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HOUSTON-The second quarter numbers are in and Houston’s CBD is still ailing with 345,000 sf of negative absorption. In contrast, the city’s four western submarkets rang up 600,000 sf to the positive.

Trione & Gordon Oncor International yesterday unveiled the quarter’s numbers at a press conference led by principal Sanford Criner. As before, the CBD had center stage.

Criner said the imbalance between the CBD and the suburbs will only continue to grow because the CBD has no significant demand generators for space. It’s a “very, very rough market,” he added, predicting today’s 17% vacancy will rise to 20% before all is said and done.

Criner said Houston’s office market has yet to touch bottom although the city itself might be there in the economic cycle. The good news is downtown construction is now at an end. “We have ceased adding to the problem,” he stressed.

Criner wouldn’t say how far apart the quoted rent is from the accepted rate, but the indication is that it’s comparable to the scenario a decade ago when building owners’ net effective rent ranged from negligible to $3 per sf.

The city’s main employers, the energy companies, are posting profits, but not deploying the capital into job-producing ventures that would fuel the need for more space. Instead, Criner pointed out, the top firms–Exxon, Conoco and BP–are continuing to economize through layoffs. While it’s not likely the companies will put a significant amount of space on the market, it’s also not likely that they will be expanding.

The city’s merchant energy firms, like Dynegy, are stabilizing, but there is no positive demand from that sector either, according to Criner. “Phantom space should further delay a recovery,” he said, explaining that space will be the first to fill before more is sought when the companies start growing again.

Of the 15 suburban submarkets, Southwest Freeway, Westchase, Katy Freeway and the Energy Corridor accounted for 600,000 sf of positive absorption in the quarter, according to the Houston-based Trione & Gordon’s research team.

The CB Richard Ellis Inc. and Trione & Gordon merger is still working. Criner said if all goes well that it likely will close at summer’s end. For now, the plan is to hold the downtown office and name, but eventually that too could change.

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