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Slowly, Confidence is Returning to Houston’s Office Market and the Texas Oilpatch

NAI Partners Houston: From right to left, Dan Boyles, Jason Gaines, Chris Caudill, Alex Taghi, Andrew Pappas and Jim Tainter.

NAI Partners Houston: From right to left, Dan Boyles, Jason Gaines, Chris Caudill, Alex Taghi, Andrew Pappas and Jim Tainter.

HOUSTON – ( By Michelle Leigh Smith) – Although some dead carcasses and trouble spots continue to exist, confidence is being resurrected in the Texas oilpatch and in the Houston commercial real estate market.

“Overall, we are seeing a more positive mindset. Hopefully that will lead to more transactions. The theme I’m hearing is that the worst is over,” said Houston office broker Dan Boyles of NAI Partners. “Some oil service companies are busy hiring. A lot of this is concentrated in the Permian Basin, but there’s a more upbeat attitude.”

West Texas Intermediate crude oil now hovers around $50 a barrel, recovered from a low below $30 a barrel not that long ago.

“We are seeing much more confidence,” says Boyles. “Our business is predicated on people having confidence in going forward. People are not hesitating to make a decision.”

Boyles was one of the speakers are the recent NAI Partners breakfast and review of commercial real estate imarkets n the first quarter of 2017.

“Yes, we are starting to see that trend rebound,” says Alex Taghi, NAI Partners Vice President, Office. “Sublease is a great barometer of where we are and tenants are definitely focuses on sublease. The majors have given back a tremendous amount of space. You don’t see the behemoth deals, but there’s a lot of private equity money out there.”

On the retail side, the challenges are ever present but Jason Gaines, Senior VP of Retail for NAI Partners says he’s beginning to see some cracks. “2016 actually had a spike in retail construction. 2017 should maintain or slightly decrease that level. The biggest amount of retail construction this year is going to be around the Grand Parkway pieces.

With announcements earlier this month that Rue 21 and Payless will each close 400 stores and Sears looking at closing 42 locations. Faced with what market observers politely call “protracted slump,” Neiman Marcus is on the sales block and it’s clear that the soft goods guys are hurting.

“As we lose these boxes like Sears, there are not a lot of companies to fill in,” says Gaines. “Boot Barn is coming on strong. Ten years ago they were in D level locations in tertiary markets like Lufkin or Lake Jackson. Now they are in Katy.”

“I deal with entrepreneurs who face a number of factors beyond online,” says Gaines. “A Wal-Mart or an HEB can weather three years of wait while houses are built, but Mr. Franchisee can’t. The Grand Parkway Loop spurred a bunch of development.

“I think the bigger trend is the idea that the banks are going to continue a trend of shedding retail branches,” Gaines notes. “It won’t be an immediate or sudden purge, but should be a consistent trend for the coming years.”

He’s seeing some interesting movement downtown, as B Buildings, like the Niels and Mellie Esperson Buildings, are attracting top-drawer tenants to downtown Houston. “Retailers see aggressive terms and conditions in the downtown office buildings that are considering an addition of street level retail,” says Gaines.

“The best example of an older building where major resources are being spent is Allen Center, instead of becoming the land that time forgot. Brookfield Property Partners has created a $48.5M campus environment, adding a big outdoor space with umbrellas and lawn chairs, a performance/event space and many more amenities. Brookfield has eliminated the circa 1970 skybridge and opened up more than an acre of green space that will be much more adaptable.

Managing Director Jim Tainter says NAI Partners’ Austin office has tripled their business in the state capital.

April 27, 2017 Realty News Report Copyright 2017

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