Wanted to start by introducing myself, my name is Cesar Zavala. I am first generation Mexican American with aspirations of becoming an entrepreneur since the day I was born. Watching family members build successful businesses only fueled that desire more. Fast forward to today, I am a commercial real estate agent helping small businesses and investors find locations to operate and grow. I really enjoy what I do and love watching a start-up go from a garage to a 40,000 SF warehouse. Not exactly in that order but you get my point. The commercial real estate market is often complicated to navigate if you don’t have a hand on the pulse so I created this blog to share insights into a market that is often referred to as the wild-wild-west. Through this blog I hope to educate both small business owners in the market looking to lease and owners of commercial properties looking to sell. When I’m not focused on real estate I enjoy spending time with family and friends, reading, and cooking. Enough about me though, let’s get to the bread and butter.
Houston Commercial Leasing Market
Let’s start with office leasing, vacancy has increased from 16% in Q1 2020 to just over 18% currently Q1 2021. Net absorption has also dropped off a cliff, the result of COVID-19 and the drastic drop in oil prices from March. According to the Dallas Fed oil and gas companies accounted for 102 bankruptcies.
” 2020 was the worst year for business failures in the oil patch since 2016 when 142 companies filed.”— Dallas Fed
Potential tenants can take advantage of this environment and negotiate better lease terms. Multi-Family hasn’t gone unscathed, between new supply coming online (inside the 610 loop) and renters fleeing to the suburbs. Complexes have ramped up incentives to entice tenants into long term leases. If you are in the market for an apartment unit, now would be a great time to take advantage of the incentives being offered. The star of commercial real estate (Industrial) has continued to perform well. According to CoStar data over 1,400 leases were signed in 2020 with over 50% being services and logistics firms.
On the sales side, buyers have remained active in the multi-family as well as the industrial market. 86% of transactions recorded were mostly in the value-add department. The bid-ask spread between buyers and sellers is still wide, as buyers are looking for heavy discounts.
Sum It Up….
In conclusion, if you are in the market to lease right now is a great time to negotiate terms with landlords. If you are looking to buy commercial real estate, price discovery is making it very hard to comp properties so proceed with caution. I hope to be a source of information for anyone looking to get into the CRE Houston market. Whether you are a start-up, looking to expand current operations, or are an active investor looking for value-add or passive income deals. I am here to help answer any questions one might have backed by not only experience, but real time data. If you liked this go check me out on social media LinkedIn or Twitter you wont be disappointed!