HOUSTON (CBRE) – Commercial real estate experts talked about Houston CRE market conditions yesterday at CBRE’s second quarter 2012 press luncheon. Real Estate Center Research Economist Dr. Harold Hunt was there and reported back. Here are some highlights:
Energy drove the Houston office market to new heights in the second quarter. West Houston Class-A occupancy pushed above 95 percent while the Woodlands surpassed 99 percent.
Less than 20 blocks of contiguous space 100,000 sf or larger remain citywide.
New construction is low as well, with only two of the ten buildings currently under construction delivering in 2012.
“Total office space under construction is only 2.7 million sf in a 190 million-sf market,” said Sanford Criner, CBRE Houston’s executive vice president of global corporate services. “We believe there is about nine million sf of demand in the Energy Corridor alone, but only 760,000 sf remains to be leased.”
Energy Corridor rents have been increasing rapidly, rising almost $2 per sf in the last year.
According to Criner, Houston is the only U.S. office market where lenders are willing to underwrite future rent growth into their funding offers.
More than 50 percent of the 2.7 million sf under construction has already been preleased.
“Lenders are not going to oversupply the market again based on loose lending standards,” said John Fenoglio, CBRE’s executive vice president of debt and equity. “Houston is now a preferred market for all property types, but only the best projects will get financed.”