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JLL’s Dan Bellow: Landlords Cut Rents as Houston Becomes a Tenants Market Again

Dan Bellow

Dan Bellow

HOUSTON – Long-time Houston broker Dan Bellow, president of Jones Lang LaSalle-Houston, says some Houston office buildings owners have reduced rents and overall rental rates are under pressure as Houston’s office market has become a “tenants’ market.”

With energy company cutbacks and oil patch layoffs, oil companies are putting excess Houston office space  – some of it in brand new buildings – on the market as sublease space.

A number of landlords already have slashed rents by $3 to $5 per square foot, Bellow told the CoreNet Global Houston Emerging Leaders organization in a recent speech.

With empty sublease space and 17 million square feet of office space under construction, including Hines’1 million square-foot spec building in downtown, the Houston office market has flipped from being a landlord-dominated market to a tenant market, Bellow said. And tenants will have the upper hand in lease negotiations for a while.

“For a couple of years, it will be a tenants’ market,” Bellow said.

The price of West Texas Intermediate crude fell from $100 a barrel last summer to $50 a barrel in a few short months – a major blow to the Houston economy. After gaining 120,000 jobs last year, Houston economists are now expecting to gain only 63,000 job in 2015.

A severe economic downturn is not expected, Bellow said, but if oil prices remain in the $40 to $50 a barrel range for a long time Houston’s economy could become more bloody.

With an audience primarily of young professionals, Bellow said in his speech that 2015 will be a down year for commercial real estate and he advised the young CRE people to be conservative in their personal spending.

“We are going to come out of this. We just don’t know how long it will be,” Bellow said.

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