Houston’s commercial real estate sector saw many changes in 2009. Although protected somewhat by its rapid job growth, things got a bit iffy in the early part of 2009, when vacancy rates soared and rental prices started tumbling.

In contrast, the better part of 2008 saw escalating rent prices and a low vacancy rate. In other words, the commercial real estate market in 2009 started to feel the pain of the crumbling national economy and equally grim housing market.

Office Building Sales

Sales of office buildings were down nearly 56 percent in the last month of 2008, compared to the same time a year earlier. As office building sales decreased, the demand for office space also decreased, thereby prompting many companies to postpone moving or expanding their operations.

Office space vacancy was about 13 percent at the end of 2008, which was a 12 percent increase from 2007. As a result, it was quite reasonable to expect perks from landlords, such as free rent, parking concessions and other bonuses.

The slowdown of the Houston commercial real estate market in 2009 began happening at the same time builders were adding nearly five million square feet of office space to the Houston market. As a result, just 35 percent of that space was pre-leased.

Companies Pulling Back, Vacancies on the Rise

With falling oil prices, many companies in the Houston area have chosen to delay hiring new employees, and some have even been left no choice but to cut their workforce.

However, the Texas Medical Center and the Port of Houston continue to be strong points for Houston, and are expected to buoy rental prices.

Although the Houston commercial real estate market suffered alongside the many other large markets in the United States over 2009, it is important to keep everything in perspective: Houston saw a 56 percent drop in property sales, while nationwide property sales were down nearly 70 percent.

Houston used to be the city that was protected from the brunt of the recession storm, but not many people can say that anymore. And in the middle of all the uncertainty is the commercial real estate market, which may also be headed for trouble as the year comes to an end.

Property sales for commercial real estate have dropped significantly, and vacancies have risen in their place. Lower oil prices and a tough credit market have sent the commercial real estate market off course and into uncertain waters.

We have witnessed sales of office buildings drop off a cliff from the end of 2008. In fact, sales of office buildings in Houston were off 56 percent between 2007 and 2008. Many companies have backed out of plans to expand or relocate, and many have simply downsized to save costs.

Combine that with worries of a second round of foreclosure problems, and a recipe for disaster begins to pan out.

Where do we go from here?

So, where does this leave building owners? For many, the need to lease office space has resulted in much lower rental rates and the lure of incentives. It has also left business owners in an advantageous position, as they have many options regarding rental space.

From office space to retail and commercial properties, the commercial real estate market in Houston is facing an uncertain future as vacancy rates climb and the recession takes it hold.

Opportunities for Rental Properties

If you are interested in commercial rental space in Houston, now may be the time to snag a great deal, complete with incentives and perks. Many commercial building owners are offering everything from free rent to free parking, so consider all of your options if you are in the market for office, retail or commercial space.