HOUSTON, Texas – Massive job cuts in the oil sector and falling oil prices have led to a slowdown of new construction in Houston. The cuts have impacted both residential and commercial construction.
Home construction values dropped by eighteen percent in December. This includes both single-family homes and apartments, according to a Dodge Data and Analytics report published by Ken Simonson at Construction Citizen. The month of December saw construction starts drop from $743.9 million in December 2014 to $610 million in December 2015.
For all of 2015, the residential construction totals were down by one percent compared to all of 2014.
While Houston home sales also fell in 2015, the Houston Association of Realtors (HAR) points out that 2015 was still the second-highest year on record following the peak in 2014. Single family home sales fell by 9.7 percent in December 2015 when compared to December 2014.
“With oil dropping to levels around $30 a barrel, I think it’s fair to say that the Houston housing market is going to remain cooler for at least a little while,” said HAR Chairman Mario Arriaga. “The good news is the local economy is vastly more diversified than it was during the oil bust of the 80s and other industries are continuing to hire, so it really is going to come down to consumer confidence.”
Texas wide, consumer confidence is on the rise, according to Texas Comptroller Glenn Hegar’s Texas Economy website. The Texas Consumer Confidence index was 117.9 in January 2016. This represents a 1.1 percent increase over the same period in 2015 and a 16.62 percent increase over December 2015. It is also higher than the national consumer confidence index of 98.1 for January 2016. The national index fell by 5.49 percent compared to the prior year.
Commercial construction starts in Houston also fell significantly in December compared to the 2014 numbers. A total of $666.6 million in new construction starts was reported in December 2014, according to the Construction Citizen article. That number fell to $467.1 million in December 2015.
Retail construction starts appear to still be on the increase in Houston. Projections call for an increase in retail floor space of 4.53 million square feet for 2016, a 3.4 million square feet increase over 2015 and 2.4 million square feet increase over 2014.
Business Insider reported on the troubles facing those trying to lease commercial office space in Houston. They quote a report from Savills Studley which states that companies are trying to cut overhead and operating expenses by subleasing office space. This trend has spiked by nearly 70 percent in 2015, putting 7.6 million square feet (msf) on the market.
Five years of increased leased space has now reversed itself. Occupancy rates fell by 1.4 msf, the report stated. This represents the biggest decrease in occupancy since 2009. Houston’s vacancy rate has spiked to 23.2 percent.
In a scene representative of the 1980s oil bust, “see-through buildings” are beginning to be noticed around the Houston skyline. One example cited is the 11-story office building opened by Piedmont Office Realty Trust in 2015. The building, located in the heart of Houston’s west-side energy corridor, opened without a single tenant, according to a Wall Street Journal report.
Other building projects around Houston report similar results.
“So now everyone is hoping for a miraculous turnaround in the price of oil, in addition to healthy growth in the overall US economy, and everything else will follow,” Business Insider reported. “They’re hoping for another oil boom, and all that comes with it.”
Bob Price serves as associate editor and senior political news contributor for Breitbart Texas and is a member of the original Breitbart Texas team. Follow him on Twitter @BobPriceBBTX.