As the price of oil bottoms out, Houston’s economy lies in wait.
Economist at the Greater Houston Partnership, Patrick Jankowski, spoke before the Association of Commercial Real Estate Professionals last Thursday.
The meeting of architects, developers, and real estate agents listened on as Jankowski leveled with them, “I’m not going to sugarcoat the truth.”
Growth in employment has declined from nearly 120,000 extra jobs in 2014 to none just last month, Jankowski reported. What’s even worse is the fact that the lost jobs were paid well and included positions in engineering, manufacturing, and the oil and gas industry. Beyond this, they were replaced by jobs that don’t pay so well in the fields of construction, education, and hospitality. In total, wages paid fell from 2014’s $48 billion to $44 billion at the end of 2015.
Jankowski said that the impact has definitely been felt in Houston. Other than gas, sales in retail have fallen from $29 billion at the end of 2014 to $26.5 billion in the last quarter of 2015. Building permits and car sales have also slipped in 2016.
In the meantime, office vacancies have increased to 14 percent from the 12 percent recorded for 2014. Subleases have climbed from 14 to 18 percent as well. In May, apartment occupancy hit below 80 percent and builders are currently constructing an extra 20,000 units or roughly 14 percent of the market.
“In the ‘80s we had a problem with office buildings. Apartments now are going to be the office buildings of the ‘80s. They’re going to be vacant for a long time,” Jankowski declared, “We don’t need any more apartments, please.”
He also revealed that Houston is constructing apartment buildings at quadruple the rate that Houston is cranking out jobs.
According to Jankowski, it’s also not certain if Houston has experienced the worst of it. Large amounts of vacant office space implies that the oil and gas industry has no aim to start hiring in bulk anytime in the near future.
“They’ve looked at their workforce needs over the long term, and they realized their workforce is not going to grow enough to need this space, “Jankowski asserted, “It’s a little bit sobering.”
Article written by HEI contributor Briana Steptoe.