By Patsy Fretwell

Are you looking for the perfect site to build your new manufacturing or office building?  Or just trying to find a space to lease for a business expansion? Commercial Gateway can assist you in finding either land or any other improved property for sale or for lease.

Commercial Gateway, the commercial division of the Houston Association of REALTORS®, was founded in 2001 by local members of the Houston brokerage community as a not-for-profit cooperative to compile and manage information on Houston’s large commercial real estate marketplace. Market areas were determined based on business activity centers and align with local area management districts.

Brokerage firms and property managers are now more advanced in their use of market data, and many have in-house research and marketing professionals.  But our challenge remains to collect, measure and document this market in terms that are relevant to the more than 1,500 member brokers from more than 650 member firms that use our information system.  The challenge now includes working in conjunction with the research and marketing professionals who provide their firms with market data, thereby reducing duplication of effort with regard to research.

Our public search allows anyone to search our database for all asset types of commercial property and find a member’s listing. Commercial Gateway members, on the other hand, access the database through a password-protected portal that allows a broader range of searchable parameters along with many different marketing and research-oriented tools and features. With more than 3,780 land listings for sale and 229 for lease, Commercial Gateway offers the largest database of land listings than any other area system.

Yet this commercial database is more than just a collection of commercial listings in the Houston area currently totaling 5,700 properties for sale and 10,500 spaces for lease. Commercial Gateway is also a researched system, with trained researchers conducting primary research, verifying property records and listings daily.  And unlike other listing services, properties in Commercial Gateway can only be listed by a professional with an active Texas real estate license, which is verified by our membership coordinator.

Although property updates are performed daily, the goal of the research staff is to make sure each single- and multi-tenant property is updated at least once every 90 days. Many firms update daily or send updates as changes occur while others distribute monthly inventories. To achieve that goal, research parameters have been set:  only properties classified as office 20,000 square feet or larger along with industrial properties 10,000 square feet or larger are actively surveyed each quarter for availability and rental rates.  All other property records are examined to ensure market areas are correct and other geographical data is substantiated in the system so searches for these properties yield accurate results.

The current surveyed database includes more than 1,440 office buildings containing 194.6 million square feet and 10,728 industrial buildings representing 380.8 million square feet. Statistics are compiled each quarter detailing vacancy, rental rates and absorption by market area and type of property and distributed in a news release. Commercial Gateway’s Advisory Board, made up of local brokers, sign off on the statistics and provide commentary on the marketplace for the release.

Maintaining an updated property database is a multi-faceted challenge.  In today’s busy expanding market, keeping track of the proposed and under-construction properties is just another facet of the research, as is keeping track of owners, agents and other building contacts.  When a broker asks to withdraw a listing, very seldom is a new broker mentioned, so more primary research is required to track down the new leasing agent.

Another major survey challenge is determining the vacancy or availability of a particular space so absorption can be calculated accurately.  Net absorption is defined as the change in occupied space from one period of time to another.  Brokers who lease a space today will usually take that space off the market and off Commercial Gateway when the lease is signed since it is no longer available; but true net absorption should not be calculated until the company physically vacates one space and occupies the new space after buildout. Absorption numbers are quoted each quarter from a number of different sources and usually vary.  The variations come from how available spaces are treated, which determines whether that space is counted as absorption this quarter or a year from now when the tenant actually occupies the space.

Available space can also be marketed and still be occupied.  Companies could be leasing on a short-term basis, or a landlord has been given notice that the company has signed a lease elsewhere and will be moving.  This is what we term future availability. Since the landlord’s dream is that one company leaves and another is waiting to occupy the space with rent being paid continuously, it is important that future availability is listed in the system.  Commercial Gateway offers two data fields that note this timing: availability date and move-in date, so clients know when a space is actually available.

Our system also tracks sublease space, which is available space that is usually not occupied but offered at a discounted rate for the remainder of the original lease contract.  The tenant may be moving elsewhere or perhaps just cutting back its space but must continue paying rent through the lease term, which is when the space then converts to direct space available from the landlord.  Sublease space is not calculated in the absorption numbers but can make a major impact on the marketplace when totaled with direct space.

Currently, members can access reports detailing current building information and historical vacancies and rental rates.  Searches can be performed using parameters such as market area, building status, class, primary use, occupancy type, year built, total building size and availability, along with others.

In addition to the basic research challenges of keeping track of brokers and owners, the many build-to-suit industrial buildings, whether for lease or for sale, require additional review. Once the single tenant moves in or the building is 100% leased, the original broker may request their name be removed as a contact for the building.  Viable contacts for these properties continue to be extremely difficult to maintain, as are contacts for the hundreds of existing single-tenant, free-standing buildings that may or may not be available.

Another survey challenge is collecting realistic market lease rates.  Many brokers prefer to report lease rates as negotiable rather than give a specific dollar amount.  And even when lease rates are quoted in dollar ranges, various lease rate types treat expenses, taxes and other occupancy costs differently. The different lease rate types make it difficult to effectively compare properties and their lease rates.  When it comes to developing statistics for the overall market, special formulas must be applied to keep the rates comparable using operating expenses, which must be collected annually.  Commercial Gateway reports all averages as gross rates, adding in the operating expenses reported.

Identifying distinct properties can also be a challenge since the names and addresses used for a specific property may vary.  A single building may have different addresses (especially if built on a corner) or a range of addresses for various tenants, so care must be taken to not create duplicate entries in the database even if two buildings show the same address.

Finally there is the challenge of compiling property characteristics, especially when it comes to industrial buildings.  Many properties are designed for different purposes, so, with industrial buildings for example, it is important to know how high the ceilings are, what types of loading doors exist, if there is a crane along with other relevant property characteristics.  Gathering this detailed profile on each specific property can be tedious, but it is very important to prospective tenants and their broker representatives.

Commercial Gateway continues to add value for our members with additional features such as a grantee/grantor property search, a comp database that tracks sales and leases, a tenant database, and other additional research and marketing tools added for brokers to better utilize the database.

As Houston’s commercial market wrestles with the challenges of the area’s changing economy, Commercial Gateway will continue to provide the most relevant, detailed information available for its members and the commercial real estate community at large.