"Texas, often referred to as the Lone Star State, is a thriving hub for economic growth and innovation, making it an attractive destination for commercial real estate investment." - Chris Evans

Houston’s Transportation Infrastructure Impacts Commercial Real Estate in 2024

Houston, the largest city in Texas and the fourth-largest in the United States, is known for its expansive transportation networks, including major highways, railroads, and one of the busiest ports in the country. As the city continues to grow, transportation plays a pivotal role in shaping its real estate market, particularly the commercial sector. The accessibility and connectivity provided by Houston’s transportation infrastructure directly influence property values, tenant demand, and investment opportunities.

In this comprehensive analysis, we explore how Houston's evolving transportation system is impacting commercial real estate and the broader market trends that investors and brokers should be aware of heading into 2024.

1. Houston’s Transportation Network: An Overview

Houston is renowned for its extensive transportation network, which includes a vast system of highways, public transit, and international shipping routes. The city’s infrastructure is designed to accommodate its growing population and economic activity, making it a critical factor in the development of the commercial real estate market.

Key Components of Houston’s Transportation Infrastructure:

• Highways and Freeways: Houston’s transportation system is dominated by major highways such as Interstate 45, Interstate 10, and the Loop 610. These highways play a crucial role in connecting the city’s commercial centers, suburbs, and industrial areas.

• Public Transit: METRO, Houston's public transit system, includes buses, light rail, and park-and-ride services, connecting major business districts and residential neighborhoods.

• Port of Houston: As one of the busiest ports in the U.S., the Port of Houston is essential for trade and logistics, significantly impacting industrial real estate in the region.

• Airports: George Bush Intercontinental Airport (IAH) and William P. Hobby Airport (HOU) provide international and domestic air connectivity, supporting both business travel and freight transport.

How These Networks Influence Commercial Real Estate:

The efficiency and reach of Houston’s transportation systems directly affect where businesses choose to locate, how tenants move through the city, and where investors see potential for growth. Proximity to highways, public transit stations, and logistics hubs is often a deciding factor for commercial tenants seeking office spaces, retail locations, or industrial facilities.

2. The Impact of Highways on Commercial Property Values

Houston’s extensive network of highways has a significant influence on commercial real estate values. Businesses that rely on easy access to transportation—such as retail stores, warehouses, and office complexes—tend to cluster near major highways, where high visibility and convenience attract both customers and employees.

Key Highways and Their Influence:

• Interstate 45 (I-45): This north-south route connects downtown Houston to cities like Dallas, making it a critical corridor for businesses that rely on regional connectivity.

• Interstate 10 (I-10): Running from the Gulf of Mexico through Houston and westward to San Antonio, I-10 serves as a major artery for logistics and distribution centers.

• Beltway 8: As a tollway that circles the city, Beltway 8 links Houston’s outer suburbs to the core business districts, making it a prime location for suburban office parks and retail developments.

Property Value Trends Near Highways:

• Retail Real Estate: Retail properties near major highways benefit from increased traffic and higher visibility, often commanding premium rents.

• Office Spaces: Corporate tenants often seek office buildings with direct highway access to reduce commute times for employees, increasing demand for office space along these corridors.

• Industrial Real Estate: Proximity to highways is essential for distribution centers and warehouses, as it facilitates the movement of goods. As a result, industrial properties near highways are highly sought after.

Opportunities for Brokers:

Brokers should focus on properties with easy access to major highways when advising clients in industries that prioritize logistics and transport. Additionally, investors looking for high-growth potential may want to target areas surrounding highway expansion projects, as these developments can increase property values over time.

3. Public Transit Expansion and Its Impact on Commercial Real Estate

While Houston has long been known as a car-dependent city, its public transportation system is steadily growing. The expansion of the METRORail and bus services is shaping the future of commercial real estate, especially in areas where transit access is becoming more reliable and convenient.

METRORail Expansion:

The METRORail light rail system currently serves several key areas of Houston, including downtown, the Texas Medical Center, and the Museum District. Ongoing expansion projects aim to connect more neighborhoods to the rail network, offering faster and more efficient transit options for commuters.

• Red Line: Serving downtown and the Medical Center, the Red Line has already led to increased demand for office spaces and retail developments along its route.

• Green and Purple Lines: These newer lines connect downtown Houston with the East End and the Third Ward, areas that are seeing significant revitalization due to improved transportation access.

Bus Rapid Transit (BRT):

Houston is also developing a bus rapid transit system, which offers faster service with dedicated lanes. The BRT is expected to enhance connectivity between neighborhoods and commercial centers, making certain locations more attractive to businesses.

How Public Transit Influences Commercial Real Estate:

• Office Leasing: Companies seeking to attract top talent are increasingly looking for office spaces near public transit to offer employees alternatives to driving. This trend is especially prevalent among tech companies and startups.

• Retail and Mixed-Use Developments: Retail developments near transit hubs are in high demand as they attract foot traffic from commuters. Mixed-use projects that blend office, residential, and retail spaces are emerging in areas with strong transit access.

• Increased Property Values: Properties located near transit stops typically experience a boost in value due to their convenience and appeal to both businesses and residents.

Opportunities for Brokers:

Brokers should monitor upcoming public transit projects and advise clients on properties located near expanding transit lines. As transit access improves, these properties are likely to see increased demand and higher rental rates, making them attractive investments.

4. The Role of Houston’s Ports and Airports in Commercial Real Estate

Houston's position as a major logistics hub is bolstered by its world-class port and airports, which play a significant role in driving demand for industrial and commercial properties.

Port of Houston:

The Port of Houston is a key player in the city’s economy, handling over 200 million tons of cargo annually. Its importance in global trade has a direct impact on the demand for industrial real estate, particularly warehouses, distribution centers, and logistics facilities.

• Proximity to the Port: Industrial properties located near the port are in high demand due to the need for efficient shipping and receiving operations.

• Warehouse Space: The port's continued expansion has led to increased demand for warehouse space, especially in the nearby areas of Pasadena and Baytown.

Airports and Commercial Real Estate:

Houston’s airports, including George Bush Intercontinental Airport (IAH) and William P. Hobby Airport (HOU), are crucial for both passenger travel and cargo logistics. As international business travel resumes post-pandemic, the demand for commercial real estate near these airports is expected to rise.

• Corporate Office Demand: Companies that rely on frequent air travel, such as multinational corporations and tech firms, often seek office space near the airports for easy access.

• Hotel and Hospitality Real Estate: The areas surrounding Houston’s airports are prime locations for hotel developments, catering to business travelers and tourists.

Opportunities for Brokers:

Brokers should focus on industrial properties near the Port of Houston and the city’s airports. Investors can benefit from the steady demand for logistics-related facilities and the growing need for corporate office spaces near these transportation hubs.

5. Future Transportation Projects and Their Impact on Commercial Real Estate

Houston’s transportation infrastructure is set to undergo significant improvements in the coming years, with several key projects already in the planning and construction phases. These projects will play a crucial role in shaping the future of commercial real estate in the city.

North Houston Highway Improvement Project:

One of the largest transportation projects in the region, the North Houston Highway Improvement Project aims to expand and modernize I-45, one of the city’s most important thoroughfares. This expansion is expected to ease traffic congestion and improve connectivity between downtown Houston and the northern suburbs.

• Commercial Real Estate Impact: As the project progresses, areas along the I-45 corridor may see an increase in property values, particularly in neighborhoods that were previously underserved by transportation infrastructure.

METRONext Plan:

The METRONext plan outlines Houston’s vision for expanding its public transportation network, including new light rail lines, bus rapid transit routes, and park-and-ride facilities. This comprehensive plan aims to make Houston’s transit system more accessible and reliable.

• Impact on Commercial Properties: Properties located near future transit stations are expected to appreciate in value, making them attractive options for long-term investment.

Opportunities for Brokers:

Brokers should track these future projects closely and advise clients on how upcoming transportation improvements may impact property values. Investors looking for long-term growth potential should consider properties in areas that will benefit from enhanced connectivity.

Final Thoughts: Maximizing Real Estate Opportunities in Houston’s Transportation-Driven Market

Houston’s transportation infrastructure continues to play a central role in shaping its commercial real estate market. Whether it’s the convenience of highway access, the growth of public transit, or the logistics capabilities provided by the port and airports, transportation is a key driver of property values and tenant demand.

For brokers and investors, staying informed about transportation trends and upcoming projects is crucial to capitalizing on Houston’s evolving commercial real estate market. By understanding the relationship between transportation and real estate, brokers can help clients make informed decisions that align with the city’s growth trajectory in 2024 and beyond.