Texas Real Estate Business

OCT 2017

Texas Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in Texas.

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www.REBusinessOnline.com Texas Real Estate Business • October 2017 • 39 price stabilization will return to pre- Harvey projections, subject to further geopolitical changes and influences. Virgilio: The amount of buildings affected was relatively minimal, so we aren't anticipating major long-term ef- fects from Harvey. Many of the build- ings that flooded should not flood again — at least in theory. Cizik: Pre-Harvey, the office mar- ket had begun to stabilize. While ab- sorption was still negative, the rate of space placed into availability by energy companies had definitely de- clined. The recovery stage of the market has not yet begun, but the bottom has formed. Harvey will slow the recovery for a few months, but we expect a bit of a slingshot once companies deal with the employees and corporate flood issues. Ultimate- ly, we don't anticipate that Harvey will cause more than a 60- to 90-day delay in these trends. TREB: How severe an effect is Har- vey likely to have on construction of new office projects? Stephens: We don't anticipate any major delays to completion times for projects that were under construction prior to the storm. Granello: Harvey will prove to have caused delays to construction projects around the city, depending on the phase of construction and what ex- isting infrastructure might have been damaged. Governing authorities are attempting to help accelerate building permits to damaged buildings, but the sheer volume of permits being re- quested is going to problematic. Virgilio: Above all else, the spill- over of increased materials and labor costs from the residential side will im- pact the office sector, also in the form of heightened costs, as well as in the form of delayed office build-outs. Duffy: Without Harvey, Houston is ready for a lull in new office con- struction across most submarkets. The Woodlands might be the lone excep- tion to that assertion. TREB: How are existing and pro- spective office users taking advan- tage of Houston's "tenants' market?" Stephens: Generally speaking, the Houston office market has been soft thanks to the downsizing of nu- merous energy firms. The available amount of sublease and direct space has increased dramatically since the beginning of 2015; as a result, ten- ants are able to negotiate lower rental rates, in some cases with a month or two of free rent and other tenant im- provement allowances. Granello: Office users that are represented by experienced and well-informed advisors will do well leveraging the volume of inventory. It's critical to be able to identify land- lords with the right structure and profile to get aggressive and perform reliably on aggressively priced offer- ing. Another way to reduce occupancy costs is to recast an existing lease with a two- to three-year remaining term. Many landlords are eager to add investment value through lon- ger-term leases, even if it means re- ducing a tenant's overall footprint or providing front-loaded concessions. Virgilio: So far we've found that most tenants are able to see the "writing on the wall," and get back into the market before it returns to equilibrium. Cizik: Many are taking advantage of the shift from the landlords' to the tenants' market, which developed over the past several years, by lock- ing into new leases at better econo- mies than they would have been able to achieve pre-dip. These packages are weighted with more tenant improvement dollars and a little more free rent, as opposed to just a drop in the face rate. But the declines in face rates and incentives have created windows of opportunity for office users in most submarkets. n WE HAVE FUNDED OVER $400 MILLION IN COMMERCIAL REAL ESTATE LOANS THE LAST 3 YEARS! Money360 is a direct lender with proprietary capital that ensures certainty of execution. We specialize in custom solutions for income-producing properties in transition. Bridge and permanent loans from $1M to $20M, direct nationwide lender. FEATURES: • Loan to value up to 75% • Terms of 1 year to 10 years • Primary, secondary and tertiary markets • Non-recourse available • Flexible prepayment penalties • Interest-only payments (Bridge) HOTEL RETAIL INDUSTRIAL OFFICE IRVINE, CA MORRIS COUNT Y, NJ DAY TON, OH FAYE T TE VILLE, NC $9.7M Bridge Loan 2 years • 65% LTV $1.9M Permanent Loan 5 years • 73% LTV $7.5M Bridge Loan 2 years • 75% LTV $17M Bridge Loan 3 years • 75% LTV Specialists in structuring creative financing solutions to meet borrowers' needs Custom solutions and quick funding (888) 634-0436 • money360.com/loans • loans@money360.com Greg Cizik Colliers

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