Economic Highlights Houston 2014

2014 Houston

Economic Highlights Presented in conjunction with ghp’s

2014 Houston Region Economic Outlook December 11, 2014

.

Publication underwritten by:

contents Houston in perspective Payroll employment Unemployment rate Goods-producing and service-providing jobs Employment by industry Employment change by industry Wage change by industry Employment growth in major metros The work ethic in Houston Foreign-born population Gross area product by industry Purchasing managers index Oil and natural gas prices Drilling activity and oil price Foreign trade Air passengers Residential real estate Office market Houston hotel data Retail sales New car, truck and SUV sales Inflation Living cost comparison Housing cost comparison Housing cost Houston region population Most populous U.S. metros, cities and counties Top metro areas by gross domestic product Gross area product forecast Population and employment forecast

3 4 6 8 10 12 14 16 18 19 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 55 56 58

Houston Economic Highlights, a publication of the Greater Houston Partnership, is designed to impart a quick understanding of the changes in Houston’s economy over the past decade.

Each page is devoted to a single indicator or a few related indicators. In most cases, a key point and a few bullets that amplify what the data say appear on one page, and a table with historical data follows on the next.

houston in perspective People •

If the nine-county Houston MSA were a state, according to the U.S. Census Bureau, it would rank 18th in population. The Houston MSA’s 6,313,158 residents as of July 1, 2013 would place it behind Tennessee (6,495,978) and ahead of Missouri (6,044,171) and Maryland (5,928,814).

•

If Harris County were a state, it would rank 27th in population. Its 4,336,853 residents as of July 1, 2013 would place it behind Kentucky (4,395,295) and ahead of Oregon (3,930,065) and Oklahoma (3,850,568).

•

If the City of Houston were a state, it would rank 36th in population. The city’s 2,195,914 residents in 2013 place it behind Nevada (2,790,136) and ahead of New Mexico (2,085,287).

•

Among the nation’s metropolitan areas, the Houston MSA in 2013 ranked fourth in number of Hispanics (2,279,622), seventh in number of blacks (1,063,017) and seventh in number of Asians (438,349), according to the Census Bureau’s American Community Survey.

ECONOMY

2

•

The U.S. Bureau of Economic Analysis estimates the Houston MSA had a nominal GDP of $517.4 billion in 2013. Among the states, Houston would rank 9th, after New Jersey ($543.1 billion) and ahead of North Carolina ($471.4 billion).

•

If the MSA were an independent nation, it would rank as the world’s 25th largest economy, according to the International Monetary Fund – behind Poland ($517.7 billion), but ahead of Norway ($512.6 billion) and Belgium ($508.3 billion).

•

In October 2014, the Houston MSA had more jobs (2,939,500) than 35 states, including Wisconsin (2,868,000), Minnesota (2,847,000), and Tennessee (2,825,500).

•

In 2013, the Houston Association of Realtors® Multiple Listing Service recorded closings on 88,766 properties – an average of one every 6.0 minutes.

•

In 2013, Houston MSA automobile dealers sold 347,859 new cars, trucks and SUVs – an average of one every 1.5 minutes.

•

In 2013, the Houston Airport System handled 50,908,863 passengers – an average of 5,811.5 passengers per hour around the clock.

•

In 2013, the City of Houston issued building permits for construction valued at $6.15 billion – an average of $195 per second.

•

In 2013, contracts for the construction of new buildings in the Houston MSA totaled $11.7 billion – an average of $22,260 per minute.

Partnership Research | December 2014

houston in perspective The Houston region is one of the youngest, fastest-growing, and most diverse populations in the nation.

• •

• •

2014 Houston MSA

Montgomery

The Houston Combined Statistical Area (CSA) covers 14,288 square miles – an area larger than Maryland.

The nine-county Houston Metropolitan Statistical Area (MSA) covers 9,432 square miles – an area smaller than Maryland but larger than New Jersey.

Harris County covers 1,778 square miles – an area nearly half as large as Rhode Island.

At 655 square miles, the city limits of Houston could contain the cities of New York, Washington, D.C., Boston, San Francisco, Seattle, Minneapolis and Miami.

Liberty

Austin

Waller

Harris

Chambers

Fort Bend Galveston

Brazoria

Geography for the Data in this Publication •

Metropolitan statistical areas (MSA) are geographic delineations defined by the Office of Management and Budget (OMB) for use by federal statistical agencies in collecting, tabulating and publishing federal statistics. These geographic delineations change over time, with the most recent change occurring in March 2013.

•

Some governmental agencies (e.g., U.S. Bureau of Labor Statistics and Texas Workforce Commission) continue to use the 2009 MSA delineation. In other cases, agencies have adopted the new 2013 MSA delineation for reporting purposes.

•

This publication contains data based on both of these two delineations for Houston, depending on the source. Where possible, every effort was made to revise data to reflect the new nine-county Houston MSA.

2009 MSA Delineation for the Houston region: Houston-Sugar Land-Baytown Metropolitan Statistical Area (MSA) contains 10 counties: Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, San Jacinto and Waller.

2013 MSA Delineation for the Houston region: Houston-The Woodlands-Sugar Land Metropolitan Statistical Area (MSA) contains nine counties: Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery and Waller.

2014 Greater Houston Partnership service area: GHP’s service area contains 11 counties: Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, San Jacinto, Walker, and Waller

Partnership Research | December 2014

3

payroll employment The Houston metro area gained 120,600 jobs, growing 4.3 percent, from October ’13 to October ’14.

NONFARM PAYROLL EMPLOYMENT Houston MSA

150

2,900

120

2,800

90

2,700

60

2,600

30

2,500

0

2,400

-30

2,300

-60

2,200

-90

2,100

-120

2,000

-150 ‘04

‘05

‘06

‘07

‘08

‘09

‘10

‘11

‘12

‘13

‘14

12-MONTH CHANGE (000)

NONFARM PAYROLL EMPLOYMENT (000)

3,000

‘15

Total payroll employment 12-month change Source: Texas Workforce Commission

4

•

The recession in the early ’00s was relatively shallow in Houston, with the region losing 52,000 jobs between the peak in December ’01 and the trough in July ’03. However, employment was slow to recover; with Houston not returning to its previous employment peak until November ’04.

•

Rapid job growth in upstream energy during ’06 and ’07 led a broad-based expansion that extended to nearly all industries by August ’08, after which job growth fell sharply in the face of a deepening national recession. By February ’09, the 12-month net change in employment turned negative.

•

The recession in Houston lasted 16 months, with job losses continuing through January ’10. A total of 153,800 jobs were lost. The recovery began in February ’10 with the first report of job gains. The 12-month net change in employment finally turned positive in July ’10.

•

The region returned to its pre-recession employment peak in November ’11 when the Texas Workforce Commission reported total nonfarm employment in the region stood at 2,633,200. Since January ’10, the region has created 463,800 net new jobs, or more than three new jobs for every one job lost in the downturn.

Partnership Research | December 2014

payroll employment Houston-Sugar Land-Baytown Metropolitan Statistical Area NONFARM PAYROLL EMPLOYMENT, YEAR-END Year

Nonfarm Payroll Employment

Change from Prior Year

2004

2,325,300

37,600

2005

2,414,500

89,200

2006

2,520,500

106,000

2007

2,609,600

89,100

2008

2,629,500

19,900

2009

2,520,700

-108,800

20 10

2,568,000

47,300

20 1 1

2,648,500

80,500

20 12

2,763,900

115,400

20 13

2,840,100

76,200

12 months ending in October 20 14

2,939,500

120,600

Source: Texas Workforce Commission

Partnership Research | December 2014

5

unemployment rate Houston’s unemployment rate remains well below that of the nation.

UNEMPLOYMENT RATE Houston MSA, Texas and U.S. 11

% CIVILIAN LABOR FORCE

10 9 8 7 6 U.S. 5

Texas Houston MSA

4 3 ‘05

‘06

‘07

‘08

‘09

‘10

‘11

‘12

‘13

‘14

‘15

Source: Texas Workforce Commission

6

•

Houston’s unemployment rate held below the U.S. rate early in the past decade, tracked marginally above the U.S. rate through the middle of the decade, and remained significantly below the U.S. rate throughout the Great Recession. Today’s rate falls a percentage point below the U.S. rate and on par with the Texas rate.

•

During the Great Recession, Houston’s unemployment rate fluctuated between 6.5 and 9.0 percent but never hit the double digit rate of the U.S. The local rate remained well below the U.S. rate because the region did not suffer the magnitude of job losses the rest of the nation endured. This can be attributed to a variety of factors—the quick recovery of the oil and gas industry, the lack of a local housing bubble thus the lack of a housing bust, and the strength of Houston exports to overseas markets.

•

Houston’s October ’14 unemployment rate was 4.7 percent, down from 5.9 percent in October the prior year. Texas’ unemployment rate was 4.8 percent in October ’14, down from 6.0 percent in October ’13. The U.S. rate was 5.5 percent in October ’14, down from 7.0 percent in October the year prior. The rates are not seasonally adjusted.

•

Labor availability remains better here than in many other metropolitan areas. Because Houston’s labor force is large, its October ’14 unemployment rate of 4.7 percent translates into 158,129 unemployed workers seeking jobs.

Partnership Research | December 2014

unemployment rate Unemployment Rate: Houston MSA, Texas and the United States PERCENT OF CIVILIAN LABOR FORCE UNEMPLOYED Annual Averages

Year

Houston -Sugar Land -Baytown MSA

Texas

U.S.

2004

6.2

6.0

5.5

2005

5.6

5.4

5.1

2006

5.0

4.9

4.6

2007

4.3

4.4

4.6

2008

4.8

4.9

5.8

2009

7.6

7.6

9.3

20 10

8.5

8.2

9.6

20 1 1

8.3

8.1

8.9

20 12

6.8

6.8

8.1

20 13

6.2

6.3

7.4

20 14 – 12 Months ending in October

5.3

5.4

6.4

Source: Texas Workforce Commission

Partnership Research | December 2014

7

goods-producing and service-providing jobs Houston’s service-providing sector gained 89,900 jobs for the 12 months ending October ’14. The goods-producing sector added 30,700 jobs during the same period.

GOODS-PRODUCING AND SERVICE-PROVIDING EMPLOYMENT Houston MSA Serviceproviding Goodsproducing

580

2,400

2,300

2,200 540 2,100 500 2,000

460

420

1,900

SERVICE-PROVIDING JOBS (000S)

GOODS-PRODUCING JOBS (000S)

620

1,800 ‘04

‘05

‘06

‘07

‘08

‘09

‘10

‘11

‘12

‘13

‘14

‘15

Source: Texas Workforce Commission

8

•

Since the bottom of the recession, Houston has added 123,100 goods-producing jobs and 340,700 service-providing jobs.

•

From October ’13 to October ’14, Houston’s goods-producing employment rose 5.5 percent. In the same period, service-providing employment rose 4.0 percent. Both sectors have reached a record level of employment.

Partnership Research | December 2014

goods-producing and service-providing jobs Houston Metropolitan Statistical Area (MSA) ANNUAL AVERAGES Year

Goods-Producing

Service-Providing

2004

436,700

1,849,325

2005

453,400

1,896,850

2006

485,000

1,962,967

2007

517,800

2,030,717

2008

534,200

2,068,425

2009

489,525

2,043,733

20 10

469,733

2,057,858

20 1 1

487,983

2,1 03,892

20 12

521,700

2,1 7 1,975

20 13

547,200

2,241,200

20 14 – October 12-month average

567,050

2,303,600

Source: Texas Workforce Commission

Partnership Research | December 2014

9

employment by industry Already one in three jobs in Houston exist in professional and business services and wholesale and retail trade.

EMPLOYMENT BY INDUSTRY Percent of Total

15%

Professional & Business Services

15%

Wholesale & Retail Trade Government Health Care & Social Assistance

13%

Manufacturing Accommodation & Food Services Construction Transportation, Warehousing & Utilities

11% 1%

Mining & Logging

1% 2% 2%

9%

3% 9% 7%

5%

4%

4%

Other Services Finance & Insurance Real Estate, Rental & Leasing Educational Services Arts, Entertainment & Recreation Information

Source: Texas Workforce Commission, October 2014

•

10

Nonfarm payroll employment in the Houston-Sugar Land-Baytown Metropolitan Statistical Area reached 2,939,500 in October ’14, a 4.3 percent increase from the 2,818,900 in October ‘13.

Partnership Research | December 2014

employment by industry

HOUSTON MSA EMPLOYMENT BY INDUSTRY Industry

Jobs

Percent of Total

Total Nonfarm

2,939,500

100.0

Total Private

2,550,300

86.8

Goods Producing

586,700

20.0

Service Providing

2,352,800

80.0

117,900

4.0

Oil and Gas Extraction

63,200

2.2

Support Activities for Mining

53,900

1 .8

Construction

205,800

7.0

Manufacturing

263,000

8.9

174,900

5.9

88,100

3.0

588,000

20.0

Wholesale Trade

156,200

5.3

Retail Trade

292,200

9.9

Transportation, Warehousing, and Utilities

139,600

4.7

Information

33,300

1 .1

Finance and Insurance

93,000

3.2

Real Estate and Rental and Leasing

55,000

1 .9

Professional and Business Services

448,600

15.3

222,100

7.6

Legal Services

24,200

0.8

Accounting, Tax Prep, Bookkeeping

21,000

0.7

Architectural, Engineering, and Related Services

79,800

2.7

Computer Systems Design and Related Services

32,400

1 .1

Management of Companies and Enterprises

25,000

0.9

362,100

12.3

53,400

1.8

308,700

10.5

Arts, Entertainment, and Recreation

29,500

1 .0

Accommodation and Food Services

251,300

8.5

Other Services

102,800

3.5

Government

389,200

13.2

Mining and Logging

Durable Goods Non-Durable Goods Trade, Transportation, and Utilities

Professional, ScientiďŹ c, and Technical Services

Educational and Health Services Educational Services Health Care and Social Assistance

Source: Texas Workforce Commission, October 2014, not seasonally adjusted

Partnership Research | December 2014

11

employment change by industry Professional and business services were responsible for a fifth of Houston’s job growth in the past ten years.

PERCENT SHARE OF METRO HOUSTON JOB GROWTH October '04 - October '14 19.9

Professional/Business Services

17.8

Trade/Transportation/Utilities

16.2

Educational & Health Services

11.7

Accommodations/Food Services

8.7

Manufacturing

8.2

Mining and Logging

7.8

Government

6.3

Construction Other Services

1.8

Financial Activities

1.6

Arts/Entertainment/Recreation

0.4

Information

-0.5

Source: Texas Workforce Commission

12

•

As demand in the professional and business services sector grows, demand for support services, like office administration, facilities support, and employment services also increases.

•

The trade, transportation and utilities sector benefits from the expanding local consumer market through growth in jobs, wages and population. Transportation benefits from the doubling of trade, from $104.6 billion in ’04 to $251.8 billion in ’13, through the Houston-Galveston Customs District.

•

The education and health services sector benefits from the region’s population and employment growth, and health services is further spurred by the aging of the population. The U.S. Census Bureau estimates the region added 137,700 residents in ’13, translating into additional health care consumers.

•

Mining and logging, employment in Houston primarily oil and gas exploration, is closely linked to oil prices and the on-going shale oil boom. Much of Houston’s manufacturing sector is geared to supplying the equipment the oil industry needs to tap those shale resources.

Partnership Research | December 2014

employment change by industry Job Growth: Houston Metropolitan Statistical Area (MSA) HOUSTON MSA JOB GROWTH BY INDUSTRY Industry

October ’04 October ’14 Change

Total Nonfarm

Percent Change

Percent Share of Job Growth

2,300,100

2,939,500

639,400

27.8

----

Mining and Logging Construction

64,900

117,900

53,000

81.7

8.2

165,800

205,800

40,000

24 .1

6.3

Manufacturing

207,100

263,000

55,900

27.0

8.7

125,200

174,900

49,700

39.7

7.8

81,900

88,100

6,200

7.6

1.0

474,100

588,000

113,900

24.0

17.8

Wholesale Trade

120,000

156,200

36,200

30.2

5.7

Retail Trade Transportation, Warehousing and Utilities

241,900

292,200

50,300

20.8

7.9

112,200

139,600

27,400

24.4

4.3

Durable Goods Non-Durable Goods Trade, Transportation, and Utilities

Information

36,500

33,300

-3,200

-8.8

-0.5

Financial Activities

137,700

148,000

10,300

7.5

1.6

89,400

93,000

3,600

4.0

0.6

48,300

55,000

6,700

13.9

1.0

321,100

448,600

127,500

39.7

19.9

51,700

79,800

28,100

54.4

4.4

258,700

362,100

103,400

40.0

16.2

41,700

53,400

1 1 ,700

28 . 1

1.8

217,000

308,700

91,700

42.3

14.3

26,900

29,500

2,600

9.7

0.4

176,800

251,300

74,500

42 . 1

11.7

19,600

24,100

4,500

23.0

0.7

157,200

227,200

70,000

44.5

10.9

Finance and Insurance Real Estate and Rental and Leasing Professional and Business Services Architectural, Engineering, and Related Services Educational and Health Services Educational Services Health Care and Social Assistance Arts, Entertainment, and Recreation Accommodation and Food Services Accommodation Food Services and Drinking Places Other Services Government

91,100

102,800

11,700

12.8

1.8

339,400

389,200

49,800

14.7

7.8

Source: Texas Workforce Commission

Partnership Research | December 2014

13

wage change by industry Houston workers earned $169.7 billion in salary and wages in ’13, with professional and business services responsible for one-fifth of all wages paid.

HOUSTON MSA WAGE CHANGE BY INDUSTRY, 2009-2013 35 30

$, BILLIONS

25 20 15 10 5 0 Prof and Business Services

Trade, Trans Educ Manufacturing Nat Res Construction and Util and Health and Mining Services 2009

2013 inflation adjusted*

Financial Activities

Leisure and Government Hospitality

Other Services

Information

2013 nominal

* Adjusted for inflation to 2009 dollars

Source: Texas Workforce Commission

14

•

Houston MSA workers earned $169.7 billion in wages paid in ’13, reflecting a 24.6 percent increase from the $136.2 billion paid in ’09. Adjusted for inflation, total wages increased 14.6 percent over this period. Per employee, real wages increased, on average, 4.2 percent from $54,693 in ’09 to $56,974 in ’13.

•

Professional and business services disbursed $32.7 billion or one-fifth of all wages paid in the Houston region in ’13. The sector was also responsible for a third of the region’s wage growth from ’09 to ’13.

•

Wages paid in natural resources and mining (i.e., oil and gas) increased 24.4 percent from ’09 to ’13 (inflation-adjusted). The sector is responsible for a tenth of all wages paid but 16.4 percent of the growth in total wages from ’09 to ’13.

•

On an inflation-adjusted basis, aggregate wages fell in two sectors from ’09 to ’13: government, an 8.2 percent decrease from $4.3 billion in ’09 to $3.9 billion in ’13, and information, a 5.9 percent decrease from $2.3 billion in ’09 to $2.2 billion in ’13.

Partnership Research | December 2014

wage change by industry

HOUSTON MSA NOMINAL WAGE CHANGE BY INDUSTRY ($ MILLIONS)

Industry

2009 Wages

Total Natural Resources and Mining Construction Manufacturing Trade, Transportation and Utilities Information Financial Activities Professional and Business Services Education and Health Services Leisure and Hospitality Other Services Government

2013 Wages

2009-2013 Nominal Wage Change (millions)

$136,189.2

$169,750.2

$33,561.0

13,377.3 11,015.2 15,810.7 25,535.3 2,297.5 9,230.5 23,997.4 23,668.8 4,587.0 2,387.1 4,282.3

18,095.8 12,936.4 20,1 37.0 31,958.7 2,349.1 11,402.4 32,751 .9 27,433.5 5,6 18.1 2,792.9 4,274.4

4,718.6 1,921.2 4,326.3 6,423.4 51.7 2,171.9 8,754.5 3,764.7 1,031.1 405.8 -7.9

HOUSTON MSA REAL WAGE CHANGE BY INDUSTRY ($ MILLIONS)*

Industry

2009 Wages

Total Natural Resources and Mining Construction Manufacturing Trade, Transportation and Utilities Information Financial Activities Professional and Business Services Education and Health Services Leisure and Hospitality Other Services Government

2013 Wages Adjusted for Ination*

2009-2013 Real Wage Change*

$136,189.2

$169,750.2

$19,951.5

13,377.3 11,015.2 15,810.7 25,535.3 2,297.5 9,230.5 23,997.4 23,668.8 4,587.0 2,387.1 4,282.3

16,645.0 11,899.3 18,522.6 29,396.5 2,160.8 10,488.2 30,126.0 25,234.0 5,167.7 2,569.0 3,93 1.7

3,267.7 884.1 2,711.8 3,861.1 -136.7 1,257.7 6,128.6 1,565.2 580.6 181.9 -350.6

* 2009 dollars

Source: Texas Workforce Commission

Partnership Research | December 2014

15

employment growth in major metros Houston has the fastest employment growth rate of any major U.S. metro area.

EMPLOYMENT GROWTH RATE — PERCENT CHANGE 20 Most Populous Metro Areas 4.4

Houston, TX

3.7

Dallas, TX

3.3

Seattle, Wa

3.2

Miami, FL

2.8

San Francisco, CA

2.6

Phoenix, AZ

2.5

San Diego, CA

2.3

Atlanta, GA

2.2

Riverside, CA Tampa, FL

1.7

Minneapolis, MN

1.7

Boston, MA

1.5

Los Angeles, CA

1.5

New York, NY

1.4

St. Louis, MO

1.4

Baltimore, MD

0.9

Chicago, IL

0.9

Detroit, MI

0.2

Philadelphia, PA

0.2

Washington, DC

0.2

Source: U.S. Bureau of Labor Statistics, seasonally adjusted

16

•

From October ’13 to October ’14, the Houston MSA gained 122,900 jobs, a 4.4 percent growth rate.

•

All of the 20 major metro areas posted a net gain over the period.

•

Since the bottom of the recession, the Houston metro area has added 463,800 net new jobs, or more than three times the 153,800 jobs lost during the recession. That’s more than the current employment of 320 U.S. metro areas.

Partnership Research | December 2014

employment growth in major metros Net Change in Nonfarm Payroll Employment

EMPLOYMENT GROWTH, OCTOBER ’13 - OCTOBER ’14 20 Most Populous U.S. Metropolitan Statistical Areas Change in Jobs (000)

Percent Change

New York-Northern New Jersey-Long Island, NY-NJ-PA

124.5

1.4

Houston-Sugar Land-Baytown, TX

122.9

4.4

Dallas-Fort Worth-Arlington, TX

115.8

3.7

Los Angeles-Long Beach-Santa Ana, CA

82.3

1.5

Miami-Fort Lauderdale-Pompano Beach, FL

75.5

3.2

San Francisco-Oakland-Fremont, CA

59.2

2.8

Seattle-Tacoma-Bellevue, WA

58.6

3.3

Atlanta-Sandy Springs-Marietta, GA

56.4

2.3

Phoenix-Mesa-Glendale, AZ

46.9

2.6

Chicago-Joliet-Naperville, IL-IN-WI

38 .1

0.9

Boston-Cambridge-Quincy, MA-NH NECTA

38 .1

1.5

San Diego-Carlsbad-San Marcos, CA

32.5

2.5

Minneapolis-St. Paul-Bloomington, MN-WI

3 1 .1

1.7

Riverside-San Bernardino-Ontario, CA

27.8

2.2

Tampa-St. Petersburg-Clearwater, FL

20.5

1.7

St. Louis, MO-IL

18.9

1.4

Baltimore-Towson, MD

11.8

0.9

Washington-Arlington-Alexandria, DC-VA-MD-WV

6.5

0.2

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

4.8

0.2

Detroit-Warren-Livonia, MI

4 .1

0.2

Metro Area

Source: U.S. Bureau of Labor Statistics; seasonally adjusted.

Partnership Research | December 2014

17

The Work Ethic in Houston The work ethic is alive and well and flourishing in Houston.

THE WORK ETHIC IN HOUSTON “If you work hard in this city, eventually you will succeed.”

89.3

90%

87.9

85%

PERCENT WHO AGREE

86.8 85.1

85.6

83.0 80.6

80%

81.5

81.1 78.2

78.2

76.7 75%

78.3

76.4 75.3

74.7

79.6

79.5 75.8

76.0

'91

'93

70%

65% '82

'83

'84

'85

'86

'87

'88

'89

'95

'97

'99

'01

'03

'05

'07

'09

'11

'13

Source: Rice University, Houston Area Survey Note: The work ethic question was included in the survey annually until ‘89 and became a biennial question thereafter.

18

•

Houston’s business success appears related, at least in part, to the overwhelming prevalence of the work ethic here and to confidence that Houston provides an environment in which individual initiative will be rewarded.

•

According to Rice University’s annual Houston Area Survey, a large majority of Houstonians agree with the statement: “if you work hard in this city, eventually you will succeed.” In March 1982, when employment in Houston stood at what was then the all-time peak, 81 percent of respondents agreed. In February 1987, when Houston was at the bottom of its recession and unemployment stood above 10 percent, fully 75 percent of respondents still shared this view. In 1999, 83 percent of Houstonians accepted this statement — a record at the time. In 2001, agreement soared to 88 percent. (By 1990, it had become clear that Houstonians’ responses to this item barely shifted, thus the question is only asked every other year.)

•

In contrast to Houston’s strongly positive attitude, agreement with this same statement in national samples over the same period has ranged only from 58 to 63 percent. The difference between Houston and the nation as a whole is statistically significant and has endured through the entire range of the regional business cycle.

•

The confidence that personal effort will be rewarded in Houston transcends racial and ethnic categories.

Over the past six surveys, on average 85 percent of Anglos, 82 percent of Blacks, 88 percent of U.S.-born Latinos, and 94 percent of U.S.-born Asians agreed with the statement.

Partnership Research | December 2014

Foreign-Born Population Houston is a magnet for international migration.

PERCENT OF METRO POPULATION FOREIGN-BORN 20 Most Populous Metro Areas 38.8%

Miami, FL

33.4%

Los Angeles, CA

29.7%

San Francisco, CA

28.5%

New York, NY

23.7%

San Diego, CA

22.6%

Houston, TX Washington, DC

22%

Riverside, CA

21.3% 17.8%

Chicago, IL Dallas, TX

17.5%

Seattle, WA

17.4%

Boston, MA

17.3% 14.4%

Phoenix, AZ

13.3%

Atlanta, GA

12.6%

Tampa, FL Philadelphia, PA

10%

Minneapolis, MN

9.7%

Detroit, MI

9.3%

Baltimore, MD

9.2%

St. Louis, MO

4.4%

Source: U.S. Census Bureau, 2013 American Community Survey

•

In ’13, according to the Census Bureau’s American Community Survey, more than one in five Houstonians was foreign-born, versus one in eight nationwide. (The Houston-The Woodlands-Sugar Land Metropolitan Statistical Area, with a total ‘13 population of 6.3 million, includes Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, and Waller counties.)

•

In only five of the nation’s 20 most populous metropolitan areas—Miami, Los Angeles, San Francisco, New York and San Diego—do foreign-born residents represent a larger share of total population than in Houston.

•

Houston’s foreign-born population of 1.42 million is greater than the total populations of 10 states.

Partnership Research | December 2014

19

Gross Area Product by Industry Mining (oil and gas) accounts for one-fifth of Houston’s Gross Area Product.

Services account for a near equal share.

GROSS AREA PRODUCT Houston MSA .1% Mining

5.7%

Construction

19.3%

20.9%

Manufacturing Trade

4.6%

Transportation, Warehousing & Utilities Information Finance, Insurance & Real Estate Services Services

11.9% 7% 1.5%

18.3% 10.5%

Government Agriculture

Source: The Perryman Group, Summer 2014

20

•

Services contributed percent 20.9 percent to the Houston-Sugar Land-Baytown Metropolitan Statistical Area Nominal Gross Area Product in ‘13. Mining (e.g., oil and gas exploration and production) represented 19.3 percent, followed by manufacturing at 18.3 percent, and finance/insurance/real estate at 11.9 percent.

•

The Perryman Group estimates Houston MSA’s Nominal Gross Area Product for ‘13 at $533.0 billion.

Partnership Research | December 2014

Gross Area Product by Industry Houston-Sugar Land-Baytown Metropolitan Statistical Area NOMINAL GROSS AREA PRODUCT (GAP)

2014

Supersector or Sector

(Billions)

Mining

$102.936

Share of GAP (%)

2015 Projected (Billions)

Projected Share of GAP (%)

19.3%

132.509

21.1%

Construction

24.784

4.6

28.480

4.5

Manufacturing

97.734

18.3

11 2.01 1

17.8

Durable Manufacturing

29. 187

5.5

32.41 1

5.2

Nondurable Manufacturing

68.547

12.9

79.599

12.7

Trade (Wholesale and Retail)

56.093

10.5

64.974

10.3

Transportation, Warehousing & Utilities

37.080

7.0

41.733

6.6

7.752

1.5

8.432

1.3

Finance, Insurance & Real Estate

63.388

11.9

71.783

11.4

Services

111 .633

20.9

132.617

21.1

Government

31 .158

5.7

34.937

5.6

Agriculture

0.436

0.1

0.479

0.1

Information

Total All Industries

$532.997

100.0%

$627.955

100.0%

Source: The Perryman Group, Summer 2014

Partnership Research | December 2014

21

Purchasing Managers Index Houston’s PMI has signaled production growth for 62 consecutive months.

PURCHASING MANAGERS INDEX Readings Above 50 Signal Short-Term Growth

70

65

60

55

50

45

40

35

30 ‘04

‘05

‘06

‘07

‘08

‘09

‘10

‘11

‘12

‘13

‘14

‘15

Source: Institute for Supply Management

22

•

The Houston Purchasing Managers Index (PMI), a short-term leading indicator of regional production, soared to a high of 67.9 in January ’06 — the strongest reading for the Houston PMI since it was introduced in January ’95 — and then trended downward over the next two years before collapsing in late ’08. (Readings below 50 signal likely contraction within the next three or four months.)

•

The Houston PMI is based on a survey of some 80 purchasing executives in key Houston industries — oil and gas exploration and production; manufacturing; engineering and construction; chemicals; distribution; health care; and business and financial services. It measures over-the-month changes in sales (new orders), production, employment, purchases of new equipment, prices paid for major purchases, lead times from sellers, purchased materials inventory and finished goods inventory.

•

The abrupt deterioration of the national economy in August ’08 and worsening prospects locally are reflected in the steep decline of the Houston PMI into the opening months of ’09 before edging upward from a record low of 39.0 in March ’09.

•

The PMI returned to 50.0 in September ’09, with consistent plus-50 readings since October ’09. As of October ’14, the Houston PMI has remained above 50 for 62 consecutive months. The record for the most consecutive months the PMI held at or above 50 was 70 months starting January ’03 and ending October ’08.

•

The index stood at 58.5 in October ’14 and has averaged 57.2 through the first ten months of the year, compared to 59.0 over the same period in ’13. The PMI signals continued production growth for Houston into ’15.

Partnership Research | December 2014

Purchasing Managers Index The Houston Purchasing Managers Index is a short-term leading indicator of regional production.

ANNUAL AVERAGES Year

Houston

United States

2004

6 1.7

60.5

2005

61.5

55.5

2006

62.0

53.9

2007

59.2

51.1

2008

54.3

45.6

2009

44.9

46.3

20 10

55.1

57.5

20 1 1

60.1

55.3

20 12

58.5

51.7

20 13

58.4

53.9

YTD Average - October ‘14

57.2

55.6

Note: The Houston and U.S. Purchasing Managers Indexes are conceptually similar but not identical.

Source: Institute for Supply Management-Houston

Partnership Research | December 2014

23

oil and natural gas prices Through the first 10 months of ’14, oil prices averaged $98.26 a barrel and natural gas prices averaged $4.39 per MMBtu. SPOT CRUDE AND NATURAL GAS PRICES Monthly Averages

16

140

14

120

12

100

10 WTI

80 60

8 6

40

Natural Gas

20

4

NATURAL GAS, $ /MMBtu

WTI, $ BARREL

160

2 '04

'05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

0

Source: U.S. Energy Information Administration

24

•

The Friday spot market closing price for a barrel of West Texas Intermediate (WTI), the benchmark U.S. light crude oil, rose from $20 at the beginning of ’02 to more than $147 in July ’08 before plunging below $40 in late ’08 and early ’09. It rebounded to the vicinity of $100 in early ’11, partly due to the “Arab Spring” and uncertainties over supplies from the Middle East. Oil prices have averaged above $94 per barrel in ’12 and $98.00 in ’13.

•

The spot price for natural gas followed that of oil, peaking above $13 per million British thermal units (MMBtu) in June ’08, and then falling to $4 in ’09. Natural gas prices rebounded to $5 in early ’10, before trending downward again. Prices have averaged $2.75 per MMBtu in ’12, $3.91 in ’13 and $4.39 October ’14 YTD.

•

The WTI monthly average reached a high of $108 in June ’14 but fell 30.6 percent to $75 in November ’14.

The drop in prices is a result of expanding U.S. domestic production coupled with weak global economic growth.

•

In its November Short-Term Energy Outlook, EIA forecasts WTI spot prices to average $95.00 per barrel in ’14 and $77.75 in ’15. Henry Hub natural gas spot prices are projected to average $4.57 per MMBtu in ’14 and $3.94 in ’15.

•

Gulf Coast petrochemicals manufacturers, unlike many of their counterparts elsewhere, rely heavily on natural gas as a feedstock. As a rule of thumb, Gulf Coast plants can compete on the world market so long as the ratio of oil price to gas price exceeds 6. The ratio is expected to stay well above that level over the next several decades. As a result, U.S. and foreign companies have announced a major expansion of chemical plants. The American Chemistry Council has identified 148 chemical industry investment projects valued at $125 billion that have been publicly announced; approximately two-thirds of those projects are located along the Gulf Coast.

Partnership Research | December 2014

oil and natural gas prices Spot Market Prices for West Texas Intermediate Crude Oil and Henry Hub Natural Gas

52-WEEK AVERAGES OF FRIDAY CLOSING PRICES Year

Spot Market Crude Oil Price ($/bbl)

Spot Market Natural Gas Price ($/MMBtu)

2004

41.67

5.78

2005

56.67

8.84

2006

66.20

6.67

2007

72.72

6.91

2008

99.99

8.8 1

2009

62.08

3.90

20 10

79.35

4.33

20 1 1

94.58

3.1 2

20 12

94.07

2.76

20 13

98.00

3.72

97. 91

4.33

20 14 – October 52-week average

Source: U.S. Energy Information Administration

Partnership Research | December 2014

25

drilling activity and oil price Rig counts rose in ’14 but are expected to decline in ’15 as oil prices fall below $70 per barrel.

RIG COUNT AND REAL OIL PRICES* 12-Month Running Average 160

2,500

2,000

Active Domestic Rigs

120 100

1,500 Real Oil Price* 1,000

80 60

WTI 2008 $/BBL

ACTIVE DOMESTIC RIGS

140

40 500 20 '04

'05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

*Real oil price inflation adjusted to 2008 dollars

Sources: Baker Hughes, Inc.; U.S. Energy Information Administration

26

•

In the years following the ’82 oil price collapse, exploration and production adapted to historically low real energy prices. Much of the decline in the rig count since the record high of 4,520 in December ’81 does not reflect low prices, but rather technological advances that have dramatically increased exploration efficiency and decreased finding costs.

•

As an incipient worldwide recession burst into full bloom in August ’08, worldwide energy demand fell dramatically. The world was abruptly awash in oil, and prices fell dramatically — from the vicinity of $145/ bbl at the July ’08 peak to $35/bbl in December ’08. Drilling activity responded swiftly. As oil prices rebounded in the latter half of ’09, oil-directed drilling responded, reversing the sliding rig count.

•

The real price* of West Texas Intermediate (WTI)—the U.S. benchmark for light, sweet crude—averaged $89.36 per barrel for the 12 months ending October ’14, unchanged from its average of $89.41 during the same period in ‘13. However, the real price of WTI has fallen from a monthly average of $96 in June ’14 to $76 in October ’14. (*inflation-adjusted to 2008 dollars)

•

The Baker Hughes count of active domestic rotary rigs averaged 1,838 for the 12-months ending October ’14, up 4.0 percent from the 1,767 rigs operating during the same period last year.

•

Tudor, Pickering, Holt & Co., notes that if U.S. oil prices remain around $70 a barrel, drilling activity could decline roughly 25 percent in ’15.

Partnership Research | December 2014

drilling activity and oil price Active Domestic Rotary Rig Count and Real Price of West Texas Intermediate Crude

ANNUAL AVERAGE Year

Active Domestic Rotary Rigs

Real Price of WTI (2008 $/bbl)

2004

1,190

47.27

2005

1,381

62.20

2006

1,648

70.76

2007

1,767

75.04

2008

1,877

99.48

2009

1,086

62.02

20 10

1,544

78.04

20 1 1

1,874

90.54

20 12

1,919

88.35

20 13

1,762

90.52

20 14 – October 52-week average

1,838

89.36

Note: Spot market price of WTI adjusted for inflation using 2008 dollars as the base.

Sources: Baker Hughes Incorporated, Energy Information Administration

Partnership Research | December 2014

27

foreign trade The value of foreign trade passing through Houston has more than doubled over the decade.

FOREIGN TRADE Houston-Galveston Customs District 300

TRADE VALUE, BILLIONS ($)

$268.0 $240.9

250

89.9

$162.1 $136.4

150 $104.6 100

50

39.5

148.6

147.1

$251.8 128.9

$260.3 136.8

94.7

72.3 150.9

47.0 89.4

127.1

$167.6

58.1

104.1

119.4 $211.4

$185.3

200

$274.2

75.2

116.8

112.9

122.9

123.6

'13

'14*

92.4

65.1

0 '04

'05

'06

'07

'08

Imports

'09

'10

'11

'12

Exports

* 12-months ending September '14

Source: Wiser Trade

28

•

The Houston-Galveston Customs District handled $251.8 billion trade in ’13, ranking it as the fourth busiest district behind Los Angeles ($414.8 billion), New York ($379.1 billion), and Laredo ($253.2 billion).

•

Forty-one countries logged more than $1 billion in trade through the Houston customs district in ’13. The 10 largest, which accounted for 51.4 percent of all trade, included Mexico ($28.4 billion), Venezuela ($15.1 billion), Brazil ($13.9 billion), Saudi Arabia ($13.7 billion), China ($13.6 billion), Colombia ($11.7 billion), The Netherlands ($9.6 billion), Germany ($8.9 billion), Russia ($8.3 billion), and South Korea ($6.3 billion).

•

Imports totaled $122.9 billion in ’13. The top five imports were oil and oil products ($67.5 billion), industrial machinery ($9.1 billion), iron and steel ($7.9 billion), electrical machinery ($5.4 billion), and organic chemicals ($5.2 billion).

•

Exports totaled $128.9 billion in ’13. Leading exports included refined oil products ($50.6 billion), industrial machinery ($19.3 billion), organic chemicals ($16.9 billion), plastics ($7.5 billion), and electrical machinery ($5.1 billion).

•

Houston is on pace for a strong year in exports. Exports are up 8.4 percent from $92.6 billion in September ’13 YTD to $100.4 billion in September ’14 YTD. Imports experienced a small increase of 0.7 percent from $93.1 billion in September ’13 YTD to $93.8 billion in September ’14 YTD. Over this period, the 25.0 percent increase in imported industrial machinery has helped offset the 11.0 percent decline in imported mineral fuel and oil.

•

The Houston-Galveston Customs District includes the ports of Houston, Galveston, Freeport, Texas City, Corpus Christi, Port Lavaca, Bush Intercontinental Airport and Sugar Land Regional Airport.

Partnership Research | December 2014

foreign trade Houston – Galveston Customs District

ANNUAL TOTALS IN FOREIGN TRADE Dollar Value, Billions Year

Imports

Exports

Trade

2004

65.146

39.478

104.625

2005

89.444

47.006

136.451

2006

104.086

58.091

162. 178

2007

112.979

72.329

185.309

2008

150.997

89.905

240.903

2009

92.425

75.233

167.659

20 10

116.770

94.684

211.456

20 1 1

148.629

119.399

268.028

20 12

147.146

127. 1 17

274.263

20 13

122.911

128.944

251.855

20 14 12-months ending September

123.558

136.761

260.319

Source: Adapted from WISERTrade: International Trade Database, WISER LLC, Copyright 2004.

No Claim to Original United States Government Works. All Rights Reserved.

Partnership Research | December 2014

29

air passengers Total passenger volume has grown by eight million since ’04.

DOMESTIC AND INTERNATIONAL PASSENGERS Houston Airport System

60

48.0

50

AIR PASSENGERS (000,000)

44.9

51.8

7.4

7.7

50.5 8.0

6.9

6.4 40

51.1

43.7

44.1

41.1

42.5

38.5

49.5

50.0

50.2

50.9

8.5

8.6

8.8

9.0

40.7

41.0

41.4

41.6

41.9

'09

'10

'11

'12

'13

48.5 7.8

52.9 9.7

43.2

30

20

10

0 '04

'05

'06

'07

'08

Domestic

'14*

International

* 12-months ending Oct '14

Source: Department of Aviation, Houston Airport System

30

•

In response to high aviation fuel costs and declining business travel, major airlines in September ’08 began reducing seat-miles by shifting to less frequent service on some routes, eliminating other routes altogether, and switching to more fuel-efficient aircraft. In ’09, the Houston Airport System (HAS) saw air passenger volume decline. The low point was in August ’09 when the 12-month total was 47.7 million passengers.

•

As the economy began to improve in late ’09, so did passenger traffic. HAS is projected to surpass its pre-recession peak in ’14, handling 52.9 million passengers in the 12 months ending October ’14. Record levels of international (9.7 million) and domestic (43.2 million) travelers passed through HAS during this period. The strong growth stemmed from the launch of several international nonstop routes in ’14, including Munich, Seoul and Stavanger. HAS also continued to benefit from the introduction of flights to Istanbul and Beijing in ’13.

•

On average, the Houston Airport System handles three passengers every two seconds. Over a year, HAS passenger traffic typically exceeds the combined populations of Florida, New York and Illinois.

Partnership Research | December 2014

air passengers Houston Airport System – Domestic and International Air Passengers ANNUAL TOTALS Year

Domestic (000)

International (000)

Total (000)

2004

38,465.1

6,384.5

44,849.6

2005

41,065.0

6,909.1

47,974.1

2006

43,688.4

7,411.0

51,099.4

2007

44,094.6

7,723.0

51,817.6

2008

42,524.2

7,960.1

50,484.4

2009

40,695.9

7,809.9

48,505.8

20 10

41,025.7

8,507.9

49,533.6

20 1 1

41,393.4

8,637.3

50,030.7

20 12

41,564.5

8,764.6

50,329.1

20 13

41,922.6

8,986.3

50,908.9

20 14 – Oct 12-Month Total

43,166.4

9,724.1

52,890.5

Source: Houston Airport System

Partnership Research | December 2014

31

residential real estate Houston’s housing market remains tight as active listings fall to record lows and 12-month sales activity surpasses 90,000 homes for the first time in the region’s history.

HOUSTON MSA RESIDENTIAL HOUSING MARKET 100 Sales (12-Month Total)

SALES/LISTINGS (000)

90 80 70 60 50 40

Average Listings

30 20 '04

'05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

Source: Houston Association of Realtors®

32

•

Houston home sales grew during the early ’00s with much of the growth fueled by subprime financing, i.e., loans made to households that would not otherwise have qualified for a mortgage. At the peak of the subprime lending in early ’07, local realtors sold nearly 90,000 homes over a 12-month period. However, this was an unsustainable level of activity.

•

As borrowers began to default on their mortgages, lending requirements became more stringent and home sales declined. Home sales peaked at 88,504 units in the 12 months ending February ’07 and fell to 60,169 units in the 12 months ending October ’11.

•

Home sales would have declined further if not for the first-time homebuyers’ tax credit available for homes purchased between April ’08 and May ’10. After the tax credit expired, home sales fell again. The nadir was May ’11 when only 59,777 homes were sold over the previous 12-months.

•

Sustainable sales growth didn’t return until Houston began to add jobs again. The Texas Workforce Commission reported initial job growth in January ’10, yet 18 months of job growth elapsed before consumers regained their confidence and the home market rebounded.

•

Sales began to grow in the fall of ’11 and have heated up since then. The Houston Association of Realtors® reports local brokers sold 90,836 homes in the 12 months ending October ’14, the highest on record.

During the same period, active listings averaged 28,805, their lowest point since December ’01.

Partnership Research | December 2014

residential real estate Houston Multiple Listing Service Data HISTORICAL CLOSINGS, SALES PRICES AND LISTINGS

Year

Total Closings

Median Sales Price*

Average Active Listings

2004

72,184

134,574

41,218

2005

79,012

142,659

43,379

2006

87,799

148,350

44,032

2007

83,736

151,706

50,643

2008

69,336

150,724

50,946

2009

63,801

150,963

45,286

20 10

61,005

153,990

51,097

20 1 1

63,606

153,618

48,800

20 12

74,164

162,502

40,247

20 13

88,269

179,674

32,101

20 14 – Oct 12-mo total/avgs

90,836

194,513

28,805

* Average of monthly medians

Source: Houston Association of Realtors®

Partnership Research | December 2014

33

office market Office occupancy has improved steadily since the end of the Great Recession.

OFFICE OCCUPANCY RATES PERCENT OF COMPLETED SPACE LEASED

93 CBD

91 89

Suburbs

87 85 83 81 79 77 75

‘04

‘05

‘06

‘07

‘08

‘09

‘10

‘11

‘12

‘13

‘14

‘15

Source: CBRE

34

•

In Houston – the nation’s fifth-largest office market, with 198.0 million square feet (msf) of net rentable area – overall occupancy at the end of the third quarter of ’14 stood at 88.1 percent (91.3 percent in the Central Business District (CBD) and 87.2 percent in the suburbs). Houston’s 98.5 msf of Class A space was 91.9 percent leased.

•

The third quarter ’14 Class A asking lease rates ranged from $25.00 to $53.52 per square foot in the CBD and Class A lease rates in suburban submarkets ranged from $18.50 to $51.81. Overall asking lease rates averaged $26.10.

Partnership Research | December 2014

office market Office Occupancy: Houston Metropolitan Statistical Area (MSA)

CENTRAL BUSINESS DISTRICT AND SUBURBAN OFFICE OCCUPANCY RATES Percent Of Completed Space Central Business District

Suburbs

Year

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

1999

—

90.18

90.26

91.73

—

88.66

87.42

85.62

2000

93.55

93.63

94.35

94.68

85.82

85.65

85.78

86.00

2001

93.74

93.15

92.90

92.77

84.35

84.36

84.86

85.1 3

2002

91.14

90.91

91.16

88.56

84.22

83.81

84.1 3

83.82

2003

82.46

82.06

80.37

80.91

83.76

83.56

83.49

85.39

2004

78.62

79.10

80.07

79.89

84.83

84.80

84.86

84.8 1

2005

79.70

81.35

81.07

81.93

85.07

85.64

86.16

86.66

2006

82.21

82.88

84.31

87.49

86.55

87.26

87.59

88. 1 1

2007

87.45

88.66

89.85

91.06

88.53

88.96

89.24

88. 41

2008

91.14

91.17

91.44

91.74

87.42

87.43

87.29

87.1 0

2009

91.53

91.04

90.81

90.24

86.16

84.64

83.04

82.40

20 1 0

89.90

89.60

89.50

89.80

82.00

82.00

82.10

82.00

20 1 1

88.34

85.89

88.80

89.28

82.80

83.00

83.34

82.60

20 12

89.28

89.17

87.90

90.35

84.50

85.17

86.40

86.20

20 13

90.34

91.22

88.80

90.80

86.69

87.00

87.90

87.50

20 14

90.70

90.80

91.30

—

87.30

87.20

87.20

—

Source: CBRE

Partnership Research | December 2014

35

houston hotel data After a drop in hotel activity during the Great Recession, Houston hotel room rates, occupancy and revenue per available room are steadily rising.

HOUSTON HOTEL DATA Four-Quarter Moving Average

110 Occupancy

70

Room Rate

105

65

100

60

95

55

90

50

85

45

80

40

AVERAGE ROOM RATE $, 4-QTR AVG

AVERAGE OCCUPANCY, 4-QTR AVG

75

75 '04

'05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

Source: PKF Hospitality Research, LLC

36

•

Houston hotel room rates, occupancy and revenue per available room (RevPAR) all declined as the aftermath of the September 11, ’01 attacks reduced business travel. The hotel industry began to show gradual improvement only with the exceptional boost from Super Bowl XXXVIII in January and early February ’04.

•

The influx of southern Louisiana residents, who fled to Houston in the aftermath of Hurricane Katrina from late August into December ’05, pushed occupancy to record levels and solidly boosted RevPAR.

•

The peak in ’08 reflects robust convention business and the boost from Hurricane Ike, which ravaged the Gulf Coast near Houston in September ’08. Unraveling economic conditions in ’09 eroded hotel performance.

•

During the Great Recession, the four-quarter average for occupancy fell as low as 54.1 percent, average room rates ran $88.63, and RevPAR dropped to $48.34.

•

Houston hotels began their recovery in ’11 as business and leisure travel resumed. In ’12, occupancy averaged 65.4 percent, average room rates ran $94.10, and RevPAR averaged $61.52.

•

In the second quarter of ’14, indicators of hotel activity met or surpassed their pre-recession peaks. The four-quarter moving average for occupancy rates reached 70.5 percent in Q2/14, RevPAR stood at $74, and room rates were $104.74. The pre-recession peak for occupancy was 70.4 percent in Q2/06, RevPAR’s previous record was $70.92 in Q4/08, and room rates hit their high of $104.75 in Q4/08.

Partnership Research | December 2014

houston hotel data Occupancy, Room Rates and Revenue Per Available Room ANNUAL AVERAGES Occupancy

Room Rate

Revenue Per Available Room

(Percent)

($/Day)

($/Day)

2004

61.9

88.61

55.73

2005

67.3

79.07

53.29

2006

66.2

88.16

58.34

2007

66.2

95.75

63.44

2008

67.6

104.75

70.92

2009

55.4

91.64

51.00

20 1 0

55.0

88.24

48.57

20 1 1

59.8

90.49

54.13

20 12

65.4

94.10

61.47

20 13

69.0

101.27

69.94

20 14 – Average of Four Quarters ending Q2/14

70.5

104.74

73.99

Year

Source: PKF Hospitality Research, LLC

Partnership Research | December 2014

37

retail sales After three years of rebounding from the recession, Houston MSA retail sales reached a record high of $116 billion in the four quarters ending Q2/14.

120 Nominal

115 110 105 ($ BILLIONS)

GROSS RETAIL SALES, 4-QTR MOVING TOTAL

HOUSTON MSA GROSS RETAIL SALES Four-Quarter Moving Totals

2006 Constant US Dollars

100 95 90 85 80 75 70 '07

'08

'09

'10

'11

'12

'13

'14

'15

Source: Texas Comptroller of Public Accounts

38

•

According to the Texas Comptroller’s Office, the running four-quarter total nominal gross retail sales in the Houston-Sugar Land-Baytown Metropolitan Statistical Area (MSA) reached its pre-recession peak in the fourth quarter of ’08 at $101.4 billion. This timing coincides with the first reported job losses in the Houston region. After bottoming out in the second quarter of ’10, retail sales grew consistently over the next few years as Houston consumers regained confidence in the economy.

•

In constant (i.e., ’06 inflation-adjusted) dollars, Houston region retail sales grew 4.3 percent from $95.5 billion in ’12 to $99.7 billion in ’13.

•

The region’s retail sales reached a new record in the second quarter of ’14 with $116.4 billion in total nominal gross sales over the previous four quarters.

•

In Q2/14, Harris County was responsible for 76.5 percent of the region’s gross retail sales. Montgomery County accounted for 6.7 percent and Fort Bend County was 6.1 percent of the total.

•

The top three retail sales categories in Q2/14 were gasoline stations (28.0 percent), general merchandise (15.9 percent), and motor vehicles (15.2 percent).

•

In the third quarter of ’14, CBRE reported a total of 209.8 million square feet of rentable retail space and a vacancy rate of 6.6 percent in the Houston market. New retail space under construction totaled nearly 2.1 million square feet.

Partnership Research | December 2014

retail sales Houston-Sugar Land-Baytown MSA Gross Retail Sales

ANNUAL TOTALS Nominal Sales

Constant 2006 Dollars

($000,000)

($000,000)

2006

76,207

76,207

2007

84,056

82,591

2008

101,402

96,418

2009

87,864

83,125

20 1 0

90,404

84,100

20 1 1

100,872

90,879

20 12

108,257

95,524

20 13

114,529

99,664

20 14 – four quarters ending Q2

116,380

99,773

Year

Source: Texas Comptroller of Public Accounts

Partnership Research | December 2014

39

New Car, Truck and SUV Sales Houston area vehicle sales reached record-breaking volumes in ’14.

NEW CAR, TRUCK AND SUV SALES Harris County and Houston MSA 380

Houston MSA

UNITS (000), 12 MO ENDING

360 340 320 Harris County

300 280 260 240 220 200 180 160 ‘04

‘05

‘06

‘07

‘08

‘09

‘10

‘11

‘12

‘13

‘14

‘15

Source: TexAuto Facts Report, InfoNation, Inc., Sugar Land, TX

40

•

Vehicle sales have rebounded strongly since bottoming out in December ’09. Since then, Houston auto sales have increased by 70.0 percent, from 218,710 autos in the 12-months ending December ’09 to 372,207 autos in the 12-months ending October ’14.

•

Houston-area auto dealers set a new record in June ’14 when 376,012 vehicles were sold in the 12 months ending June ’14, surpassing the previous record of 371,537 units sold in the 12 months ending November ’01.

•

Houston region retail sales price of autos averaged $34,392 for the 12-months ending October ’14, the highest on record. During this period, the market share of SUV/truck sales averaged 57 percent.

Partnership Research | December 2014

New Car, Truck and SUV Sales Harris County and Houston Metropolitan Statistical Area ANNUAL TOTALS - Harris County Year

Cars

Trucks and SUVs

Totals

2004

109,049

128,579

237,628

2005

116,965

137,048

254,013

2006

125,946

148,086

274,032

2007

123,110

158,070

281,180

2008

114,774

127,340

242,114

2009

83,778

92,159

175,947

20 10

89,474

106,256

195,730

20 1 1

88,764

115,757

204,521

20 12

119,890

144,119

264,009

20 13

127,173

152,802

279,975

132,926

164,346

297,272

20 14 October 12-month total

ANNUAL TOTALS - Houston-Sugar Land-Baytown MSA* Year

Cars

Trucks and SUVs

Totals

2004

129,742

174,242

303,984

2005

140,737

181,331

322,068

2006

153,058

196,580

349,638

2007

149,677

209,093

358,770

2008

140,088

166,772

306,860

2009

100,129

118,581

218,710

20 10

105,753

134,601

240,354

20 1 1

107,552

147,444

254,996

20 12

143,061

182,027

325,088

20 13

153,210

194,649

347,859

160,383

211,824

372,207

20 14 October 12-month total

* Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, San Jacinto and Waller counties.

Austin and San Jacinto counties were added in January 2007, but the series may be treated as continuous because those counties have a negligible impact on the totals.

Source: TexAuto Facts Report, InfoNation, Inc., Sugar Land, TX

Partnership Research | December 2014

41

inflation Over the past two years, Houston’s inflation rate has been double that of the U.S. INFLATION, 12-MONTH CHANGE 6% 5% 4% Houston CPI-U 3% 2%

U.S. CPI-U

1% 0% -1% -2% -3% '05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

Source: U.S. Bureau of Labor Statistics

42

•

The cost of consumer goods and services as measured by the Consumer Price Index for All Urban Consumers increased 1.7 percent nationwide from October ’13 to October ’14. Core inflation (all items less the volatile food and energy categories) rose 1.8 percent over the past 12 months.

•

From October ’13 to October ’14, consumer prices in the Houston-Galveston-Brazoria metro area (Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery and Waller counties) increased 3.4 percent, the largest 12-month gain in prices since December ’13. Annual core inflation was 3.7 percent.

•

From ’08 to ’12, the annual change in the Houston CPI and U.S. CPI closely tracked each other. For the past couple of years, Houston prices have grown at a faster pace than the U.S. as Houston’s economy experienced a strong recovery from the Great Recession while the U.S. underwent tepid growth.

Partnership Research | December 2014

inflation

CONSUMER PRICE INDEX ANNUAL CHANGE Year

Houston CPI

U.S. CPI

2004

3.60

3.26

2005

4.24

3.42

2006

1 .13

2.54

2007

3.93

4.08

2008

-0.17

0.09

2009

2.69

2.72

20 10

1.86

1.50

20 1 1

3.08

2.96

20 12

1.00

1.74

20 13

3.62

1.50

20 14 - October YOY change

3.37

1.66

Source: U.S. Bureau of Labor Statistics

Partnership Research | December 2014

43

living cost comparison Houston offers a low cost of living while maintaining a high quality of life with the amenities expected in a world-class city.

COST OF LIVING COMPARISON 20 Most Populous U.S. Metros 52.3

San Francisco, CA

51.9

New York, NY

37.1

Boston, MA

35.7

San Diego, CA

33.3

Los Angeles, CA

31.8

Washington, DC

17.3

Seattle, WA Philadelphia, PA

12.6

Miami, FL

12.6 8.5

Baltimore, MD Chicago, IL

6.6

Minneapolis, MN

6.4

Atlanta, GA

-2.2

Dallas, TX

-2.3

Phoenix, AZ

-4.3

Detroit, MI

-5.0

St. Louis, MO

-5.3

Houston, TX

-5.7

Tampa, FL -8.7 Riverside, CA* N/A

% Below / Above U.S. Average Source: Council for Community and Economic Research (C2ER), Cost of Living Index, Third Quarter 2014 (Data based on a survey of 264 urban areas, published October 2014) *Riverside, which is among the top 20 MSAs, did not participate in the Q3/14 COLI survey.

44

•

The C2ER Cost of Living Index for the third quarter of 2014 shows that Houston has the second lowest cost of living among the nation’s 20 most populous metropolitan areas. Houston’s housing costs are 35.0 percent below the average for the 20 most populous U.S. metros, and its overall costs are 17.5 percent below the average for this group. If one excludes the five most expensive housing markets—San Francisco, New York, Los Angeles, Washington, D.C., and San Diego—which tend to skew the average, Houston’s housing costs are still 16.8 percent below the major metro average.

•

The C2ER Cost of Living Index for the third quarter of 2014 also shows that Houston’s overall after-taxes living costs are 5.7 percent below the average for all 264 urban areas participating in the survey, partly due to housing costs that are 8.0 percent below the national average.

Partnership Research | December 2014

living cost comparison

COST OF LIVING COMPARISONS 20 Most Populous U.S. Metros (Average for 264 Urban Areas = 100)

Metropolitan Statistical Area

Composite Groceries

Housing

Utilities Transportation

Health Care

Misc Goods & Services

San Francisco-Oakland-Hayward, CA

152.3

126.8

263.2

101.6

106.2

118.6

113.0

New York-Newark-Jersey City, NY-NJ-PA

151.9

116.8

244.6

118.7

110.5

111.6

124.7

Boston-Cambridge-Newton, MA-NH

137. 1

107. 1

179.6

137.3

106.7

124.4

129. 1

San Diego-Carlsbad, CA

135.7

105.0

206.4

119.2

120. 1

113.6

106.7

Los Angeles-Long Beach-Anaheim, CA

133.3

104.9

203.9

109.4

114.9

111.0

106.6

Washington-Arlington-Alexandria, DC-VA-MD-WV

131.8

109.0

222.7

99.0

105.6

94.0

94.8

Seattle-Tacoma-Bellevue, WA

117.3

106.7

135.7

99.4

114.5

115.3

114.0

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

112.6

110.8

123.0

114.4

103. 1

99.6

110.0

Miami-Fort Lauderdale-West Palm Beach, FL

112.6

109.9

133.3

97.5

110.2

99.9

104.7

Baltimore-Columbia-Towson, MD

108.5

107.8

142.7

96.6

101.4

90.8

90.8

Chicago-Naperville-Elgin, IL-IN-WI

106.6

95.2

117.8

104.4

116.4

102.3

99.8

Minneapolis-St. Paul-Bloomington, MN-WI

106.4

103.0

111.9

91.3

100.8

105.0

110.5

Atlanta-Sandy Springs-Roswell, GA

97.8

102.9

92.8

91.2

100.9

103.4

99.6

Dallas-Fort Worth-Arlington, TX

97.7

99.7

86.7

97.4

98.5

100.6

104.8

Phoenix-Mesa-Scottsdale, AZ

95.7

101.6

93.8

92.4

106.6

99.0

91.0

Detroit-Warren-Dearborn, MI

95.0

92.9

90.3

101.5

98.9

95.9

96.0

St. Louis, MO-IL

94.7

102.8

72.0

115.8

102.2

105.7

98.5

Houston-The Woodlands-Sugar Land, TX

94.3

85.8

92.0

100.6

95.8

96.6

96.8

Tampa-St. Petersburg-Clearwater, FL

91.3

95.7

75.2

102.7

100.5

90.7

95.4

Riverside, CA*

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Note: Data are unweighted averages for all reporting places in each metropolitan area.

Source: Council for Community and Economic Research (C2ER), Cost of Living Index, Third Quarter 2014 (Data based on a survey of 264 urban areas, published October 2014) *Riverside, which is among the top 20 MSAs, did not participate in the Q3/14 COLI survey.

Partnership Research | December 2014

45

housing cost comparison Houston’s housing costs are among the lowest of the major U.S. metro areas.

HOUSING COST COMPARISON 20 Most Populous U.S. Metros 163.2

San Francisco, CA

144.6

New York, NY

122.7

Washington, DC

106.4

San Diego, CA

103.9

Los Angeles, CA

79.6

Boston, MA

42.7

Baltimore, MD

35.7

Seattle, WA

33.3

Miami, FL

23.0

Philadelphia, PA

17.8

Chicago, IL

11.9

Minneapolis, MN Phoenix, AZ

-6.2

Atlanta, GA

-7.2

Houston, TX

-8.0 -9.7

Detroit, MI

-13.3

Dallas, TX Tampa, FL St. Louis, MO

-24.8 -28.0

Riverside, CA* N/A

% Below / Above U.S. Average Source: Council for Community and Economic Research (C2ER), Cost of Living Index, Third Quarter 2014 (Data based on a survey of 264 urban areas, published October 2014) *Riverside, which is among the top 20 MSAs, did not participate in the Q3/14 COLI survey.

46

•

The C2ER Cost of Living Index for the third quarter of 2014 shows that Houston’s housing costs are 8.0 percent below the nationwide average and 35.0 percent below the average for the 20 most populous U.S. metros. Lower housing costs are one of the reasons Houston’s overall living costs are 5.7 percent below the nationwide average for places of all sizes and 17.5 percent below the large-metro average. (This housing index is based 84.11 percent on homeownership and 15.89 percent on rental occupancy.)

•

Even if Houston home values continue to appreciate and the apartment market continues to grow, Houston’s housing should remain inexpensive in the context of many other major metro areas.

Partnership Research | December 2014

housing cost comparison

HOUSING COST COMPARISON 20 Most Populous U.S. Metros (Average for 264 Urban Areas = 100) Housing Cost Index*

Percent Above or Below the Nationwide Average

San Francisco-Oakland-Hayward, CA

263.2

163.2

$813,737

New York-Newark-Jersey City, NY-NJ-PA

244.6

144.6

$763,113

Washington-Arlington-Alexandria, DC-VA-MD-WV

222.7

122.7

$709,796

San Diego-Carlsbad, CA

206.4

106.4

$660,040

Los Angeles-Long Beach-Anaheim, CA

203.9

103.9

$590,600

Boston-Cambridge-Newton, MA-NH

179.6

79.6

$509,633

Baltimore-Columbia-Towson, MD

142.7

42.7

$445,331

Seattle-Tacoma-Bellevue, WA

135.7

35.7

$401,869

Miami-Fort Lauderdale-West Palm Beach, FL

133.3

33.3

$389,128

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

123.0

23.0

$372,411

Chicago-Naperville-Elgin, IL-IN-WI

1 17.8

17.8

$356,036

Minneapolis-St. Paul-Bloomington, MN-WI

111.9

1 1 .9

$335,922

Phoenix-Mesa-Scottsdale, AZ

93.8

-6.2

$286,167

Atlanta-Sandy Springs-Roswell, GA

92.8

-7.2

$280,221

Houston-The Woodlands-Sugar Land, TX

92.0

-8.0

$263,895

Detroit-Warren-Dearborn, MI

90.3

-9.7

$261,814

Dallas-Fort Worth-Arlington, TX

86.7

-13.3

$241,365

Tampa-St. Petersburg-Clearwater, FL

75.2

-24.8

$213,724

St. Louis, MO-IL

72.0

-28.0

$204,022

Riverside, CA***

N/A

N/A

N/A

Metropolitan Statistical Area

Average Price for New 2,400Square-Foot House**

* Index is based 84.11 percent on homeownership costs and 15.89 percent on apartment rent. ** Approximately 2,400 square foot home with 4 bedrooms, 2 baths, family-room (or equivalent), 2-car garage and 8,000 square foot lot. Neighborhoods are typical for corporate middle-management transferees.

Source: Council for Community and Economic Research (C2ER), Cost of Living Index, Third Quarter 2014 (Data based on a survey of 264 urban areas, published October 2014) ***Riverside, which is among the top 20 MSAs, did not participate in the Q3/14 COLI survey.

Partnership Research | December 2014

47

Housing: Average Sales Price Housing is more affordable in Houston than in other major metropolitan areas.

AVERAGE SINGLE FAMILY HOME SALES PRICE $813,737

San Francisco-Oakland-Hayward, CA

$763,113

New York-Newark-Jersey City, NY-NJ-PA

$709,796

Washington-Arlington-Alexandria, DC-VA-MD-

$660,040

San Diego-Carlsbad, CA

$590,600

Los Angeles-Long Beach-Anaheim, CA

$509,633

Boston-Cambridge-Newton, MA-NH

$445,331

Baltimore-Columbia-Towson, MD

$401,869

Seattle-Tacoma-Bellevue, WA

$389,128

Miami-Fort Lauderdale-West Palm Beach, FL Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

$372,411

Chicago-Naperville-Elgin, IL-IN-WI

$356,036

Minneapolis-St. Paul-Bloomington, MN-WI Phoenix-Mesa-Scottsdale, AZ

$335,922 $286,167

Atlanta-Sandy Springs-Roswell, GA

$280,221

Houston-The Woodlands-Sugar Land, TX

$263,895

Detroit-Warren-Dearborn, MI Dallas-Fort Worth-Arlington, TX

$261,814 $241,365

Tampa-St. Petersburg-Clearwater, FL

$213,724

St. Louis, MO-IL

$204,022

Riverside, CA* N/A

Note: Prices are for homes approximately 2,400 square foot with 4 bedrooms, 2 baths, family-room (or equivalent), and 2-car garage and 8,000 sq. ft. lot. Neighborhoods are typical for corporate middle-management transferees.

Source: Council for Community and Economic Research (C2ER), Cost of Living Index, Third Quarter 2014 (Data based on a survey of 264 urban areas, published October 2014) *Riverside, which is among the top 20 MSAs, did not participate in the Q3/14 COLI survey.

48

Partnership Research | December 2014

Housing: Apartment Rental Rates Apartments are more affordable in Houston than in many other major metropolitan areas.

AVERAGE MONTHLY APARTMENT RENTS $2,471

San Francisco-Oakland-Hayward, CA

$2,303

Los Angeles-Long Beach-Anaheim, CA

$2,151

New York-Newark-Jersey City, NY-NJ-PA

$2,082

Boston-Cambridge-Newton, MA-NH

$1,822

Washington-Arlington-Alexandria, DC-VA-MD-

$1,738

San Diego-Carlsbad, CA

$1,431

Seattle-Tacoma-Bellevue, WA

$1,382

Miami-Fort Lauderdale-West Palm Beach, FL

$1,300

Baltimore-Columbia-Towson, MD Chicago-Naperville-Elgin, IL-IN-WI

$1,164

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

$1,143 $1,112

Minneapolis-St. Paul-Bloomington, MN-WI Houston-The Woodlands-Sugar Land, TX

$1,057

Dallas-Fort Worth-Arlington, TX

$1,046

Atlanta-Sandy Springs-Roswell, GA

$955

Detroit-Warren-Dearborn, MI

$951

Tampa-St. Petersburg-Clearwater, FL

$870

St. Louis, MO-IL

$831

Phoenix-Mesa-Scottsdale, AZ

$822

Riverside, CA* N/A Note: Apartment rents for 950 square feet, 2 bedrooms, 1½ baths; tenant pays for all utilities except water

Source: Council for Community and Economic Research (C2ER), Cost of Living Index, Third Quarter 2014 (Data based on a survey of 264 urban areas, published October 2014) *Riverside, which is among the top 20 MSAs, did not participate in the Q3/14 COLI survey.

Partnership Research | December 2014

49

houston region population Houston has a sustained history of exponential population growth.

HOUSTON REGION POPULATION

7

POPULATION (000,000)

6

5

4

3

2

1

0 1850

1860

1870

1880

1890

City of Houston

1900

1910

1920

Harris County

1930

1940

1950

1960

1970

1980

1990 2000 2010

2013

Houston-The Woodlands-Sugar Land MSA

Source: U.S. Census Bureau

50

•

From the first census in Texas in 1850 through the 2010 census, the Houston-The Woodlands-Sugar Land Metropolitan Statistical Area — Harris, the adjoining seven counties, and Austin county — has averaged a compound annual population growth rate of 3.4 percent.

•

Between the 1940 and 1980 census, the City of Houston pursued a vigorous annexation policy. The 1990 census was the first since 1920 to find that fewer than half the residents of the nine-county region resided within the city limits of Houston. Even in the most recent census, 35.3 percent of the region’s residents lived in the central city. The fact that such a large share of the region’s population live and can vote in the city of Houston has helped it avoid the kinds of malaise that afflict many central cities in large metropolitan areas where a much smaller share of the population have such a vested interest in the health of the central city.

•

The Houston-The Woodlands-Sugar Land MSA is the nation’s fifth most populous metropolitan area. The 1,231,394 residents the Houston metro area added between the 2000 and 2010 census represents average annual growth of 123,139, or 10,262 per month.

•

Between July 1, 2010 and July 1, 2013 (the period for which the Bureau of the Census released its most recent population estimates), metro Houston added 392,742 residents, or 10,909 per month.

•

Houston overtook Philadelphia as the nation’s fifth most populous metro area in mid-’10.

Partnership Research | December 2014

houston region population Census Counts POPULATION TOTALS

Census Year

Houston-The WoodlandsSugar Land Metropolitan Statistical Area*

Harris County

City of Houston

1850

27,984

4,688

2,396

1860

55,317

9,070

4,845

1870

80,866

17,375

9,332

1880

112,053

27,985

16,513

1890

137,800

37,249

27,557

1900

202,438

63,768

44,633

1910

252,066

115,693

78,800

1920

348,661

186,667

138,276

1930

545,547

359,328

292,352

1940

752,937

528,961

384,514

1950

1,083,100

806,701

596,163

1960

1,594,894

1,243,158

938,219

1970

2,195,146

1,741,912

1,233,505

1980

3,135,806

2,409,544

1,595,138

1990

3,750,411

2,818,199

1,630,553

2000

4,693,161

3,400,578

1,953,631

2010

5,920,416

4,092,459

2,099,451

6,313,158

4,336,853

2,195,914

2013**

* Census numbers for the 2013 MSA deďŹ nition, which includes the nine counties of Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery and Waller. ** As of July 1, 2013

Source: U.S. Census Bureau

Partnership Research | December 2014

51

most populous metropolitan areas Houston is the fifth most populous metro area in the nation.

POPULATION ESTIMATES U.S. Metros Residents Added 7/1/12 to 7/1/13

Residents as of 7/1/13 19,949,502

1. New York-Newark-Jersey City, NY-NJ-PA

111,749

13,131,431

2. Los Angeles-Long Beach-Anaheim, CA

94,386

9,537,289

3. Chicago-Naperville-Elgin, IL-IN-WI

23,230

6,810,913

4. Dallas-Fort Worth-Arlington, TX 5. Houston-The Woodlands-Sugar Land, TX

6,313,158

6. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

6,034,678

108,112 137,692 15,145

5,949,859

7. Washington-Arlington-Alexandria, DC-VA-MD-WV

87,265

8. Miami-Fort Lauderdale-West Palm Beach, FL

5,828,191

64,909

9. Atlanta-Sandy Springs-Roswell, GA

5,522,942

68,513

10. Boston-Cambridge-Newton, MA-NH

4,684,299

11. San Francisco-Oakland-Hayward, CA

4,516,276

12. Phoenix-Mesa-Scottsdale, AZ

4,398,762

13. Riverside-San Bernardino-Ontario, CA 14. Detroit-Warren-Dearborn, MI 15. Seattle-Tacoma-Bellevue, WA

42,204 62,117 71,130

4,380,878 4,294,983

38,546 2,151

3,610,105

57,514

3,459,146

36,729

17. San Diego-Carlsbad, CA

3,211,252

35,114

18. Tampa-St. Petersburg-Clearwater, FL

2,870,569

16. Minneapolis-St. Paul-Bloomington, MN-WI

19. St. Louis, MO-IL 20. Baltimore-Columbia-Towson, MD

2,801,056 2,770,738

25,391 4,550 16,816

Source: U.S. Census Bureau

•

52

Between July 1, 2012 and July 1, 2013 (the period for which the U.S. Census Bureau released its most recent population estimates), the Houston-The Woodlands-Sugar Land Metropolitan Statistical Area added more residents than any other U.S. metro area.

Partnership Research | December 2014

most populous cities Houston is the fourth most populous city in the nation.

POPULATION ESTIMATES U.S. Cities Residents Added 7/1/12 to 7/1/13

Residents as of 7/1/13

61,440

8,405,837

1. New York, NY

31,525

3,884,307

2. Los Angeles, CA

5,862

2,718,782

3. Chicago, IL

35,202

2,195,914

4. Houston, TX

4,518

5. Philadelphia, PA

1,553,165

6. Phoenix, AZ

1,513,367

24,843

7. San Antonio, TX

1,409,019

25,378

8. San Diego, CA 9. Dallas, TX

15,976

1,257,676

10. San Jose, CA

998,537

11. Austin, TX

885,400

12. Indianapolis, IN

843,393

13. Jacksonville, FL

842,583

14. San Francisco, CA

18,867

1,355,896

15,958 20,993 8,550 5,975 10,022

837,442

15. Columbus, OH

822,553

16. Charlotte, NC

792,862

17. Fort Worth, TX

792,727

18. Detroit, MI

688,701

19. El Paso, TX

674,433

20. Memphis, TN

653,450

12,450 18,420 14,643 -9,881 309 -1,106

Source: U.S. Census Bureau

•

Between July 1, 2012 and July 1, 2013 (the period for which the U.S. Census Bureau released its most recent population estimates), only New York City added more residents than the city of Houston.

Partnership Research | December 2014

53

most populous counties Harris County is the third most populous county in the nation.

POPULATION ESTIMATES U.S. Counties Residents Added 7/1/12 to 7/1/13

Residents as of 7/1/13 10,017,068

1. Los Angeles County, CA

5,240,700

2. Cook County, IL

12,708

4,336,853

3. Harris County, TX

82,890

4,009,412

4. Maricopa County, AZ

68,800

5. San Diego County, CA

3,211,252

35,114

6. Orange County, CA

3,114,363

29,008

7. Miami-Dade County, FL

2,617,176

8. Kings County, NY

2,592,149

9. Dallas County, TX

24,466 23,714

2,480,331

10. Queens County, NY

2,296,175

11. Riverside County, CA

2,292,507

12. San Bernardino County, CA

2,088,371

13. King County, WA

2,044,449

14. Clark County, NV

2,027,868

26,424 20,286 27,628 10,918 36,875 30,209

15. Tarrant County, TX

1,911,541

16. Santa Clara County, CA

1,862,041

26,016

17. Broward County, FL

1,838,844

24,031

18. Bexar County, TX

1,817,610

19. Wayne County, MI

1,775,273

20. New York County, NY

1,626,159

Source: U.S. Census Bureau

54

65,378

Partnership Research | December 2014

30,096

31,823 -17,223 4,836

Top Metro Areas by Gross Domestic Product Houston has the fourth largest metro GDP in the nation.

GROSS DOMESTIC PRODUCT Top 20 Metros

1 New York-Newark-Jersey City, NY-NJ-PA 1,471,170

11 Seattle-Tacoma-Bellevue, WA 284,967

2 Los Angeles-Long Beach-Anaheim, CA 826,826

12 Miami-Fort Lauderdale-West Palm Beach, FL 281,076

3 Chicago-Naperville-Elgin, IL-IN-WI 590,248

13 Minneapolis-St. Paul-Bloomington, MN-WI 227,793

4 Houston-The Woodlands-Sugar Land, TX 517,367

14 Detroit-Warren-Dearborn, MI 224,726

5 Washington-Arlington-Alexandria, DC-VA-MD-WV 463,925

15 Phoenix-Mesa-Scottsdale, AZ 209,523

6 Dallas-Fort Worth-Arlington, TX 447,574

16 San Diego-Carlsbad, CA 197,886

7 San Francisco-Oakland-Hayward, CA 388,272

17 San Jose-Sunnyvale-Santa Clara, CA 196,829

8 Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 383,401

18 Denver-Aurora-Lakewood, CO 178,860

9 Boston-Cambridge-Newton, MA-NH 370,769

19 Baltimore-Columbia-Towson, MD 168,845

10 Atlanta-Sandy Springs-Roswell, GA 307,233

20 Portland-Vancouver-Hillsboro, OR-WA 163,692

Gross Domestic Product ($000,000)

Source: U.S. Bureau of Economic Analysis, 2013 GDP by Metropolitan Area, current dollars

•

The Houston region has a gross domestic product greater than 42 states.

•

If the metro were a sovereign nation, it would ranks as the world’s 25th largest economy.

Partnership Research | December 2014

55

gross area product forecast Real Gross Area Product in Houston shows sustained growth over the next quarter century.

REAL GROSS AREA PRODUCT FORECAST $ Billions*

1,087.451 954.878

822.392 693.829 573.177 461.956 300.861

’05

349.840

’10

’15

’20

’25

’30

’35

’40

* '05 constant dollars

Source: The Perryman Group, Summer 2014

56

•

Real (i.e., net of inflation) Gross Area Product (GAP) in the Houston region is expected to grow at an average annual rate of 3.48 percent from ’15 to ’40 in The Perryman Group’s forecast.

•

The Houston MSA’s real gross area product is projected to more than double between ’15 and ’40.

•

Compound annual growth rates over the forecast period are highest in mining (6.5 percent); services (6.9 percent); manufacturing (6.4 percent); trade (5.4 percent); and finance, insurance, and real estate (5.5 percent).

Partnership Research | December 2014

gross area product forecast Real Gross Area Product: Houston-Sugar Land-Baytown Metropolitan Area ESTIMATES AND FORECASTS Real Gross Area Product

Compound Annual Growth Rate (Percent),

Year

$000,000 Constant ’05 Dollars

2005

300,861

—

2010

349,840

3.06

2015

461,956

5.72

2020

573,177

4.41

2025

693,829

3.89

2030

822,392

3.46

2035

954,878

3.03

2040

1,087,451

2.63

5 Years Ending

Source: The Perryman Group, Summer 2014; Growth rate calculations by the Greater Houston Partnership

Partnership Research | December 2014

57

population and employment forecast Houston is expected to lead the state and nation in population and employment growth between ’15 and ’40.

POPULATION AND EMPLOYMENT Houston-Sugar Land-Baytown MSA

12

9.9

10

9.2 8.4 7.8

8

7.1 MILLIONS

6.5 6

4

3.8

3.4

3.1

4.7

4.4

4.1

2

0 ’15

’20

’25

Population

’30

’35

’40

Employment

Source: The Perryman Group, Summer 2014

•

From ’15 to ’40, The Perryman Group sees population growth averaging 1.68 percent annually in the Houston region. Over the same period, the Texas-based economic forecasting firm expects wage and salary employment to rise at a 1.71 percent annual rate.

•

The Houston–Sugar Land–Baytown Metro Area will lead the state in population growth, adding 3.38 million residents between ’15 and ’40. Perryman also forecasts that Houston will add an additional 1.63 million jobs and account for almost one-fourth of Texas job growth during that time frame.

The Perryman report states:

58

•

The Houston-area remains a global center for the oil and gas industries with corporate headquarters, related technology firms, and service businesses contributing to ongoing growth. In spite of the cyclical nature of oil and gas exploration and production, global expansion in energy demand and technological advances will keep Texas and the Houston area at the forefront of the industry.

•

Additional drivers of economic activity through the long-term horizon will be, among others, the Port of Houston and other regional facilities and the strong health care base.

•

The Houston area is projected to continue to outperform most parts of the United States in the decades to come.

Partnership Research | December 2014

population and employment forecast Houston-Sugar Land-Baytown MSA

ESTIMATES AND FORECASTS Population

Payroll Employment

(000s)

(000s)

2015

6,541

3,087

2020

7,133

3,435

2025

7,766

3,777

2030

8,440

4,111

2035

9,157

4,428

2040

9,918

4,718

Year

Source: The Perryman Group, Summer 2014

Partnership Research | December 2014

59

Publication underwritten by:

Patrick Jankowski, CCR

Jenny Philip

Vice President, Research

Manager, Economic Research

Follow me on Twitter: @pnjankowski

Read my blog: houston.org/economy/blog

Connect with me: linkedin.com/in/pnjankowski