A lengthy period of low energy prices would undoubtedly have a cooling effect on the Houston economy and depending upon the duration would result in significant job losses in the energy sector. However, Houston is not all about energy.

Houston has the largest medical center in the world with 55 different member institutions and tremendous planned growth. We have the second largest port in the United States. There are major capital investments underway as growth is expected with the widening of the Panama Canal in 2016. A large part of the Houston energy industry is chemicals and other downstream products. This part of the energy business thrives on lower oil prices.

Given the percentage of the Houston economy related to energy is much less than in the 80s, we feel our portfolio will sustain this period. At Weingarten Realty, we experienced the major downturn in Houston in the mid-80s and a couple of less significant downturns in the 90s and in the 2000s. Our occupancy has never fallen below 90%.

Further, there are a few key differences I would like to point out. First, in 1985, 71% of our ABR, that’s average base rent, was in Houston. Today, it totals 16%. The extent of our geographic diversification driven by the transformation is not fully appreciated even by some who follow us. More importantly, the quality of the centers that make up that 16% is far superior to the portfolio we had even as little as five years ago.

Today, 80% of our Houston ABR is in what we term our key centers, and the majority of these centers serve super zips. To quantify the strength of these centers, the average household income for these properties is nearly 30% higher than the average for the Houston CBSA and the percentage of college graduates is nearly 50% higher comparatively. Little new space has been built or is planned to compete with these centers. The land prices are just too expensive near most of our centers for competitive retail properties.

Additionally, about 80% of our merchants in Houston are national and regional retailers today with significantly fewer mom and pop tenants. However, the mom and pop tenants we have in our Houston portfolio have operated in our centers for an average of nine years. Bottom line for us, we have outstanding properties in Houston that provide necessity-based goods and services with retailers that are experienced in operating and downturns.