assure you, the vast majority of developers look at things like market occupancy and projected occupancy when deciding whether to build new buildings. The "anchor" lease that you try to get signed before starting construction is a factor, but it usually only fills less than half of the building, and for the rest, you have to know what the market's doing in order to project how long it will take to stabilize. This is certainly true when you go to get financing, no matter how much magic you might think you have. I guarantee you no financing decision gets made on a new project without people on both sides of the table scrutinizing the occupancy numbers and trends, unless the project is 100% pre-leased, and even then they'll still at lease glance at the occupancy numbers in order to get an idea of what will happen if the leases expire or a tenant defaults.
  6. Luminare, From 2012-2014, we had about 18 million SF of office space begin construction. From 2015-2017, we had about 0 SF of office space begin construction. From 2018-2020, we've had 2 or 3 million SF of office space begin construction. Oil prices were high in 2012-2014, low in 2015-2017, and mediocre in 2018-2020. Has the 2-3 million SF built in 2018-2020 been leased primarily to non-oil companies? Yes. Does this mean that our office market is no longer tied to oil? No, it is still tied to oil. Would those 2-3 million SF have started construction if oil prices were low and companies were laying off workers? No, probably not. You're saying that even though the leases in the new buildings aren't for oil companies, those buildings still wouldn't have been built if oil was doing badly? That's what I'm saying. Developers need to know that the other buildings are somewhat stable before they build new ones.
  7. New article today in Costar on Houston. Short version: everything is bad. Oil Price Wars, Coronavirus Threaten to Rattle US Commercial Real Estate Houston Could Be Hardest Hit as Energy Stocks Drop The coronavirus is slashing demand for oil as businesses and consumers reduce travel, cutting demand for fuel from flights and transportation. (Getty Images) By Marissa Luck CoStar News March 09, 2020 | 06:30 P.M. U.S. markets nosedived as oil price wars and concerns about the coronavirus outbreak sent shock waves through the global economy, sparking concern about an economic downturn that could deflate consumer confidence, curb business spending and dent revenue for commercial real estate companies. Houston, known as the world's energy capital, is especially vulnerable because oil makes up about one-third of the economy. Analysts are predicting that a potential period of sustained low oil prices could lead to thousands of job losses, lowering demand for retail, apartment and office space. Talks between the Organization of the Petroleum Exporting Countries and its allies crumbled last week with Russia refusing to cut oil production and Saudi Arabia responding over the weekend with historic price cuts that pushed down oil markets. The production decreases were expected to help the industry, which was teetering on the edge as the coronavirus slashes demand for oil because businesses and consumers are traveling less, cutting demand for fuel for transportation. The effects could reverberate throughout the commercial real estate sector. On Monday, all four of the major publicly traded commercial real estate brokerages suffered blows to their stock prices, with CBRE seeing shares slide more than 9%, JLL’s stock was down over 5%, Cushman & Wakefield’s was down more than 10%, and Colliers International's stock was down more than 7% as of Monday afternoon. The apartment market could be disrupted by any drastic changes in job growth that could stifle demand. Houston’s population is growing, but at a slower rate, with most of the population growth coming from new births and international migration instead of domestic migration. Amid the uncertainty, businesses may decide to delay signing new leases for retail and office space. “The apartment market is already overbuilt and landlords are having to offer concessions and incentives. They may have to boost those,” said Patrick Jankowski, an economist at the Greater Houston Partnership. “It will affect real estate in the broad sense that with the collapse in the stock market, weakness in oil prices and coronavirus crisis, that could affect business confidence and when the business community is concerned about the outlook, they’re less likely to lease additional space.” Brent crude, the global benchmark for crude oil prices, was down more than 21%, trading at about $35 per barrel as of mid-day Monday. West Texas Intermediate prices, the benchmark for American crude, fell more than 20%, hovering around $32 per barrel as of mid-day Monday and was slated for its second worst day since it began trading on the New York Mercantile Exchange in 1983, according to media reports. Goldman Sachs analysts are predicting oil could plunge to $20 per barrel, which is a sharp decline from the benchmark of $45 per barrel that most U.S. energy companies say is needed to be profitable. Globally, the energy analyst firm Wood Mackenzie said most oil companies need Brent crude to be about $53 per barrel to break even. After trading opened Monday, the S&P 500 fell 7%, triggering a circuit breaker to stop trading for 15 minutes. Investors are spooked by the threat of a pandemic hampering economic growth, shaking consumer confidence and upending supply chains. A 2005 study from Congressional Budget Office modeled the impact of a potential influenza that “could produce a short-run impact on the worldwide economy similar in depth and duration to that of an average postwar recession in the United States.” A severe pandemic could cut U.S. gross domestic product by about 4.5%, followed by a sharp rebound, the study found. “Right now, we have no clue where we are in between two events" of either a mild outbreak or a severe outbreak, said Bill Gilmer, economist at University of Houston’s Bauer College of Business, in an interview with CoStar News. "The possibility of even a mild outbreak on the horizon ... [could lead to] a modest slowdown in the U.S. economy, if not a recession." Nationally, lower oil prices are typically a positive for the economy as cheap gas prices and energy prices are a stimulus for manufacturers and consumers, but that is not expected to be the case for the coronavirus outbreak, known as COVID-19, that started in China and has spread to about 105 countries and territories across the globe, including the United States. Business Investment Concern Huge conferences across the globe such as IHS Markit’s CERAWeek in Houston, the South by Southwest arts and technology festival in Austin, Texas, and a real estate industry gathering in Cannes, France, have been canceled because of coronavirus concerns. "With COVID-19 drastically reducing global travel, this stimulus [from lower energy prices] comes at the worst time, when conferences and major events are being canceled; airlines and hotels are struggling due to the decline in travel; and people are moving around less, especially in the most-affected cities and regions," said Justin Boyar, CoStar's director of market analytics in Houston. "With the stock market declining and fears of a recession on the horizon, consumers will be nervous to spend, even with lower oil prices. With a decline in consumer spending, business investment could decline as well." Houston could be the hardest hit U.S. city by the triple whammy of lower oil prices, the coronavirus restricting travel and consumer spending and the potential for the U.S. economy to sink into a slowdown. Big oil stocks sank as the oil price wars rattled investors. Chevron and Exxon Mobil, which both own millions of square feet of real estate in the Houston area and employ thousands of workers in the city, each saw their stock tumble between 10% and 15% on Monday compared to Friday's closing. The last energy downturn started in 2014 and lasted until mid-2017 with oil prices plunging 75% from more than $100 per barrel to about $26 per barrel. The city of Houston shed about 93,000 energy jobs during that time and has only regained about 40% of those jobs since, Jankowski said. Almost 500 North American energy companies in the upstream, midstream and services sectors filed for bankruptcy between 2015 and 2019, according to Haynes and Boone LP, a law firm that tracks energy bankruptcies. Before coronavirus threats, economists already were expecting Houston’s economy to take a blow as the energy industry struggled with a shrinking availability of capital. Wall Street investors that helped fuel the U.S. shale boom have lost interest in the sector after more than a decade of poor returns. The Greater Houston Partnership forecasts there could be about 4,000 energy jobs lost in 2020 because of the credit crunch. "Basically, we saw equity market and credit markets just turn their backs on the oil industry … oil companies were already cut off from credit and that basically meant they were dependent on cash flow and the price of oil,”"said Gilmer, the economist with the University of Houston. Some oil producers may see their cash flows somewhat insulated for now if they had already locked buyers into contracts with oil set at higher prices. "U.S. shale will certainly take the brunt of the pain, their production is unlikely to change quickly with much activity already committed and significant volumes hedged and protected," said Chris Midgley, global head of analytics of the energy analysis firm S&P Global Platts, in a note to clients. "However, some producers, who have used more sophisticated collars for their hedging strategy, could find themselves in all sorts of difficulty." Job losses in the energy industry could impact demand for new office and apartment space at a time when Houston already was facing systemic high office vacancy rates and concerns of overbuilding in the multifamily market. Houston has the highest office vacancy rate in the country at 16.9%, according to CoStar analysts. A sustained period of oil prices in the $20s to $30s per barrel range could be "devastating" for the U.S. energy sector, particularly oilfield services providers such as Halliburton, Schlumberger and Baker Hughes, CoStar's Boyar notes. "At the very least, the recent price drop is assuring that growth in the energy sector will be stagnant for the foreseeable future — which could continue to cause stagnation in Houston’s office sector the most," Boyar said. "Combined with the spread of coronavirus and a faltering U.S. economy this late in the cycle, and candidly the picture for Houston’s economy hasn’t looked this bleak since the early 1980s."
  8. The office market is tied to them. If oil companies are contracting, it will hurt new office development. They may not be the ones signing leases in the new office buildings (except for Marathon at City Centre), but if they start vacating large blocks of Class A office space, office rents will tumble and there will not be any new buildings.
  9. Saudia Arabia and Russia were on the same page until late last week, but oil was already sinking due to the virus and its effect on global oil demand. Saudi Arabia and Russia's "price war" is the result of a disagreement about what to do about already falling prices due to the virus. Saudis wanted a big coordinated production cut but Russia wouldn't go along, so now there is a price war. Yes, if fracking companies are killed, it will benefit offshore in a couple years because today's oversupply and lack of investment will produce tomorrow's undersupply. If fracking is severely damaged long term, then the next time there is an undersupply, offshore will reap the benefits. Even if the fracking industry can just be reduced to where there are not so many competing companies, that will help offshore in the next cycle since you won't have this ruthless fracking competition glutting the market.
  10. Although oil is down because of the coronavirus, so it really is ultimately the virus. Things might get real slow around this forum for awhile. I hope that all the projects expecting financing decisions soon will get them (TMC3, Laneways, Block 98, etc.), but the economy is collapsing and credit could freeze up. The silver lining might be that if fracking gets killed in a price collapse, that could open the door for a revival in offshore projects in a couple years, which fills a lot more office space in Houston than the fracking sector does.
  11. Bingo? Will they get Ethel from the St. Vincent Harvest Years Society to call the numbers? She's the best. And what about bridge? This thing is DOA unless there's a good game of contract bridge.
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