Tuesday , 18 February 2020
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Falling Oil Prices Prompt Downgrade of Cousins Stock

Greenway Plaza, a 10-building office complex in Houston, is a major holding of Cousins Properties.

Greenway Plaza, a 10-building office complex in Houston, is a major holding of Cousins Properties.

ATLANTA – A pair of REIT analysts have downgraded the stock of Cousins Properties because of concerns about the impact of falling oil prices on Houston’s office market.

Houston is the dominant market in market in the portfolio of Atlanta-based Cousins (stock symbol: CUZ on the New York Stock Exchange.)

Citing falling oil prices and exposure to Houston, a security analyst from Bank of America downgraded Cousins to “Hold” from “Buy” and Stifel also downgraded the CUZ shares, according to Atlanta’s Skyline Views blog.

Cousins invested heavily in Houston office in 2013 with its $950 million purchase of the 4.4 million square-foot Greenway Plaza office complex and the $233 million purchase of the 1.3-million square-foot Post Oak Central in the Uptown/Galleria market.

Despite the rapid tumbled in oil prices, (West Texas Intermediate is now below $70 a barrel, down from $100 a barrel this summer), Houston’s office market is showing no major signs of weakness.

Rental rates for Houston office space rose 5.1 percent over the last year, according to a third quarter report by Colliers International.

The citywide average rental rate stood at $26.94 per square foot, Colliers reported.

Although some Houston downtown Class A towers were quoting rates around $50 per square foot – lofty rents that were once thought to be impossibly high.

Citywide vacancy stood at 11.9 percent at the end of the third quarter, down from 12.6 percent a year earlier, Colliers reported. The average CBD Class A vacancy is 9.8 percent.

With over 120,000 new jobs created over the last year, office space has been filling up at a brisk pace. Houston’s office market has year-to-date absorption of 4.4 million sf.

Despite the recent downgrades, Cousins’ stock rose sharply on Friday to close at $11.68 per share, up 1.8 percent. The stock broke above $13 per share in August and its 52-week high is $13.30, but it had been below $10 a share prior to 2013.

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