As the national real estate market
struggles, the Houston economic
scene, bolstered by the oil and gas market, continues to support a healthy
regional real estate leasing market.
“As you drive around town, construction and development is apparent all
around the Houston area,” says Darrell
McCorquodale, vice president at Wells
Fargo Bank in Houston. “The national
economy and financial market turmoil
does not seem to be having a large
impact on Houston development.”
Smart Business learned more from
McCorquodale about the present state of
the Houston economy and what entities
might have an impact on it in the future.
Which market in Houston helps the leasing
activity the most right now?
The oil and gas market helps a lot. I
have clients who have leased some
space over the last six to 12 months, and
a lot of the activity has involved oil-related companies acquiring more space. The
Houston market seems to be doing quite
well, our office is looking at several
requests, and our volume seems to have
picked up since the beginning of the
year. Lease activity seems to be picking
up as several of my clients have secured
new leases recently in both the office
and retail sectors.
Does the price of oil affect how the oil companies lease land?
As the price of oil has increased, it
appears to have had a positive effect on
the market’s leasing activity. Several of
my borrowers’ tenants have increased
their lease space as a result of the oil and
gas activity recently, which has created
their need for additional staff and space.
Our business banking division of the
bank mainly deals with companies with
financing requests between $250,000 and
$10,000,000, so our division of the bank
targets customers that provide support
services to the large oil and gas companies as well as other industries. As mentioned previously, we have seen an
increase in leasing activity as well as
new construction projects and a portion
of that can be attributable to the
increase in prices.
How does the market in Houston compare
to the rest of the country?
My focus is obviously on Houston, but
I know there is a lot of talk about a possible recession and a stagnant real estate
market nationwide. I know we are very
busy here at Wells Fargo, and we’re
looking at a lot of deals. It seems like it’s
been that way since Houston has been
tied to the oil and gas industry. I think
the Houston market has grown more
diverse over the last 10 or 15 years, but
oil and gas is still a very big player in this
region. As long as it’s doing well, it
seems like Houston does well.
What are some of the other markets in
Houston that are picking up speed?
Industrial real estate is big as more
industries move to the area. Houston also has a large medical community. I
know there is a lot of new construction
in the area due to our medical center. A
lot of new hospitals are being built, not
only in the new center but in some of the
suburbs, as well. There is also a lot of
new construction along Interstate 10.
How do the changing interest rates affect
real estate transactions?
The interest rates are kind of volatile
right now. People see that the prime rate
is dropping pretty dramatically so a lot
of them are calling with questions about
their current interest rate. And I think a
lot of people are looking to buy now
because of the interest rate.
As an example, I have several clients
with floating and adjustable rate notes.
Though they are pleased that rates are
going down, some of them are looking
for ways to fix the rate now because it
can eliminate the potential interest rate
risk in the future and secure a fairly low
rate.
Do the Federal Reserve’s actions affect the
real estate market very much?
I know after the 75 basis point drop
recently following the emergency session, we received a lot of phone calls
from clients that wanted to look at the
interest rates on their deals that are
financed for the long term. The clients
see that the prime rate has dropped 75
basis points, and they think that their
rates should drop, as well, and that does-n’t necessarily happen. That 75 basis
point drop in your short-term rate doesn’t mean your long-term rate is going to
drop, as well. A lot of times the long-term rates have already anticipated the
short-term drop and have factored it into
the long-term deal.
DARRELL MCCORQUODALE is vice president at Wells Fargo Bank in Houston. Reach him at (713) 827-2180 or
[email protected].
