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January 21, 2010 
 
 
2011

 
Don’t expect much economic improvement until 2011, even though we’re probably out of the recession, says Grubb & Ellis chief economist Bob Bach. At a forecast Tuesday, he pointed out job growth lags recovery, and CRE lags job growth. So, what lags CRE?
 
Grubb & Ellis chief economist Bob Bach

For 2010, Bob predicts: vacancy rates will bottom out mid-year; cap rates will rise; and rental rates, average lease size, and term will all continue to drop. However, he believes we are probably 70% through price corrections, job growth will begin in Q3, absorption will flatten out in the Q3 or 4, and transactions are on the horizon. He thinks industrial will turn around first, followed by multifamily and retail, with office trailing. The biggest risk: when the government withdraws stimulus help, the economy might lose steam and slow progress.

G&E VP's Ken Page, Keith Lloyd, Gus Lagos, Scott Davis, John Nicholson, and moderator Beth Young.

G&E VP overdrive: Ken Page, Keith Lloyd, Gus Lagos, Scott Davis, John Nicholson, and moderator Beth Young. The panelists’ different angles led to some disagreement: Gus (Retail) thinks Houston CRE will hit bottom in late ’10; John (Industrial) believes we may be on the rise already; Ken (Investment) predicts ’11 will be the low point for most but investment will bottom out even later; and Scott (Land) believes ’10 will be bad for sellers but good for buyers.  They agree sellers will struggle to compete with cheap distressed buildings. Appraisals are too low because nobody is sure what anything is worth, and John predicts they won’t climb until mid ’11.

Ken and John predict job creation won’t immediately fill office vacancies because companies have extra space for new employees, and some are having employees telecommute to cut costs. Ken believes office buildings are in a good position to sell, and that when asset pools are sold, new owners might resell individual properties that don’t fit their portfolios. He also belives most buyers in Houston this year will be foreign companies and individuals. A balance between buyer and seller expectations, he says, will come a year or two after transactions get going late this year.

Grubb's Bob Bach with coworker Charles Egele and Greater Houston Partnership’s Robert Kramp

We snapped Bob with coworker Charles Egele and Greater Houston Partnership’s Robert Kramp. Talk about interrelated: Robert and Bob used to work together at G&E, Charles and Robert met at a conference in Vegas two years ago, and Bob and Charles are headed to Vegas next week for the G&E national meeting.


FINALLY
 
Duke Realty’s David Hudson and Cory Driskill

It took more than a year, but Duke Realty’s David Hudson and Cory Driskill finalized a 56k SF lease with Fiserv at the Stafford Distribution Center. Fiserv is moving its production center from Boston to Houston (our economy is better, and the move cuts annual costs), consolidating two Houston distribution facilities, and bringing warehousing in-house. David and Cory tell us the lengthy process is not atypical, especially because longer waits often favor tenants. The lease leaves 28k SF available in the center, in which Duke proactively put 1700SF of office space to attract tenants. CBRE’s Joseph Smith repped Fiserv. Cory celebrated the deal the usual way: he ran (and finished) the Chevron Houston Marathon Sunday.


INDUSTRIAL GETS IN THE GAME

 

Here are the first LEED pre-certified industrial buildings in Houston. They’re part of Trammell Crow’s 157-acre Lakeview Business Park in Missouri City, and are for lease or sale (managing director Jim Casey tells us Trammell normally only leases, but wanted to widen its market). The buildings are 38k, 50k, and 153k SF and can be single or multi-tenant. Their construction, and the addition of streets and utilities, represent the end of Phase One of development, which for the whole park, Jim believes will take eight to ten years. Land plots are also available: a 6.2 acre one was purchased by Lufkin Industries in November. Lakeview has a 90-acre city park with lakes and trails across the street, and immediate access to Beltway 8.

 
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