Live From Houston

The Real Estate Espresso Podcast

Live From Houston

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Welcome to the Real Estate Espresso Podcast, the morning shot of what’s new in the world of real estate investing. I’m your host, Viktor Menasce. On today’s show, we’re coming to you live on location in Houston, Texas, with the site of our Kırkendal storage facility, which is currently under construction. We’re holding the formal groundbreaking ceremony today, complete with shiny shovels, ribbon-cutting, and photo opportunities. While I didn’t orchestrate any baby kissing, I did manage to get a bit of mud on my shoes.

Houston continues to experience growth. Like many North American cities, it’s unique in that there are no zoning laws. Essentially, anything can be built anywhere, subject to a few restrictions, creating a seemingly chaotic city layout. However, there’s a natural order underlying this chaos. Free-market forces dictate what works where – car dealerships tend to cluster together, as do retail outlets. Municipal utility districts often provide direction in development planning, helping to control the randomness often associated with a lack of zoning laws.

Historically, Houston has had some negative reputations. First, as the oil capital of the US, it was seen as a city for the energy sector alone. However, times have changed. While the oil industry still maintains a prominent role here, it’s far from the only industry on the scene. In fact, Houston’s economy is so diverse I’m not sure oil even makes the top three in terms of employment.

One of the city’s features is that, because the barrier to new construction is low, often there’s a tendency for the supply of accommodations to exceed demand. In the period of 2003-2004, for example, the apartment vacancy rate in parts of the city hovered near 15 percent. Hurricane Katrina, with its accompanying influx of residents relocating from New Orleans, brought the vacancy rate down to about 7 percent virtually overnight.

A second negative reputation came in 2017 when Hurricane Harvey caused so much damage many feared it would render the city unlivable. However, in truth, the city has not only survived but thrived, consistently seeing substantial increases in population upwards of 60-70,000 new residents a year. In comparison, the latest announcement from Apple proposing a new 250,000 square-foot facility, represents continued growth and job creation.

Northwest of Houston, the tech sector continues to grow. Hewlett-Packard shifted their headquarters for the enterprise division from Silicon Valley to Houston not too long ago. Following suit, Oracle also moved their headquarters here, before recently relocating again to Nashville. With more than 650,000 apartment units and an average completion rate of around 25,000 units each year, the city is far from struggling.

Interestingly, we’ve noted a shift in crime patterns as populations move. For instance, our construction project displaced several homeless individuals who had taken refuge in the woods on the property, an inadvertent result of urban development. These types of shifts are often unavoidable and unpredictable, and only through direct interaction can we gain insight and learn how to adapt.

As you think about this, I hope your day is awesome. Go make great things happen! We’ll talk to you again tomorrow.

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