"September was followed by October, October by November, and the uncertainties about Compaq were compounded by Continental, falling energy prices and ultimately the greatest corporate collapse in history," Will Penland, senior managing director in Houston, recollected at the annual forecast breakfast. Still, he said "our markets are fundamentally sound, disciplined and intact."

Class A office rates citywide are showing a 9.66% vacancy. Factor in all product type and it's more than 13%. The strongest submarkets were the Energy Corridor, Richmond-Greenway and North Belt. "If there's anyone anywhere who knows how to drive through a pothole without spilling coffee in their lap, it's us here in Houston," said Derrell Curry, senior vice president.

Curry predicts office vacancy could reach 14% with Enron's collapse. But, he said, that's the worst case scenario. Seasoned veterans have survived harder times than that. He fully expects Houston's resiliency to kick in and help pick up the market. "I'll wager positive absorption again this year of 1.2 million sf, new construction of 3.3 million sf and stable rental rates averaging $19 per sf," he confidently predicted.

The city's industrial market hit a rocky road in the fourth quarter, reported Gray Gilbert, vice president. More than 400,000 sf of negative absorption was charted on top of six million sf of new product that came on line in 2001. "It is no wonder overall vacancy ticked up by over a full percentage point to 7.9% and may go even higher this year," he assessed.

According to Gilbert, construction definitely will slow this year and may be limited primarily to build-to-suits. But, the sector's windfall could come with the proposed 450,000 sf of air cargo space at Bush Intercontinental Airport and the Bayport Terminal expansion that is projected to have a billion-dollar economic impact on the region. Add in Houston's low facility costs and there definitely are some pluses in the yearly industrial forecast.

Rental rates, Gilbert said, will remain flat "as owners will become quietly creative in their deal making by offering free rent, bonus broker commissions and higher tenant improvement allowances to lure tenants to spec projects."

Multifamily was the point man for 2001, breaking all records for rental rates, said Craig LaFollette, senior vice president. Overall occupancy stood at 91.5% at year's end in a market where the average rate is now 71.7 cents per sf.

The market absorbed 10,373 units last year amid a four-year construction low. Thirty-three projects added just 7,786 units to the market. "The decrease in construction was good news for a multihousing market dubbed 'over-built' in 1999, " LaFollette said. He believes this year will bring a slight increase in unit deliveries. It won't be a record-breaking year, but outside investors will continue to trade and build in Houston in 2002.

Retail is riding at 88% occupancy, the same as 2000's year-end. Rents rose enough to drive a decade high of $18.70 per sf, reported Simmi Jaggi, vice president. Development brought another 2.7 million sf on line with another 5.2 million sf in various stages of completion. The good news for the retail market, she concluded, is the continued success of the region's most popular discounters, Wal-Mart, Target, H-E-B, Kroger and Kohl's–and the flurry of suburban lifestyle centers resulting from their continued expansions.