Monetary policies also played a role. The 1970s and early 1980s had runaway inflation. In October 1979, the Fed changed its approach to monetary policy driving interest rates higher, which led to the 1980 through 1982 recession. Higher interest rates reduced business spending and the Iranian oil embargo reduced US oil supplies and drove up prices. The gross domestic product was negative for six of 12 quarters. The worst was in the second quarter of 1980, the worst quarterly decline since the Great Depression.

Ironically, the high oil prices allowed Houston to run counter to the US economy and the Tax Reform Act of 1986 was intended to simplify the income tax code, broaden the tax base and eliminate many tax shelters. The result, as it pertained to commercial real estate, was to reduce the market value of CRE, create an incentive for divesting of CRE, increase the difficulty of divesting of CRE, and reduce the attractiveness of investing in new housing and construction.

Kirkpatrick says this was the recipe for the 1980s. Oil was the trigger that brought on the decline, but a lot of other ingredients were needed to create an event that is still referred to 30 years later.

There are several reasons why Houston is different today; for one, its sheer size. The Houston MSA's population in the 1980s was 3.5 million. The Houston MSA's current population is 6.6 million or double that of 30 years ago. It is also more diverse, with the Port of Houston's new container terminals and the Panama Canal expansion, along with the Texas Medical Center. An there is a true bifurcation of the energy industry today with upstream exploration and midstream shipping, logistics and storage.

Unlike the 1980s, the national economy is not in a recession, creating demand for products refined from petrochemicals. There is a low cost of feed stock (oil and natural gas) that boosts profits to refiners. And, ironically, low energy prices have led to a development boom on the east side of Houston.

Moreover, the low interest rates today (10 year UST of 1.73%) are in stark contrast to 12% in 1984. In addition, the current Fed Fund Rate of 0.37% is much lower than the 16% recorded in 1981. This low cost of capital allows owners of CRE to weather any downturn.

Kirkpatrick tells GlobeSt.com: “Today, we have a good solid monetary policy with low interest rates and a lot of out-of-state institutional capital, so there is not as much stress on the market and developers have the ability to wait it out. When you look at the market as a whole, retail is good and industrial is good.”

HOUSTON—The comparisons between the 80s and today's market have been bandied about as of late. However, how similar are the two timeframes? CBRE Houston has a rationale as to why the comparisons don't hold water.

The firm says it doesn't plan to convince anyone that oil priced at $38.77 per barrel is good for the Houston economy. But, other than oil prices, Jim Kirkpatrick, senior vice president at CBRE, says there are few similarities between Houston in 2016 and Houston in the 1980s.

Kirkpatrick tells GlobeSt.com: “There is not a panic to be had. Oil is a concern but we are adding jobs and it is important to keep things in perspective.”

First, it is helpful to take a look at the factors that caused 1980s Houston: Ever-increasing oil prices spurred an unprecedented construction boom, i.e. from 1980 to 1985, 80.8 million square feet of office space (or 58% of the market) was constructed in Houston, and 131,000 apartment units (or 33% of the market) were built in Houston. Then there was a sharp fall in the price of oil in November 1985 when a barrel of West Texas Intermediate (WTI) crude sold for $30.81 a barrel. To put this in perspective, an inflation-adjusted price would be $114.51 a barrel. In July 1986, a barrel of WTI crude sold for $11.58 a barrel, a 62% drop in roughly eight months.

Monetary policies also played a role. The 1970s and early 1980s had runaway inflation. In October 1979, the Fed changed its approach to monetary policy driving interest rates higher, which led to the 1980 through 1982 recession. Higher interest rates reduced business spending and the Iranian oil embargo reduced US oil supplies and drove up prices. The gross domestic product was negative for six of 12 quarters. The worst was in the second quarter of 1980, the worst quarterly decline since the Great Depression.

Ironically, the high oil prices allowed Houston to run counter to the US economy and the Tax Reform Act of 1986 was intended to simplify the income tax code, broaden the tax base and eliminate many tax shelters. The result, as it pertained to commercial real estate, was to reduce the market value of CRE, create an incentive for divesting of CRE, increase the difficulty of divesting of CRE, and reduce the attractiveness of investing in new housing and construction.

Kirkpatrick says this was the recipe for the 1980s. Oil was the trigger that brought on the decline, but a lot of other ingredients were needed to create an event that is still referred to 30 years later.

There are several reasons why Houston is different today; for one, its sheer size. The Houston MSA's population in the 1980s was 3.5 million. The Houston MSA's current population is 6.6 million or double that of 30 years ago. It is also more diverse, with the Port of Houston's new container terminals and the Panama Canal expansion, along with the Texas Medical Center. An there is a true bifurcation of the energy industry today with upstream exploration and midstream shipping, logistics and storage.

Unlike the 1980s, the national economy is not in a recession, creating demand for products refined from petrochemicals. There is a low cost of feed stock (oil and natural gas) that boosts profits to refiners. And, ironically, low energy prices have led to a development boom on the east side of Houston.

Moreover, the low interest rates today (10 year UST of 1.73%) are in stark contrast to 12% in 1984. In addition, the current Fed Fund Rate of 0.37% is much lower than the 16% recorded in 1981. This low cost of capital allows owners of CRE to weather any downturn.

Kirkpatrick tells GlobeSt.com: “Today, we have a good solid monetary policy with low interest rates and a lot of out-of-state institutional capital, so there is not as much stress on the market and developers have the ability to wait it out. When you look at the market as a whole, retail is good and industrial is good.”