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Hurricane Ike's Impact on Houston Office Space

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Hurricane Ike, a category 2 storm, made landfall on the upper Texas Gulf Coast on September 13th.  Daily life changes immediately when one has little or no access to water, electricity or gasoline.

Houstonians acquired a ‘snake bitten’ attitude after Hurricanes Katrina and Rita.  Many locals tried unsuccessfully to evacuate during Rita while the city was operating in crises mode.  Because Rita made landfall east of Houston, and the herculean efforts of many to evacuate turned out to be ‘unproductive’, many elected to stay put during IKE.  We operated on generators (if you were lucky), water stored in the tub, propane powered cooking devises, batteries and candles.  And we all labored to insure the day’s required work was completed by sundown.

Home owners and businesses on same power grid as a fire or police stations, or other governmental offices, had their power back on in a day or two.  I know of many that went three weeks or more.

Various data sources cite:  Loss of Life – 66; Lost Productivity - $6B; Infrastructure Damage - $10B. 

How did this event affect Houston commercial real estate values?

While IKE did slow us down for a few weeks, the underlying activity, albeit slower than in 2006 and 2007, is still healthy.  Our firm closed several mid-size lease transactions immediately prior to, and after the storm.

Houston has arguably the best economic profile of any US city.  Demand remains healthy for high quality office environments as well as newer more functional industrial facilities.  Our rental rates, particularly for high class "A" assets, are at an all time high.  Most industry professionals expect a slight decline in absorption through 2009.  However, we collectively have not seen any significant reduction in rental rates or selling prices.

According to the Real Estate Center at Texas A&M, 3rd Q 2008 Houston posted 40,739 sf of positive net absorption, pushing the year-to-date tally to just over 400,000 sf. The quarterly growth was largely attributed to Class-A properties recording a 532,581-sf gain as the year-to-date net absorption (for Class A) total rose to over one million sf.

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