REAL ESTATE'S SPOTTY RECOVERY.

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Author: S. L.

• Occupancy rates in commercial buildings have finally started to rise in certain cities (see chart for examples -- and one exception). But this doesn't mean that developers are getting rich. A virtual freeze in construction since 1990 means that it is still a buyer's market and many tenants are able to just cross town and lease a lot more space in better-quality buildings for no more than they were spending a year ago.

Several companies are moving within the U.S., which helps their new hometowns at the expense of their old ones. Texas benefits from a consolidating oil industry. Big winner: Houston, where rents have dropped about 6% in the past 12 months, to $15 per square foot. New residents include Salomon's Phibro Energy USA, which moved headquarters from Greenwich, Connecticut.

In New York City's overbuilt midtown, over 27% more office space was leased in the first nine months of 1992 than in the same period last year, according to Steve Seagal, president of the Edward S. Gordon real estate brokerage firm. Over the same period, average prices fell 10% to $32.70 per square foot.

Real estate analysts think rents will soon escalate as offices begin to fill up. Among the stragglers: Chicago and Los Angeles. Both were brutalized by developers' greed.

GRAPH: WHERE OFFICES ARE FILLING UP (JIM MCMANUS FOR FORTUNE/SOURCE: CB COMMERCIAL)

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By Stephanie Losee