Of Landlords and Moratoriums

Was Judge Feldman's ruling a sign of light?

It was George Bernard Shaw who appropriately said "If all economists were laid end to end, they'd never reach a conclusion". Such is the case for the varied opinions on how the Obama administration's moratorium on drilling will impact Houston office landlords. When New Orleans Judge Martin Feldman said "thanks, but no thanks" to Mr. Obama's six-month moratorium on deep-water drilling there was undeniable relief from office owners in the Energy Capital of the World. Was this the first sign of light to come from the darkening gulf waters after the spill? For the Houston office owner there had been little to cheer about since April 20th.

Before this "date which will live in infamy", things were looking pretty good if you were a Houston real estate bull. There seemed to be renewed optimism for a recovery that existed even in the face of job cuts at the Johnson Space Center and Continental Airlines shedding jobs through its merger with United. Even after these two major bumps in the road, the end of the first quarter of 2010 saw Houston adding jobs, leasing activity picking up, and positive absorption occurring. Happy days were seemingly here again -- or at least they were on the way.

And then the Deepwater Horizon explosion. Since that dark day uncertainty has seemed to expand at the rate of the oil streaming into the Gulf of Mexico. The offshore drilling moratorium that was imposed exponentially magnified the economic problem. The six month ban halted approval of new permits for deepwater projects and suspended drilling on 33 exploratory wells. This meant definite cutbacks in Houston's energy community, a decrease in jobs, and ultimately a decrease in office demand.

The Good Judge

Enter Judge Martin Feldman. The good judge halted the ban saying the government trivialized the economic impact of the moratorium. It was a heroic ruling, but it will more than likely not have the result many landlords hope for. The Obama administration pledged to appeal the ruling faster than Tony Hayward in a yacht race and most Analysts do not have high hopes that drilling will start up any time soon -- regardless if the appeal is unsuccessful. It seems that the only real winners in this whole ordeal will be the the lawyers involved. When drilling does resume, we can safely assume that energy companies will be forced to operate under stricter oversight which may lead to mitigated growth and fewer jobs.

One certain conclusion we do not need an economist to tell us is that Landlords will need the absolute best Leasing and Management team representing them in order to maintain and grow NOI through this storm of uncertainty. The following is a list of four characteristics an office owner should look for when deciding upon a leasing and management team:

• Landlord Reps and Landlord Reps only: In a market where tenants have an advantage in negotiations, it is especially important that the team representing the owner does not have any conflicts of interest that representing both tenants and landlords can present. An owner's team needs to be experts in their niche of office landlord representation in order secure the premium market rents and maximize tenant retention.
  
• Excellent Communicators: Landlords need a team that communicates in an efficient, effective, and timely manner to all parties involved. Landlords need a team of excellent communicators.
  
• Provides Goal Oriented Leasing: Landlords need a leasing and management team that can value engineer a lease to maximize the value of the asset knowing the full exit strategy of the owner. A good representative team will negotiate the lease that maximizes the value of the asset for the Landlord.
  
• Established Tenant Rep Broker Relationships: Landlords need a leasing and management team that has well established ties with the local tenant rep brokers and prides itself on being exceptionally responsive to tenant representative real estate brokers to ensure maximum broker cooperation. Tenant rep brokers are essential and critical and must be highly valued by the owner's team.

Parkway Realty Services "PRS" meets these four criteria and much more. PRS has an owner's mindset and a relentless focus on increasing their client's NOI in any market. With incredible service and dedication from an experienced and respected team, owners can expect long term asset appreciation -- even through drilling moratoriums. For more information about how PRS uses its 35 years of experience of representing owner's best interests check out: PRS Website.