Office absorption is the highest it's been in 10 years and the vacancy is at its lowest point in eight years. "Once again, it seems we're going to buck the trend here in Houston," Guerrero predicts for 2008.

Guerrero's preliminary Q4 and year-end compilations show the office market is now a landlord's market. The CBD's 26.2 million sf of class A space is just 7.8% vacant. As a result, class A CBD rents rose 33% in the past year, hitting a weighted average of $34.98 per sf. Citywide, the weighted class A rate rose 24%, climbing to $30.53 per sf from a year ago. Class B office's weighted average jumped 12% to $19.78 per sf.

[IMGCAP(3)]Guerrero says rents will continue to climb and net absorption will remain positive in 2008. However, he doesn't believe either barometer will "go up as drastically"--if for no other reason than the construction pipeline. There is 4.9 million sf under construction, of which 3.6 million sf will come on line this year. And, the lion's share is in West Houston's Energy Corridor, Westchase and Northwest Freeway submarkets.

The key word for Houston, now as in yesteryear, is energy. Oil- and gas-related companies for offshore and onshore operations once again are pumping up the city's economy. Unlike 30 years ago, the story's different because the city has made a concerted effort to diversify its economic base, learning its lesson from relying on one industry when it was 80% driven by the oil and gas industry.

William C. Forrest, senior adviser for Sperry Van Ness in Houston, says today's economy is about 60% driven by oil and gas companies, climbing slightly in the past year. "It's perceived as more than that," he says, stressing it's not returned to the danger level of three decades ago nor is it likely to do so. He says the economic muscle from the Port of Houston and the Texas Medical Center are guarantees that history won't repeat itself.

[IMGCAP(4)]Forrest says the problem he foresees for 2008 will be the widening of the gap between buyers' and sellers' expectations. He predicts cap rates will go up slightly, but foreign and out-of-state buyers aren't going to realize the same rates as they will elsewhere in the country so it could dampen sales and increased per sf prices.

Forrest says retail sales are pushing $250 per sf to $300 per sf versus $150 per sf of a year or two ago. Office sales are bringing in $175 per sf to $200 per sf whereas the average price had been roughly $100 per sf. "Those two property types are getting close to their max," he says. As a result, he believes more owners might decide it's better to hold than fold in 2008 due to cap rate pressure.

Tamlyn, like Forrest and others, had deals carry over into the New Year. He says it's not a reflection of local market conditions or owners already pulling back, but rather ongoing fallout from the correction of the capital markets. He says it will be midyear before the ship rights.

"We're still closing deals and we're still financing deals. It's just with different players," Tamlyn says. "But, we're also realistic. It's different this time because sellers won't be able to refinance and pull out their equity and still hold. They'll hold, but not refinance."