The Houston office market is bracing for an economic storm.
Weakening oil demand and oil prices together with the wider economic downturn caused by the coronavirus COVID-19 pandemic could deal a significant blow to the city’s economy, according to the Wall Street Journal.
The office market is heavily dependent on an oil and gas industry hit hard by a production disagreement between the Organization of Petroleum Exporting Countries (OPEC) and Russia.
The city’s energy sector could lose up to 10,000 jobs, according to the Greater Houston Partnership’s head of research, Patrick Jankowski. Defaults are already up.
Trepp LLC reported last week that a nearly $70 million loan backed by an Interventure Advisors-owned office building in the city was sent to a special servicer.
Houston’s office market was hit hard by a decline in oil prices starting in 2014, but last year was recovering. There are several office projects in the works, including a 47-story tower under development by Houston-based Hines and Ivanhoe Cambridge.
Institutional investors have bought up office properties around the city, which could help buoy it going forward. Many were owned by smaller, local firms during past recessions.
“Most of the Houston buildings today are much more institutional with much more conservative capital structures,” said CBRE Senior Managing Director Mark Taylor.