It never fails that when the price of crude oil starts spiking, the commercial and industrial real estate sectors start coming back alive with new renters, and purchasers to support the oil and gas industry. Large warehouses to store oilfield drilling related products, and facilities with large storage tanks to prepare drilling mud, and other down hole chemicals are needed to keep up the demand. Even small combination office warehouse spaces will be snapped up for branch offices that support the industry. The only downside for property owners is when the prices of oil start heading south again; those companies will pack up and leave.

The commercial Realtors in the area have become used to this revolving door effect that suppliers, and service companies seem to go through from year to year, but it also effects the housing market as well. When highly paid sales staff, and management move into town, they are only there for the duration as well. This causes a vacuum throughout all markets, and it will never cease as long as those empty facilities and office buildings depend on what auto owners are paying at the pump currently.

Ironically, when auto fuel prices go up so drastically it creates a hardship on every resident in Houston, but at the same instance thousands of jobs are create d at the same time. When a family is already paying six hundred dollars or more in gas bills each month, adding a couple of hundred to that rivals most home mortgages. Until prices go back down for many it will mean waiting on buying a home in Harris, Fort Bend, and Montgomery counties.

South of Houston there are even more shuttered industrial real estate properties for lease, and for sale, since the shuttle project has been discontinued at NASA. New opportunities should open up for these properties once space exploration gets back on track. As technology advancements shift, create, and evolve older properties can be repurposed, but for those owners, it is just not coming in quick enough to pay their monthly notes. As the Internet takes up and nullifies older technologies that were traditionally in brick and mortar scenarios, people will have to rethink, and restructure the commercial side of all real estate markets.

For the time being, the commercial and industrial property owners are grateful for that spike in what we pay at the corner gas station, as it keeps them alive a little while longer. There is one industry that is not hurting right now, and that is the apartment realty game. There are over 500,000 apartments in the Metro area, and they are at ninety percent capacity. Once developers can start borrowing money to build new rental communities landlords will have to be competitive once again.

The Houston commercial real estate market is dynamic and strong, and that goes for Northwest Houston, as well. As a matter of fact, two commercial real estate markets are located just miles away from each other in Northwest Houston.

The Houston commercial real estate market of Jersey Village is home to many struggling commercial centers, but the other side of this area, along Highway 290 in Northwest Houston, is home to what some industry experts say is the hottest new commercial center in Houston.

A Move to the Northwest

Generally speaking, it appears as if the Houston commercial real estate market is extending towards the Northwest and North areas of the city. Most industry experts, such as Kim Kobriger, of Lewis Realty Advisors, say that the growth “is a natural evolution – you always have a migration outwards from a city.”

It really only makes sense that the area along Highway 290, in the Cy-Fair region, is growing by leaps and bounds because it possesses the space to accommodate new housing and commercial development. The Jersey Village area, on the other hand, does not possess this kind of space, thereby limiting new development and, ultimately, population growth.

Limited Growth in Other Areas

Jason Gaines, of Global Fund Investments, says: “There is not a lot of raw land to add housing.” The lack of growth in the Jersey Village area then leads to a large percentage of tenant vacancies.

Often times, the vacancies in many commercial centers are caused by an anchor store leaving the area. Because anchor stories are bigger name companies, they usually draw in customers to the area.

Case in point: the Jersey Village area has seen a dramatic impact on its commercial real estate business over the last few years as a result of the lack of anchors.

On the other side of the spectrum, the area along Highway 290 has been a boom for commercial development over the last five years. The hot spots are slowly moving toward Houston’s Northwest corner and, as result, residents with higher income levels are moving there and further spurring growth.

If you are interested in purchasing Houston commercial real estate, now may be the best time. From loads of available real estate to low interest rates, Houston commercial rate has never been more attractive for buyers and investors.

There are many terms used when discussing Houston commercial real estate, so it is important that you understand these terms and how they can affect your real estate deal.

1. Appraisal – An appraisal in an important first step when purchasing Houston commercial real estate, and is required for the sale of any type of property, commercial or otherwise. An appraisal will include a written report by a state-licensed professional and will include a detailed analysis of the property in question. The appraisal will include a value, as determined by the appraiser, and the reasoning behind the analysis.
2. Broker – A broker is usually always necessary when dealing with a commercial property and during a real estate transaction. All brokers must be licensed by the state, and most brokers work on a commission basis, which is usually paid by the seller.
3. Concessions – Concessions is usually the term used by brokers when speaking of benefits given to the seller to close a lease deal. As a seller, you may offer to remodel or upgrade the commercial space, or offer the tenant a reduced rent for a period of time.
4. Lien – A lien is a legal claim against a property that is made by a creditor. A property owner may have a lien on their property if they fail to pay a debt. As a buyer, your ability to purchase a property can be compromised if the property has liens against it.
5. Sale-leaseback – A sale-leaseback is the term used when an owner of a property sells the property to an investor, who then leases back the property to the original owner. Many times, this allows the owner of the property to free up capital, while allowing the investor to receive tax breaks and a guaranteed return.

If you are one of the many investors sitting on the sidelines waiting for the perfect opportunity to snag in-demand commercial real estate, now may be your chance.

Last year was one of change for the commercial real estate market in Houston, as things came to a grinding halt due, in part, to lower oil prices and the poor national economy. As a result, commercial vacancies were way up in Houston, and rental prices began to free fall.

A Different Picture in 2010

Jump ahead to 2010, however, and many analysts are painting quite a different picture. With lenders now willing to once again begin lending, and with interest rates still near historic lows, many individuals have given much thought to the advantages of purchasing commercial real estate in Houston.

The next few months in Houston will be an interesting time for commercial real estate, as many investors are expected to jump into the ring and take advantage of low prices.

Houston is also expected to experience more job gains in 2010, thereby spurring a need for commercial space.  As more job gains materialize, a population growth will also likely ensue, thereby lifting the Houston economy, as well as the real estate market in whole.

As Houston continues to offer more jobs, it will continue to weather the national economic storm – and come out ahead.

Because of overbuilding last year, many building owners and developers are now anxious to sell or lease, thereby providing great opportunities for both renters and real estate investors. In other words, everyone seems to be coming out ahead in 2010.

What we can expect in 2010:

• A stronger demand for housing, due to an increase in population
• An increase in demand for commercial real estate, due to an increase in job opportunities
• A growing economy and a steady real estate market, buoyed along by a strong energy and healthcare sector

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.