Coffee and CRE (8/17/10)

Each Monday morning, my intention is to compile five relevant and recent articles about office real estate in general and the Houston market in particular. Each article will have a link, a two sentence overview, and a one sentence takeaway. I hope over time this provides value to you.

With that, let’s get to it. I hope you enjoy the inaugural “Coffee and CRE” email:

Distress in Office CMBS (that rhymes):

· Link

· Two Sentence Overview: Office CMBS loan delinquencies have shot up 78% in the past 9 months, however the office sector still boasts the lowest delinquency rate among property types. As we know, in Office it’s all about jobs, and the 71,000 private sector jobs created in July just did not cut the mustard (90,000 were expected).

· One Sentence Takeaway: Could this mean more attractive prices are on the horizon for office buyers? (there is a allot of coin on the sidelines sure hoping so)

Be Optimistic for Office…in a little while:

· Link

· Two Sentence Overview: While weak, national office fundamentals could be pointing to a inflection point in a recovery (note: I just wanted to say “inflection point” because it sounds so smart). Nationally some office owners are able to increase asking rates while many are coughing up more concessions to keep tenants creating a weird increase in asking rate decrease in effective rate scenario.

· One Sentence Takeaway: For all the horrible news on vacancy increases and rent rate decreases, there are favorable supply conditions which could bode well for a strong recovery when demand picks up.

Texas is Tops for Business:

· Link

· Two Sentence Overview: This will probably be a theme in this weekly email about how great the Lone Star State is. Bottom line is 70% of all new jobs in the US have been created in Texas since 2008 – awesome stat to throw around.

· One Sentence Takeaway: All things economic doom and gloom considered, it just feels warm and fuzzy knowing we have a state government that is going to incentivize the heck out of new companies moving to Texas thereby creating jobs, and creating demand for office space (Texas Stats Link).

Texas fighting Drilling Moratorium:

· Link

· Two Sentence Overview: Texas Attorney General Gregg Abbot filed a legal challenge to the 6 month Obama ban on deep water drilling. The case is based around the Federal government not involving Texas at all in its decision to ban drilling ( a state right).

· One Sentence Takeaway: Lawyers are the only guaranteed winner in this whole ordeal, and the uncertainty has definitely stalled growth, but with the spill capped and damage mitigated the long term effects may not be as bad as originally thought (although there is sure to be greater regulation).

Houston Q2 Deliveries and Construction:

· Link

· Two Sentence Overview: Five buildings totaling 78,828 square feet were completed in the Houston market area in the Second Quarter. The largest buildings that are underway currently are the Hines MainPlace (972,474 SF - 10% pre-leased ) and Hess Tower (844,763 SF - pre-leased.)

· One Sentence Takeaway: New construction has decreased and even large deliverables have a good percentage preleased which should bode well for the positive supply side story once demand returns.