Houston Office Leasing Newsletter - September 2009


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Houston Office Leasing Newsletter - September 2009

  1. 1. HOUSTON MULTIFAMILY 1st QTR 2008 The Property Owner Pass-Through Property Owner By Robert S. “Bob” Lowery Pass-Through Tenant Representation PROPERTY TAXES Agreements Most states derive about 40% of their revenue from income taxes, a third from sales tax and the rest from taxes on items such as business licenses Best/Worst Houston Office and gasoline. Because Texas does not have a Submarkets state income tax, we have fairly high sales taxes (8.25%) and high property taxes. Tenant Representation Without much regard to this fact, more office buildings have been purchased in Houston in the Team Bios last 5 years than in the previous 20 years. Because of the active investment, office buildings have sold at significantly higher prices in Houston's market. Wired . The Harris County Appraisal District (HCAD) records that property assessments have increased up to 100 percent for some buildings, just over a one year or two year period. School districts and other taxing agencies, such as MUD districts, are also using these higher appraisals to calculate their tax assessments. Unfortunately, higher appraised values will mean higher taxes for landlords and ultimately these increases will pass through to the tenant. . solutions for tenants 1
  2. 2. HOUSTON MULTIFAMILY 1st QTR 2008 The Property Owner Pass Through By Robert S. “Bob” Lowery Continued… UTILITIES Informed landlords are renegotiating their power contracts with their utility companies. Those contracts, which normally run for a few years, have seen increases since 2004, with only a slight decrease in 2009. These escalations and the increased cost of energy will be included in any new contracts. Many landlords are restructuring lease forms to convert to a net lease rate plus electricity. This means that each tenant pays the actual costs for their electricity usage. This new lease form has moved to Class B and C buildings, outside of the Central Business District (CBD) where landlords are adopting the same Contact: changes. solutions for tenants 2121 Sage Road INSURANCE Suite 150 Many landlords are experiencing large increases Houston, TX 77056 in insurance costs following the impact of Ike, Katrina, and Rita along the Gulf Coast. Before the 713-840-5000 storms hit the Gulf Coast, Houston was rated as a "Second Tier City" by the underwriters, i.e., not on the coast and not in the direct path of the hurricanes. Now that Ike, Katrina and Rita have devastated the region, Houston is rated as a "First Tier City" just like Galveston, Beaumont and New Orleans. That change is driving the premiums for property insurance higher by as much as 50 percent over the last 3 years, due to the reclassification and proposed 15.6% hike to office buildings in the area. . solutions for tenants 1
  3. 3. HOUSTON MULTIFAMILY 1st QTR 2008 What is a representation letter and should I sign one? NORTHWEST FREEWAY A representation letter is usually a one-page document that a tenant rep broker will ask you to -152,000 SF ABSORPTION sign. It has several purposes. First and foremost, it 30% VACANCY demonstrates your commitment. Once the tenant rep broker has that letter from you, they know that RENTAL RATES SET TO FALL they are much more likely to get paid a commission for working on your lease. This means that they will work hard for you. In most cases, a good tenant rep broker will not do much more SUGAR LAND than a simple market survey without a signed letter. If you want to get the most out of the brokerage community, we recommend that you 92,000 SF ABSORPTION sign an exclusive agreement rather that working 17% VACANCY with several different agents on a non-exclusive REASONABLE RENTAL RATES basis. Is finding a space without hiring a broker a good idea? The answer is no. You as the tenant enter into a UPTOWN/GALLERIA lease once every so often. A broker negotiates for space on a daily basis. Would you go into an IRS audit without having someone to assist you? Same -380,000 SF ABSORPTION reasoning applies here. Also, when using the 13% VACANCY services of a tenant broker, it is likely that the TOUGH FIRST HALF OF YEAR- tenant will not have to pay for the service, rather the landlord, because the tenant rep broker EXTRA 1,000,000 SF VACANT brought you to the building. Now that I've hired a broker, what should I expect from him/her? KATY FREEWAY A broker is like any other service professional. You should expect them to represent your interests, to give you good advice and to help you through the 200,000 SF ABSORPTION different phases of the leasing process; that is 12% VACANCY helping you determine how much space you need, what are your most important selection criteria, STRONGEST RENTAL MARKET and then finding and negotiating for the space that RATES SET TO RISE best meets your needs. . 1
  4. 4. HOUSTON MULTIFAMILY 1st QTR 2008 Where can you find us? Mr. Lowery records 11 years in brokerage-related and tenant representation services of office and retail space in Houston. His quest for the most recent market in- formation, as well as his control of the strategic steps that are necessary in ROBERT LOWERY the negotiation of the Mobile: 832-275-6514 lease or sales transaction, Office: 713-840-5034 are unparalleled in the rlowery@cbunited.com industry. Mr. Pfeffer has 24 years experience in commercial real estate. He has represented tenants and landlords in over 450 commercial real estate projects with an aggregate value of more than $850 million dollars. Gary’s attention to lease terms helps his GARY PFEFFER clients negotiate Mobile: 713-248-8560 favorable price and or Office: 713-840-5060 terms to save significant gpfeffer@cbunited.com future dollars. Tenant Representative with Coldwell Banker Commercial, Mr. Cagnolatti has over 7 years in real estate development and its construction. Mr. Cagnolatti specializes in creating space plans for business owners to assist in workspace utilization, RICK CAGNOLATTI as well as helping his Mobile: 832-659-5355 clients determine location Office: 713-840-5050 . opportunities for potential rickeyc@cbunited.com growth. 1