Transcript of "Greater Houston - October 2009 Newsletter (Pp)"
Robert Lowery & Rick Cagnolatti
What your Office Tenants
Landlord Should Shun Tenants
be Doing Market
Houston Rankings, Business Articles & Houston in the News
Energy, medicine and a low cost of living.
Mega Market of the Year – Southern Business Development - August 2009
America's Best Hospitals - Cancer, M.D. Anderson Cancer Center - U.S News - July 2009
Highest Quality of Life Among Students - Rice University - Princeton Review - July 2009
Best City to Get Ahead - Forbes.com - June 19 2009
Top Metro in the Nation - Site Selection Magazine - March 2009
Nominal Job Growth (01/08 to 01/09) - U.S. Bureau of Labor Statistics – March 2009
Nation's Healthiest Housing Market – Bldr nd Hanley Wood Market Intelligence - Feb '09
Largest IT Service Economy - Onforce, Inc. (VoIP Monitor) – December 5, 2008
Hottest Labor Market - Bizjournals.com – September 8, 2008
Lowest Cost of Living Among Major Metro Areas - ACCRA Cost of Living Index – 3Q ‘08
Best U.S. City to Earn a Living - Forbes.com - August 18, 2008
Best City to Buy a Home - Forbes.com - July 14, 2008
Highest Population Growth in the Nation - U.S. Census Bureau - July 10, 2008
Best City to Live, Work and Play - Kiplinger's Personal Finance - July 2008
Top Local Government Green Power Purchaser - EPA- July 2008
America's Best Hospitals - Cancer, M.D. Anderson Cancer Center - U.S News - July 2008
Houston, We Have No Problems - Newsweek - June 30, 2008
Best City for Recent College Grads - Forbes.com - June 26, 2008
Best City for Your Job - BusinessWeek - June 12, 2008
Top U.S. Manufacturing Cities - Manufacturers' News Inc. - May 30, 2008
Most Accessible City for the Disabled - The National Organization on Disability – Feb '08
Houston ranked #2 Houston ranked #5 Houston in the spotlight
America's 10 Best Undervalued Best Heart & Heart Surgery Habitat for the Houston
Places to Live Hospitals - St. Lukes Episcopal Housing Market
U.S. News - July 16, 2009 U.S. News - August 28, 2009 Will Holder - September 6,
Best Cities for Jobs Houston Ranks Fifth for Personal 2008
Forbes.com - April 14, 2009 Income Houston, New York Has a
Number of Fortune 500 Houston Business Journal - August Problem
Headquarters 17, 2009 City Journal - July 16, 2008
Fortune Magazine - April 2009 Percentage Share of GDP Houston doesn't have a
Fastest Job Growth New York Times - July 09, 2009 problem
(01/08 to 01/09) - U.S. Bureau of Chicago Tribune - June 23,
Labor Statistics - March 4, 2009 Houston ranked #6 2008
Nation's Top Export Markets Where the Jobs Are - Ft. Bend Houston's Pipelines of
U.S. Department of Commerce - July County Prosperity
14, 2008 CNNMoney.com - July 19, 2009 Washington Post - June 23,
Top U.S. Real Estate Investment 2008
Markets Strangulation by Decree:
Houston ranked #3
Urban Land Institute - January 10, The Comeback of
Best Places To Begin A Career
Forbes.com - July 16, 2009
TPPF - May 27, 2008
Houston ranked #7 Lack of zoning has paid
The Brookings Institution - June ‘09
America's Most Visited Museums - off for Houston
North American Cities of the
Houston Museum of Natural Houston Chronicle - May 27,
FDI Magazine - April 2009
ForbesTraveler - March 2009 Closed case for "open"
Best Cities for Jobs in 2008 cities
Global Insight – October 2008
Forbes.com - January 10, 2008 Orange County Register -
Best Cities for Young
May 25, 2008
Houston ranked #9 Houston gets high marks
Forbes.com - July 09, 2008
America's Best Bargain Cities - on housing affordability
Nation's Most Charitable Cities
Forbes.com - May 13, 2009 study
Charity Navigator's 2008 Metro
World's Best Places For Real HBJ - March 28, 2008
Market Charitable Analysis Study
Estate Buys - Forbes.com - January Houston land policy
21, 2009 fosters homeownership
Houston ranked #4
HBJ - January 18, 2008
Best And Worst Cities For High-
Houston ranked #10 Neither Boom nor Bust
The World's Most Inventive Cities Federal Reserve Bank of
Forbes.com - July 14, 2009
BusinessWeek - April 2009 Dallas - January 2008
Best Value in Private Institutions
Top Ten Cities for Hispanics Regional Perspectives
Rice University - Kiplinger's -
Hispanic Magazine - August 2008 Rice University, Stephen L.
Top Ten Cities for Green Klineberg - November 2007
Cities Where Your Nest Egg Goes
Technology Innovation Opportunity Urbanism
Sustain Lane - March 2007 Joel Kotkin, Carrol
Forbes.com - October 2008
Robinson, Tory Gattis -
Best Big City for Business
Inc.com - July 2008
Top Ten Up-and-Coming Tech
Cities - Forbes.com - March 10, 2008
Have you personally met the owner?
Even though the property was bought as an investment, the landlord is still in the
people business and should go out of their way to meet up with lessees which can
lead to longer, more meaningful dealings between parties. Also, a landlord should
have a basic understanding about your business. Each tenant is different and may
have unique requirements.
Is the Landlord/Management proactive to
A long-term tenant is a valuable asset in a rental market favoring the tenant, so
landlords/management should make sure they keep on top of all those minor
maintenance issues which become noticeable if they pile up.
• Maintain the property in the best possible condition; make sure equipment is
• When the tenant reports maintenance problems, are they responding with urgency
• Issues involving water, electricity, heating and air conditioning or safety should be
resolved inside of 4 hours with a follow up to the tenants
Do they respond courteously to inquiries?
Do they show that they are fair-minded and understanding? Do they act as if you are
‘bothering’ them when you call.
Are they pleasant and show concern for their needs? Do they ignore your questions
Do they refresh building features annually?
Landlords need to have a plan to maintain the property on an annual and rotating
basis so as to provide a fresh appearance. Keeping up with some of the competing
buildings will demonstrate they care about the property and the tenant will be less
inclined to inquire. Amortized over time, the minor expenses don’t cost that much.
Are they open to modifications to your space?
Requests for improvements should always be considered. Landlords should be
open-minded and flexible to the tenant’s space. You can always restore the space to
its prior condition.
Does the Landlord/Management respect your
When landlords meet tenants in their property, they should be respectful, friendly
and informal. The landlord should avoid disparaging comments about possible
future plans that are adverse to the current tenancy.
Do they schedule preventative maintenance
Landlords perform regularly scheduled “preventative maintenance checks.” They
should make sure the tenants are aware of when such events are scheduled.
Performing these checks demonstrates a proactive approach as opposed to a “wait
and see” and allows landlords to find issues before they escalate.. They should ask
if everything is acceptable or if the you have any problems.
Do they communicate effectively?
Do they communicate with you on a regular and consistent basis throughout their
tenancy. Do they let you know if there is a scheduled maintenance such as parking
lot cleaning, so you can make arrangements. Tenants don’t mind being
inconvenienced once in awhile as long as they are aware and can make the
Do they invite your opinions?
Professional landlord/management teams inquire as to what would make their
environment better to work for the tenant. Tenants might have ideas, but don’t
openly present them. Many times, it may be something really small that could make
a world of difference. If it is a larger item, it may be possible for the landlord to
amortize the cost in the general operating expenses, if all the tenants will benefit
from the suggestions.
Do they send thank you notes or holiday
This is a simple thing that can go a long way. Landlords/Management should write
notes and sign cards. Have you received a small gift during holidays or upon move
in. It is small, but tenants notice.
Are they improving the energy efficiency of
In today’s market, efficiency and sustainability are very current issues that more and
more tenants are acutely aware of. If the property is inefficient, has hot spots or
drafty suites, a tenant is not likely to extend their tenancy. This inefficiency can
translate in higher operating costs. There are many federal programs and tax
advantages to retrofits of properties that result in efficiencies and reduced operating
costs. This effort is absolutely necessary.
Are they maintaining the grounds?
Maintaining the front entrance to the property and the common areas is an often
overlooked and important tool to help retain tenants. Does the landlord plant flowers
in the front of the property? Do they keep the parking lot clean and trash receptacle
hidden; the grass mowed and the bushes trimmed? Making the property inviting is
sometimes a subtle way to make the tenant experience more pleasurable.
Will the landlord offer a renewal bonus?
The easiest way to incentivize tenants to remain in the building is to offer a discount
for signing a new long-term lease. Considering how much money and time it would
cost the landlord to find new tenants, it is worth it. Landlords should provide
incentives to tenants for signing up early, possibly with free rent, a larger tenant
improvement allowance, reduction of security deposits, an offer to refresh paint or
carpet during their lease term, etc. (Note: to be proactive with such a program it
should start at least a year in advance of the expiration of their lease.
We advise you to stay
where you are, unless the
rent is unreasonable. In
this case, we will assist
you in locating a building
with similar qualities.
Given the economic
climate, it is likely the
building’s ownership will
continue to neglect their
building and their
Tenants Shun Tenants
From a technical standpoint, the Greater Houston office market became
a tenants’ market as of 2Q 2009. Vacancy is slowly climbing, rents are
falling behind the scenes and landlords are looking for innovative ways to
lure new tenants as well as keep the ones they have. But that doesn’t
mean things are great for leasing brokers. Space is available, at some
good rates with concessions, but not much is happening.
The main problem is that businesses are afraid or unable to act. The first
group is reluctant to commit because of uncertainty about their own
prospects, combined with the difficulty of securing loans or capital to fund
growth. The second group is facing cutbacks if not actual dissolution.
Rather than seek new space, these tenants want to rid themselves of
what they have, or at least a part of it.
The result is a stalemate.
Deals may be out there, but few tenants are stepping forward to take
advantage. Most tenants opt
to stay put rather than scout the market for the best opportunities.
Tenants are in a position where they can renew their leases at better
rates if they want to. Most of them choose that route, especially since
landlords are willing to offer space on short-term renewals. This provides
companies the chance to delay major business decisions until the
economy settles enough for them to feel confident about their future.
Some landlords are still reluctant to face reality, particularly landlords
who bought at the market’s top. They have to justify their purchase
price. They’re still asking $35 [a square foot] and up in a market where
it’s hard to get $25. They’re going to have to drop the rates if they’re
going to get tenants.
In the 80’s, Houston landlords were offering more than a year of free
rent to sign a tenant. Today, you can get free rent, but there will be a
sacrifice when it comes to tenant improvement dollars, especially in
buildings that were purchased in the height of the commercial real
estate market. Because landlords typically depend on their lenders to
underwrite TI design and construction today, they are refusing to pour
additional funds into buildings that are not performing well. So, look
around your building.
Landlords will ultimately be forced to adapt to tenant demands, even if
they have to be dragged to that point. It is the consumer and
commercial tenants who will dictate the plight of commercial real estate
markets, not building owners, no matter how much the landlord paid for
the building. The market fundamentals will always prevail over time.
Tenants have significantly more clout than they realize, now and for
Greater Houston has over 30 million square feet of vacant office space
of which 507,000 square feet of negative absorption occurred in 2Q.
Robert Lowery and Rick Cagnolatti of Coldwell Banker Commercial
expect the Greater Houston area to post another 3-5% of vacant space
by years end, reducing the occupancy rate to 82%. They also predict
available space, via subleasing, will double to 5 million square feet by
Analyze your space needs.
Investigate all properties and determine which are the most
appropriate for your needs.
Create a bidding war amongst several landlords for your business.
Protect you during lease negotiations.
Identify lease provisions that may cost or save you money during
your lease term.
Settle disputes that arise even after the lease is signed.
Ensure you get the most value from tenant improvement
Win concessions that anticipate your current and future needs.
*Obtain payment from the landlord for procuring you, the tenant,
for their building.
Robert S. “Bob” Lowery & Rick Cagnolatti
Tenant Representation Team
Coldwell Banker Commercial
2121 Sage Road, Suite 150
Houston TX 77056
832-275-6514 or 832-659-5355