Houston CRE Set For Massive Opportunities, 'Generational Change' Despite Uncertainty And Distress

Dislocation in Houston’s commercial real estate market is creating massive opportunities for buyers and developers, but not all properties are created equally, and timing will be everything.

That was the word from Transwestern Southwest President Kevin Roberts and others in a wide-ranging discussion of surviving down cycles, staying optimistic about Houston’s growth and resilience, and the opportunities that will arise from distress.

Houston’s struggling office market is particularly bifurcated, resulting in some cheap properties unlikely to garner much interest while buildings priced seven times higher may get snatched up immediately, Roberts said at Bisnow’s Houston 2025 Market Kickoff event at Four Season Hotel Houston late last week.

Having the wisdom to sort between the two could be key this year.

“We see a lot of people who are chasing office buildings by the pound,” Roberts said, adding that “there are $20[-per-SF] office buildings that you don't want to touch. There's $150[-per-SF] office buildings that you need to buy right now.” 

Houston has $1B in CMBS debt with a coverage ratio of 1.6 or less set to mature in the next three years, and 74% of those have interest rates below 5%, Roberts said. Meanwhile, most office buildings are being appraised at 15% to 20% less than when they were originally financed, and chances are vanishingly small that a new financing deal would offer the same interest rate — if new financing is possible to secure at all.

“There is a maturity wave coming,” Roberts said. “I think at the current time, we’re somewhere between trying not to catch a falling knife and fear of missing out.” 

Roberts' fellow panelists, all either founders or high-level executives of companies operating in Houston, said that dealing with a range of factors without knowing what the outcome will be is a fact of life in the industry. It is one those in the profession will have to get used to.

“We’re all in commercial real estate,” Lone Star PACE Chief Operating Officer Glenn Silva said. “If you can’t live with uncertainty, you shouldn’t be playing the game.” 

Over the 42 years NewQuest co-founder and Managing Partner Jay Sears has been in the business, the one thing he has learned is to stick to conservative principles.

“Times can be great, but tomorrow they could be in the toilet,” Sears said. “You have to be financially structured to handle good times and bad times.” 

While Houston asset classes including retail, healthcare and industrial are doing well at the moment, there could be some difficult financial times ahead, Roberts said. The tariffs proposed by President Donald Trump could cause a rise in prices, supply chain disruptions and delayed decisions due to uncertainty, he said. 

“At any level, increased tariffs are inflationary,” Roberts said. “Everything is going to cost more.” 

Although Trump said he would implement tariffs on Canadian, Mexican and Chinese imports on Day 1, he didn't sign any executive orders to that effect, instead issuing a memorandum instructing various departments to investigate “America First” trade policies. 

“Anybody who has read the incoming president's book, he's probably not going to do everything he says he's going to do,” Roberts said. “We probably do need to balance things out a little bit. But I think either way you look at it, tariffs are going to be a little bit painful for us.”

The impact from tariffs may not be all it is cracked up to be, though, and it will be less painful for developers that have an existing inventory of lights, metal and other commodities, Roberts said. 

And while Sears said he is inclined to say that the costs of construction and debt keep him up at night, he believes his company will get through it. 

Amid a generational ownership turnover and a reset in the office market, Houston will stay resilient, presenting a large number of opportunities to creatively change the industry, Roberts said.

“We’re at a time of generational ownership change and a generational change in our business,” Roberts said. “These guys are all trying to build housing developments, retail developments, entertainment venues that reduce friction between the user of real estate and the real estate. That’s the game that we’re all in, how to make it more attractive and reduce friction. That pace is growing exponentially.” 

Some of the opportunities are in retail, and there has never been a more exciting time for the shopping center business, said Sears, who travels to Asia to pitch the “Texas Miracle” to prospective tenants with NewQuest's Heather Nguyen.

Sears said they have quite the story to tell regarding population growth, demand for diverse cuisine and opportunities in high-end shopping centers.  

“The whole state is in fantastic shape right now,” he said. “The future for our company is really great. Our core business has never been better.”