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.
Tags: commercial real estate