Houston Tenants Capitalize on Soft Market in 2005
Happy New Year!
As we begin 2006, let's examine the office market statistics for 2005. This snapshot reinforces our maxim that it is still a favorable time to be a tenant in Houston.
I am pleased to be on your side of the negotiating table and look forward to working with you in 2006.
Sincerely,
Candace
Looking Ahead at 2006
The start of a new year is a traditional time to see where the economy stands and predict
what lies ahead. Recent news had both economists and corporate executives making rosy predictions that could put more pressure on rising lease rates.
Higher sales in 2006 were expected by 87% of CEOs in the recent Business Roundtable survey, with only 5% projecting lower sales. Expressing confidence, 56% of the CEOs said they would be spending more on capital investment in 2006.
Economists also saw strong spending by businesses as a powerful force that would help continue the fifth straight year of economic expansion in the U.S. In a survey of prominent economists by the Wall Street Journal, the majority
thought that the strength of the business sector would take over as the consumer housing boom that has been driving the economy begins to moderate and taper off.
In terms of growth, the consensus forecast was that the nation's gross domestic product, which is the broadest measure of economic output, would grow at an annual rate of 3.5% in 2006, not too far off the strong 4.1% average growth
experienced in the U.S. over the past
2 1/2 years.
Economic growth and business investment should mean increases in hiring, and that can impact the vacancy rate in the U.S. office market, which continued to decline for the seventh straight quarter. In addition, rental rates showed their
strongest annual growth in five years. Tenants will need the guidance of a seasoned tenant representative as the pendulum continues to swing toward the landlord's favor in months ahead.
Subleasing May Look Good to Law Firms, But Be Wary
For law firms shopping for a bargain on space, subleasing someone else's extra square
footage can seem tempting. A sublease could offer access to prime space at a discount price. Sometimes office furniture, telephone systems and even networking and computer support are included.
But a sublease is often the least desirable option, and there are traps for the unwary. In fact, when sublease space is available, there are actually three ways to approach the situation: a sublease, an assignment of lease, or drafting a
new lease with the landlord.
The big caution to subleasing is that you become dependent on the present leaseholder in many ways. For one thing, the master tenant could default down the road, especially if their business was not doing well and that caused them to
sublease in the first place. Even if the master tenant is dependable, a sublease means having to communicate through them instead of being able to work with the landlord directly. This means an extra layer of approval which could delay
decisions getting made in a timely fashion.
An assignment of the lease could work for you if the current lease is exceptionally well drafted in the current tenant's favor. But because you were not involved in that negotiation, it is best to put your needs first and go for a new
lease if possible. Generally the landlord is unwilling to accept a new lease if the primary tenant is more creditworthy.
In many situations, especially when sublease space is available for a longer term, a direct lease can often be negotiated at below-market rents, again depending on the credit of the tenant seeking the new lease. This gives you the
opportunity to negotiate concessions that are meaningful to your company.
So before you become a subtenant, get an experienced tenant representative on your side to help avoid the pitfalls. Contact Candace Baggett for some objective advice.
Cell Phones Do Much More Than Phone Calls
When the first cell phones came out in 1983, they were the size and weight of a brick and
did nothing more than place phone calls. Today's cell phones can fit in your shirt pocket and are capable of taking and displaying pictures and videos, text messaging, playing music and games, surfing the Internet, keeping track of
appointments, and much more.
While not every business user wants or needs these features, they can go from gimmicks to gotta-have functions in a hurry once you understand how to use them.
For instance, even the most basic cell phone these days is probably capable of connecting to various Internet services such as weather reports, stock quotes, and sports scores. This access can be purchased as an add-on to your plan, or on
a pay-as-you-go basis.
One Internet service that may prove the most useful is MapQuest Mobile. It not only provides maps and directions you request, if you're lost or in a big city, it can show you a map of where you are. This works if your phone is equipped
with global positioning technology, which new phones are being required to have so they give location information to 911 emergency systems.
If you really want to work on the move, cell phones combined with personal digital assistants, that have keyboards and can send and receive e-mail and Word documents are becoming more popular. So next time you have a few minutes, see what
your cell phone is capable of and how it could make you more productive.
"The beginning is always today."
Mary Wollstonecraft Shelley
English novelist (1797 - 1851)
