HOUSTON–The overall sentiment of those attending Thursday'sRealShare Houston conference was that the localmarket is in the midst of an amazing story. Rising rental rates,constant population and job growth, and a healthy pipeline of newdevelopment all comes together to create a robust market that islikely to be sustainable for the next three to four years.

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During the Institutional Capital Markets panel,moderator Steve Pumper, executive managingdirector at Transwestern, pointed out that lastyear Houston saw $4.8 billion in office sales, with the averageprice per square foot around $212. This figure spans 105 propertiesand about 26 million square feet.

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And yet, with those figures on everyone's minds, several of thepanelists admitted to not actively pursuing office deals in theHouston area and those that are find it a difficult market foracquisitions.

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“We are seeing across the board that it is tough slugging outthere,” Brad Simpkins, senior director of assetmanagement for TIAA-CREF, told attendees. “It ishard to find a good deal. You cant let any stone go unturned.”

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Part of that difficulty stems from what panelist called atale of two cities between class A and class Boffice space. Many tenants are no longer interested in locatingwithin older assets that lack amenities and the infrastructure of anewer, better class space.

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“We view the tenant's needs, and changes are so significant towhat was built in the mid 1980s and 1990s, that we are going toavoid anything that wasn't built in the last 15 years,” saidDavid Nielsen, senior vice president ofinvestments for Bentall Kennedy.

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Michael Dopler, vice president of acquisitionsfor AEW Capital Management agreed, stating thatespecially in the Energy Corridor he sees a real flight to quality,and while class A space will continue to lease up, class B will betricky.

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Those in the market are watching whatShorenstein does with 800 Bell tosee if that full-property renovation to take the class B space intothe class A space will be effective.

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“That could be the new play book that people utilize,” Simpkinssaid.

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But while there are mixed emotions about the office sector,industrial is the new buzz word.

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“Industrial is the new multifamily,” Pumper said, whileBrad Davey, vice president of ClarionPartners called it the 'industry darling.'

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Panelist, Bruce Petersen, executive managingdirector of real estate investment for USAA Real EstateCo. said his firm has been long on industrial. In 2012they developed 4 buildings and sold all of them completely vacantin 2013. They have another four going up this year and whilePetersen said he hopes they will be partly occupied when it comestime to sell he also added that you never know.

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Even with the investor demand, it isn't easy to find assets topurchase.

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“It is far and away the hardest asset class to get our handson,” Simpkins said.

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Stay tuned for more coverage on the other RealShare Houstonconference panels.

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