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The “F Word” Will Be Spoken in Houston in 2016

HOUSTON – The “F Word.”

The word “foreclosure” will be heard by commercial real estate professionals in 2016. About a year ago, Houston was leading the nation in office building construction with some 17 million square feet underway and more projects proposed. Rental rates are going down and vacancies are going up. Sublease space is everywhere and more new buildings are nearing completion.

Energy companies are in retreat as the secondary bottom fell out of the oil market in December. In the first quarter of 2016, West Texas Intermediate could dip to a 2-handle ($29.99 a barrel or less) and that is enough to ignite some panic in the Houston economy. More drillers will take Chapter 11. More sublease space is coming to Houston’s office market.

I don’t expect to see widespread foreclosures in Houston, certainly nothing like the 1980s, when – as a Houston-based reporter – I wrote about more foreclosures and real estate-related bankruptcies than any other journalist in the nation.

But we will see at least a few Houston office buildings posted for foreclosure in 2016. The good news is the foreclosures will be confined to the Houston office market, for the most part. There will be no foreclosure problem in Houston’s single-family market.

This year, the Houston office market – it could be a Class A tower or trickle-down pain in Class C – will experience a limited number of foreclosures. Exactly where the office market will spring a leak, is to be determined.

It won’t be catastrophic. But the F-Word will be spoken in the Houston office market this year.

Ralph Bivins, Editor of  Realty News Report.

Ralph Bivins, Editor of Realty News Report.

Commentary by Ralph Bivins, Editor of Realty News Report .

Jan. 12, 2016

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