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Houston Business & Commercial Law Blog

Commercial real estate projections show stable growth

Over the past two decades, commercial real estate has seen average returns that consistently hover in the double-digit realm. In fact, a 20-year average shows 10.1 percent returns on an ongoing basis. Despite the reliable profitability of the sector, some Texas investors may be concerned about the potential for a downturn in the market

It's important to note that commercial real estate is a cyclical market that naturally involves some periods of growth and decline. In 2016, returns fell below that 10.1 percent number for the first time since the financial crisis eight years before. Some projections show that 2018 and 2019 results will also fall below double digits. However, the numbers still show ongoing growth and do not indicate a systemic downturn. Projections continue to indicate that investment in the sector is positive and growth-oriented.

BlackBerry sues Facebook for infringement of 7 patents

Before smartphones, many people in Texas used devices from BlackBerry for text messaging. Although the company has ceded the mobile device market to its competitors, the company holds approximately 40,000 patents, and many of them concern cybersecurity software. Determined to derive income from its substantial portfolio of intellectual property, the company has filed a lawsuit against Facebook and its companies Instagram and WhatsApp.

The court filings detail the social media giant's alleged infringement of seven patents owned by BlackBerry. Facebook and its companies stand accused of using without permission technology for mobile messaging applications, in-game messaging, security, user interface features and battery updates.

Commercial real estate affected by e-commerce growth

Like many aspects of the commercial sector, commercial real estate in Texas is being affected by the changes brought to the retail environment by the success of e-commerce. Major online retailers like Amazon have become prominent sources of day-to-day products as well as specialty items. Increasingly, consumers are making fewer trips to retail stores in person and purchasing more of their goods online.

A number of big-box and department stores have seen an impact from the growth of e-commerce; stores from major chains like JCPenney, Macy's, Sears and CVS have closed as in-person sales drop. However, other stores and retail experiences have benefited from providing unique experiences to in-person customers that cannot be replicated by online shopping. Despite the rise of virtual businesses, there remains a significant amount of opportunity for commercial real estate investors in the retail sector.

Retail sector trends

Retailers in Texas and the rest of the country are being impacted by trends that are requiring them to be proactive when it comes to anticipating consumer behavior. Providing consumers with exactly what they want is still a concern for retailers, but these important trends can help boost the future of the retail industry.

According to the World Bank, an estimated 60 million people relocate to cities every year. The resulting urbanization and population growth gives more people the opportunity to go to stores, which results in an increase in spending.

What to look for when conducting due diligence

Individuals who are looking to purchase commercial real estate in Texas or elsewhere will generally do due diligence prior to closing on a deal. This makes it possible to look into the property, the seller and how the deal will be financed to ensure that the buyer is closing a deal that is in his or her best interest. The due diligence period can be as long or as short as the buyer and seller want it to be.

It should be long enough for a buyer to get as much information as necessary to feel comfortable about the deal. During the due diligence period, it may be possible to discover any limitations regarding how the property can be used. For instance, the property may not be zoned to be used as the buyer intends. It may also be possible that using a property in a certain manner could violate laws such as the Americans with Disabilities Act.

Excessive information sharing can put employers at risk

Employers in Texas should pay close attention to recent developments regarding employee communication with the Equal Employment Opportunity Commission, or EEOC. Employees have a right under federal law to communicate freely with the EEOC about allegations of discrimination or violations of the Americans with Disabilities Act. How an employer responds to such a complaint can have a major impact on the ensuing impact of the filing, and employers can take action to protect themselves from being at risk of further charges.

In one case, an in-house attorney issued a letter to approximately 150 employees about an ongoing EEOC lawsuit that alleged violations of the ADA. In the letter to employees, sent to alert staff that they may be questioned about the issues involved in the case, the lawyer provided extensive information about the situation. The letter included the name of the complaining employee, their specific allegations, the disability they have and the specific accommodations that they claimed were denied to them.

Superstar Enrique Iglesias sues former label in contract dispute

Many Texans regularly deal with problems created by the failure to follow through on contracts and agreements. However, these issues aren't limited to just entrepreneurs and small businesses; even major celebrities can deal with serious concerns caused by disputes over the implementation of contracts. For example, the Latin pop star Enrique Iglesias is suing Universal Music over streaming royalties in a lawsuit filed in January 2018.

Iglesias claims that he has received only a small percentage of his 50 percent royalty rate for streaming plays. The musician alleges that a breach of contract by the music distributor has deprived him of millions of dollars, and he is seeking enforcement of the stated royalty rate as well as compensation for royalties he did not receive. Iglesias' lawyer said that the business partnership between the musician and the label has achieved exceptional financial and musical success over the years as reflected in album popularity as well as billions of streams of his songs.

Twitter faces lawsuit related to trademark, breach of contract

Some Twitter users in Texas might be interested to learn that the company is involved in a lawsuit with another company called TWiT, which stands for This Week in Tech. Evan Williams, one of Twitter's co-founders, had allegedly acknowledged to Leo Laporte at TWiT that the trademarks were similar and that there had already been some confusion. However, he had assured Laporte that they intended to remain a microblogging service and not move into the area of audio and video claimed by TWiT. TWiT says they reached a satisfactory agreement based on the fact that their distribution platforms were very different.

In 2009, Williams allegedly repeated this reassurance after Laporte expressed more concern about the company expanding into audio and video. However, in 2017, Twitter announced that it would start to include original video content. Two months after that announcement, attorneys for TWiT asked Twitter to stop its trademark expansion.

Texas company loses appeal in wrongful termination case

A Texas-based company has lost an appeal involving an arbitration award. The man who received the award sold his business to the other company and was then subsequently terminated. An appeals court upheld a lower court's ruling in the case although the man was denied a motion for filed sanctions. The transaction between the two businesses involved two contracts, an interest purchase agreement and an employment agreement.

The arbitrator in the original wrongful termination case determined that the man who sold his business was terminated without just cause. While it was decided that he deserved compensation, an amount wasn't set. The arbitrator also found that a non-compete clause in the purchase agreement would remain effective for its full five-year term.

CRE investment mistakes

Texas investors who are interested in investing in the commercial real estate market should understand how difficult it can be. Regardless of what type of investment property they focus on, there are certain mistakes that they should make sure to avoid.

Making purchasing decisions without having all of the pertinent information at their disposal can result in costly missteps. Making informed decisions requires the careful consideration of the investment potential of a property, rental rates, expected grow and replacement costs. Significant thought also needs to be given to existing and future competition. Valuable assistance may be obtained from professional market managers who have the experience, intuition and market know-how to sift through properties and locate ideal investments.

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