Watch the banks. Commercial real estate is highly leveraged. Debt is everything. The entire math is based on high rental rates and low vacancy rates. Without them, the debts cannot be serviced. But now in Houston, both are shooting in the wrong direction.
OK, Houston’s economy is diversified, they say. The oil bust hurts, and there have been waves of layoffs of highly paid engineers, but it won’t hit the city as bad as the last big oil bust did, they say.
And yet, the amount of office space vacated by companies that are trying to slash their operating expenses and that is now on the market as sublease space has spiked 69% by the end of 2015, to 7.6 million square feet (msf), according to real-estate services firm Savills Studley. And they ‘continue to sit on the market.’
This post was published at Wolf Street on January 26, 2016.
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