Houston’s Resurgence: Q&A with Stockbridge’s Stephen Azar

Stephen Azar, who is Vice President, Acquisitions with Stockbridge Real Estate, answered some questions put to him by Connect Media about the current investment climate in Houston. Azar will be a presenter with Connect Houston, which will take place Feb. 7, at Station 3.

Q: From your perspective, what is the investment climate like in Houston these days?
A: I would categorize the investment climate in Houston as strong but disciplined and submarket-specific. I think investors have had a sharp focus on the city, relative to the slump in oil, combined with excess inventory, particularly in the multifamily and office sectors. Now that oil prices seem to have stabilized and real estate fundamentals continue to strengthen in most submarkets, I would expect capital investment from both institutional and private investors to pick up momentum in 2018. Houston remains a major metropolitan area with a business-friendly tax environment, an educated population, a major port and the largest medical center in the world, in addition to being the energy capital of the world. For these reasons, I believe that capital will continue to flow into the city from a real estate perspective.

Q: Are there any property types that seem to be more popular than others?
A: Industrial product has become the favored asset class among most institutional investors not only in Houston but nationally. A big factor of this trend has been the proliferation of e-commerce, as well as the shift in investor demand from parts of the retail sector to industrial. In Houston specifically, I don’t think investor appetite for industrial ever softened throughout the oil slump, as market-level fundamentals remained strong with healthy vacancy and absorption numbers in light of some substantial supply in some submarkets. I believe this trend will continue in 2018.

Q:  If you would, tell me what you’re seeing in your crystal ball. Is Houston on the rebound?
A: I believe that Houston is on the rebound from both a macroeconomic and real estate perspective. Across all property types, fundamentals seem to be strengthening and recent economic data has been quite positive. These trends, combined with a relatively muted supply pipeline across most property types and the robust appetite for real estate from both equity and debt capital, certainly leads one to believe that the future looks bright for Houston. I think the submarkets that will thrive will be those with strong demographics and property-level fundamentals.

For comments, questions or concerns, please contact Texas Commercial Real Estate News Editor Amy Sorter