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.
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solutions for tenants
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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.
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solutions for tenants
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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. .
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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.
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