Panel Sees Positives for Houston Office Market

The run-up in oil and gas prices has roiled the U.S. economy, but it has had a positive impact on the Houston office market, according to a panel of leading office brokers who convened on Tuesday at CPN’s Houston Property Opportunities Conference.Indeed, one major part of a lease that office tenants are looking for today is future expansion rights, said Aaron Thielhorn, principal of Trammell Crow Co. “We’re seeing energy companies bumping up against one another for the same space,” he said. The panel’s moderator, Mark Taylor (pictured, standing), managing director of CB Richard Ellis Inc., asked the panel if the amount of office space under development, about 7.4 million square feet, should be a concern to office landlords. Thielhorn responded that the present level of 2 million square feet being built in the CBD represents only about 4 percent of the amount of office space. But the Energy Corridor’s level of development represents about 14 percent of its office space. “The CBD should be OK, but the suburbs could be a little overbuilt,” Thielhorn said. Brian Hines, senior advisor at Sperry Van Ness, named the Galleria and the CBD as two submarkets that are “outperforming the city.” The Galleria could support a new office building of from 400,000 to 500,000 square feet, but soaring land costs mean that the building would have to be more like 800,000 square feet to make economic sense, said Eric Anderson, executive vice president of office services for Transwestern. He noted, though, that the submarket is hurt by its lack of mass transit. Anderson said that mass transit options such as the light rail system have strengthened the CBD. “It is the most loyal tenant base,” he said. “They’re there for a reason. They can take advantage of the mass transit.” Hines said office investment is robust in comparison to other parts of the U.S. “Houston is the only market in the country that hasn’t seen a severe drop in sales velocity,” he said. Thielhorn said office investors should find ways to capitalize on Houston’s positives, even in the light of the credit crunch. “We could see more cash buyers, who see the opportunity to buy a good quality asset and get a price break,” he said. “They won’t have to worry how they can finance it.”To Blog and Comment Click Here