Fort Features: 5 Reasons to Invest in Houston
Texas continues to make headlines as one of the fastest-growing states in the country. From 2010 to 2019, the population of Texas increased by about 3.8 million, and the state is home to seven of the top 25 cities nationwide for new home ownership[1]. However, Houston has been growing at a slightly slower rate than other big cities in the Lone Star State, which is why we believe now is a great time to invest there. Fort Capital entered the Houston market in 2020, and we’ve expanded our Class B industrial portfolio there by nearly 300K square feet so far in 2021. Here are the top five reasons why we believe Houston is a smart place to invest right now:
1. Houston ranks fifth when it comes to the hottest commercial markets in Texas, yet it is still the biggest[2].
It is common sense to invest where no one else is looking, and because investors are focused on cities such as Dallas/Fort Worth and Austin, Houston is providing more opportunity and potentially lower prices. Houston is currently undervalued in our estimation, which is providing strong investment opportunities.
2. Venture-capital investments in Houston increased to $753 million in 2020 from $284 million in 2016[3].
Hesitancy to enter the Houston market tends to center around the volatility of oil and gas. While oil and gas are a valid concern, there are other stable industries with scale that stabilize the market including medical, tech, arts, and entertainment. With the majority of funding coming in the healthcare and information technology sectors, Houston is now home to over 500 digital technology companies[4] and continues to reinvent itself as a city of leading tech talent.
3. Houston ranks #3 among U.S. metro areas in Fortune 500 headquarters[5].
With large projects underway such as The Ion, a 266,000-square-foot structure designed to, “bring Houston’s entrepreneurial, corporate, and academic communities together into collaborative spaces and programs,” Houston is working hard to build a tech center that will attract top talent[6]. Hewlett Packard Enterprise Co. leads the charge with plans to open their new corporate headquarters in North Houston early next year[7]. In addition to the aggregation of leaders and emerging players in the tech industry, Houston is also home to the world’s largest medical center, Texas Medical Center (TMC), which supports the newest innovations in healthcare.
4. In 2020, Houston ranked second in total value of new residential construction[8] as the metro recorded the third-largest increase in population growth in the U.S.[9].
Population growth is much more of a driver for Class B industrial than individual segments of a market, and Houston’s population of roughly seven million[10] is still growing as the fourth largest in the country. This puts e-commerce and home building in the forefront, two industries that require infill locations to store materials and products to meet demand.
5. Port Houston recorded a 30% increase in container cargo in the month of May[11].
It can be easy to underestimate the amount of commerce and e-commerce that flows through Houston. Port Houston’s greater impact nationally includes 3.2 million jobs, $801.9 billion in economic value, and more than $38.1 billion in tax revenue[12]. After a record-breaking 2020 for TEU’s (twenty-foot equivalent units)[13], it shows no signs of slowing down.
We recognize that investing in a new market comes with new challenges. At Fort Capital, we place an emphasis on understanding what we are buying, why it’s located where it is, and the driving demand behind it. Houston is unique in that its lack of zoning laws makes it home to more outlier buildings, whereas the Dallas/Fort Worth area typically contains pockets of industrial that provide lots of services to a big metro. This difference requires a better understanding of the property and tenant base more specifically, and we are up to the challenge.
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