The Houston industrial market had some strong fundamentals during the first quarter, and others that were cause for concern. Since then, of course, there has really only been one concern—COVID-19. Will the pandemic drag down what had been a well-performing sector in a growing market?
One major issue facing Houston’s economy—equally as important as COVID-19 itself—is the effect that the pandemic is having on oil prices. Stay-at-home orders around the country have decimated the need for oil, which will surely affect the energy-dependent Houston economy.
Texas’ year-over-year crude oil production dropped in March, according to data from the Railroad Commission of Texas, from 128 million barrels in 2019 to 107 million barrels this year. However, early resistance from Saudi Arabia and Russia to cut production softened demand. Russia has also indicated that it will ramp up production in June.
New data from Colliers International suggests that global land-based storage will top off in June and oil prices likely won’t rebound for at least 18 to 24 months. Energy firms, as well as the companies that support them, will look to cut costs in the next year with many filing for bankruptcy protection in the near term.
The retail, office and, to a lesser extent, multifamily sectors have and will continue to suffer because of the pandemic. Industrial CRE is an outlier, expected to perform well during the crisis. E-commerce is the only way to access some items, bringing some late adopters on board and accelerating what had already been a dominant