Houston Office Market Report – First Quarter 2019

ECONOMIC OVERVIEW

Houston’s economy sustained its steady growth through the first quarter of 2019 as employers expanded their payrolls by 72,600 jobs over the past 12 months ending in February, representing a 2.4% increase for the period. Even though the local economy gained 35,000 fewer jobs last year than initially estimated according to the benchmark revisions released in March by the Texas Workforce Commission, Houston maintained its top ranking among the major metro areas with 73,300 jobs created in 2018. As a result, the metro area’s unemployment rate has fallen to its lowest level since April 2008. Looking ahead, the Greater Houston Partnership is forecasting 71,000 overall jobs in 2019 and the University of Houston’s Institute for Regional Forecasting issued a medium forecast scenario that Houston could average 63,100 new jobs per year through 2021. Both forecasts are built on a $60-$65 oil price assumption.

The energy sector found itself in a downward spiral late last year as record-high oil production and fears of another global oil glut triggered a collapse in WTI oil prices from a high of $76 per barrel in early October down to $45 per barrel in December 2018. However, OPEC’s agreement to production cuts of 1.2 million barrels per day have helped crude oil prices recover to a range that remains profitable for shale. During the first quarter, West Texas Intermediate (WTI) crude oil rose by 33.3% to break through the $60 per barrel mark, its best first quarter performance since 2002. Traders are now watching to see if the production cuts get extended beyond June, when the agreement expires, or if higher prices push the cartel to lift output. Investors also will weigh whether OPEC’s efforts will be enough to blunt the impact of U.S. shale producers, which continue to pump crude at record levels.

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