O'Connor Office Forecast Breakfast May 19th 2010

Henry Hagendorf with Grubb & Ellis and Andrew Segal with Boxer Properties teamed up to present their views on the Houston Office market yesterday morning.

Henry had some interesting statistics and is most everyone in the brokerage community glad that we are in Texas and specifically Houston. Houston ranks 2nd in the nation in $ volume of transactions while first in # of sales.Some trouble spots will be NW Fwy where both class A & B are at the bottom of the vacancy scale. 290 construction will probably keep it that way for a while. And the Exxon relocation will hurt the Greenspoint sub market. Absorption is slightly up in B & C while somewhat flat in A. While subleases are flat they will be shifting to vacant as time goes by. Rents will bottom out late 2010 or early 2011. LEAD certifications are up significantly from 11 in 2008 to 29 in 2009.

Andrews focus has always been on distressed properties and he feels that now the market has really come to him. His out of the box thinking has moved another step out with listing his lease space on Craigs List. To date he has signed up 20 leases from this source one of which is 8,000sq ft. He has also had a mobile application built for his tenants to report difficulties and to promote interaction. Be on the watch for the CMBS Special Services. There is 1 Trillion $ and 10 Billion sq ft under the control of Bercadia, LNR. Centerline, Midland and C W Capital but just try and reach them. What is happening is a cycle of the Specials selling cheap to vultures who lower rates causing more failures bringing on more vultures and so on.