Mixed signals, where do we go from here?

by CoyDavidson on February 7, 2010

We all know what a challenging year 2009 was, but as we have moved into 2010 there is a steadily growing sense of optimism for both the Houston and National economy. Almost daily now we read a couple of news stories with positive economic news, but every third or fourth story we see tempers that enthusiasm a little with some negative economic trend that is reported or projected.

Let’s take a quick rewind of some of the key economic news that has been reported since the first of the year. On January 17th in a story reported in the Houston chronicle, longtime Texas economist Ray Perryman predicted that the Texas economy would be the first to recover, and not to expect a huge rebound but rather a slow steady recovery. A week later in another Houston Chronicle story it was reported the Houston economy added jobs for the 4th consecutive month. However we did lose 93,000 jobs in Houston during 2009. Just last week it was reported the economy grew in the 4th quarter faster than it had in six years and the national jobless rate unexpectedly dropped to 9.7% from 10% the month before. However, as I outlined in my blog post Obama, NASA and the Clear Lake Office Market the potential for thousands of job losses locally with President Obama’s plan to cancel the Constellation program at Johnson Space Center.

What about the office space market?

In mid January Colliers International released its 4Q 2009 Houston Office Market Report and just last week our 4Q 2009 North American Office Highlights. What did these reports tell us? Well it was not a good year for the Houston office market and certainly for most major office markets around the country and Canada. However, what can be gleaned from the reports is that we are starting to see the early signs of stabilization. Houston reported 1.16 million square feet of negative absorption in 2009. However, all though minimal Houston reported positive absorption of office space (236,880 SF) during the 4th quarter of 2009, but this is offset by a growing inventory of sublease space.  Houston actually posted positive absorption in 2008 as we were one of the last places to feel the recession, as most markets around the country started the negative absorption trend in early 2008.

The reports also reveal that Houston has not experienced the same percentage of depreciation in rental rates in 2009 that were felt around many major markets around the country. Let’s compare Houston with a few major markets for Class A office rental rates:

  • Houston CBD: 2.73% decrease
  • Houston Suburban: 2.2% decrease
  • Midtown Manhattan: 24.04% decrease
  • Boston CBD: 22.65% decrease
  • Denver CBD: 19.85% decrease
  • San Francisco CBD: 19.40% decrease
  • Seattle CBD: 19.12% decrease
  • Chicago CBD: 17.95% decrease
  • Atlanta CBD: 6.8% decrease
  • Atlanta Suburban: 4.84% decrease
  • Phoenix Suburban: 14.44% decrease
  • San Jose Suburban: 13.44% decrease

Where do we go from here?

I tend to be a “glass half full” kind of guy but the consensus appears to be that the economic recovery has clearly begun and the only debate centers on the velocity of the recovery. Will it be a slow bumpy ride as many predict or could we see a return of significantly improved economic conditions much sooner than most anticipate? Despite majoring in economics at the University of Texas I don’t pretend to know nor will I venture even a slightly educated guess. However, I have been advocating since last August for office tenants and industrial tenants as well to get into the marketplace now, if at all feasible to take advantage of current market conditions while the window of opportunity still exists. Just in the month of January we have seen some of Houston’s largest employers announce major real estate decisions beginning with KBR’s announcement to scrap its West Houston campus plans and expand their space downtown. This followed by Anadarko’s announcement they have purchased their Woodlands headquarters building and while ExxonMobil has made no formal announcement it is widely believed to be certain that they are planning a massive office campus on a land tract they purchased just south of the Woodlands.

Currently most Houston Landlords are in “deal making” mode offering lower rates and more liberal concession packages than in the past and this climate has really only been in existence in Houston for about 3 quarters. While I don’t believe we will get back to 2007 / 2008 rent levels over night, I do believe the liberal concession packages will dissipate quickly if we continue to get positive economic performance both locally and nationally. As, I have been saying for months the “Opportunity is Now”.

  • Share/Bookmark

{ 0 comments }

Office Property of the Week: 1100 Louisiana

by CoyDavidson on February 6, 2010

1100 Louisiana is a 55-story, 1.3-million-square-foot office building bounded by Louisiana, Dallas, Smith and Lamar streets in Houston’s Central Business District.

Developed in 1980 by Hines The tower is clad in polished Spanish Rose granite with rose-colored windows. 1100 Louisiana is connected to the tunnel system, with its convenient 45,500 square feet of retail space and service centers, as well as passageways to stores and other office buildings and the 2,234-car parking facility adjacent to the building.

The south and east curtain wall contains a series of large stepped bays at the top of the building. The tower rises from a garden-like water plaza that occupies almost a quarter of the block. It was designed by Gensler, in collaboration with James Burnett Landscape Architects, and the fountain by WET Design, who is known for the fountains at the Bellagio in Las Vegas.

Tenants and visitors may enter the tower’s dramatic lobby where four banks of elevators, with a total of 27 passenger cabs, provide efficient service to the office floors above. Two shuttle and two freight elevators also serve the tower. Each floor of 1100 Louisiana offers approximately 22,000 square feet of flexible space with 9-foot ceiling heights.

In 2009, this building was awarded LEED certification at the Gold level by the U.S. Green Building Council.

1100 Louisiana

  • Total Square Feet: 1,261,674
  • Floors: 55
  • Available Square Feet: 36,315
  • Range of Space: 4,295-16,712
  • Maximum Contiguous: 16,712
  • Quoted Rental Rate: $28.00 Net
  • Operating Expenses: $11.74
  • Parking: 1.8:1000 Ratio, $175.00-$250.00 per month

Leasing Agent: Hines Interests

Property Manager: Hines Interests

View Previous Office Properties of the Week

  • Share/Bookmark

{ 0 comments }

CRE Weekly Review: Jan 31-Feb 6

February 6, 2010

HOUSTON

A Tale of Two KBR Campuses: Plan for Clinton Drive Stirs East End Interest
The big boxes (slowly) get filled
Griffin Partners breaks ground on retail center near JSC
Anadarko Petroleum Corp purchases its Woodlands corporate headquarters building
Obama, NASA and the Clear Lake Office Market
Obama’s budget hits twofold in Houston
Moon Mission Killed for NASA (Video)
Beckman Coulter to shutter [...]

Read the full article →

Office Space Markets Beginning to Show Signs of Stabilizing

February 5, 2010

After a miserable year and a half, office leasing markets across most of North America began to show signs of hitting bottom and possibly recording growth before year-end. While both Canadian and U.S. vacancies rose during the quarter, the increases were relatively muted, but more importantly, positive absorption was recorded in both countries. With the [...]

Read the full article →

North American Industrial Markets Scale Back Losses

February 3, 2010

U.S. industrial real estate markets finished the year on a weak note, but were a marked improvement compared with the prior three quarters. The backdrop for warehouse markets was still fairly dismal with most warehouse users looking to consolidate their space needs or hold their real estate needs steady at best, but the tone was [...]

Read the full article →

Anadarko Purchases its Woodlands Corporate Headquarters Building

February 3, 2010

The Houston office market had quite a  month of January to start the year, at least in terms of major transactions and rumors of more to come. Yesterday, Anadarko Petroleum Corp’s CEO James Hackett revealed in its 4Q 2009 Earnings Conference Call the independent oil and gas concern has acquired its previously leased headquarters campus [...]

Read the full article →

Obama, NASA and the Clear Lake Office Market

January 31, 2010

In the president’s new budget, there is no money for the Constellation program. This is the next-generation human-launch system replacing the all-but-retired space-shuttle fleet, which was being developed to return our astronauts to the moon. This has Texas lawmakers preparing for major political battle to protect Houston jobs and the Johnson Space Center.
As many [...]

Read the full article →

iPad and the Commercial Real Estate Broker

January 30, 2010

I am sure unless you were under a rock this past week you heard something about Apple unveiling the iPad, their latest gadget which is a mobile device I would describe somewhere between the Smartphone and a laptop. Basically the iPad is a giant iPod touch/iPhone with a 9.7-inch screen.
While, I have not seen the [...]

Read the full article →

CRE Weekly Review: January 24-30

January 30, 2010

HOUSTON NEWS

Big battle brews over planned NASA cuts
Stanford building goes on block
Exxon Mobil is considering a move
KBR will stay downtown and expand
Houston Chronicle: Commercial Real Estate Transactions

NATIONAL NEWS

Institutions Once Bitten, But Not So Shy
Loja Real Estate Fund buys $44M shopping center
Economy in U.S. Grew at 5.7% Pace, Most in 6 years
CoStar Group: Lease Up/Lease Down [...]

Read the full article →

How Social Media has Made Me a Better Broker

January 30, 2010

Social Networking is increasingly gaining the attention of commercial real estate brokers and the focus is primarily on the value of Social Media as a business development tool. When I initiated my social networking efforts back in August of last year I had two primary objectives in mind:

Business Development: Experiment with Social Media to determine [...]

Read the full article →