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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[Mark One]

For the fiscal year ended December 31, 2003

OR

For the transition period from                      to                     

Commission File Number: 000-50256

Hartman Commercial Properties REIT

(Exact Name of Registrant as Specified in Its Charter)

Registrant’s telephone number, including area code: (713) 467-2222

Securities registered pursuant to section 12(b) of the Act:

None

Securities registered pursuant to section 12(g) of the Act:

Common Shares of Beneficial Interest, par value $0.001 per share

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The aggregate market value of the voting stock held by nonaffiliates of the Registrant as of June 30, 2003 (the last business day of the Registrant’s most recently completed second fiscal quarter) was $64,696,620 assuming a market value of $14.29 per share.

As of March 30, 2004, the Registrant had 4,907,107.16 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant incorporates by reference portions of its Definitive Proxy Statement for the 2004 Annual Meeting of Shareholders, which shall be filed no later than April 29, 2004, into Part III of this Form 10-K to the extent stated herein.

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HARTMAN COMMERCIAL PROPERTIES REIT

FORM 10-K

Year Ended December 31, 2003

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Forward-Looking Statements

This annual report contains forward-looking statements, including discussion and analysis of the Company’s financial condition, anticipated capital expenditures required to complete projects, amounts of anticipated cash distributions to its shareholders in the future and other matters. These forward-looking statements are not historical facts but are the intent, belief or current expectations of the Company’s management based on its knowledge and understanding of the Company’s business and industry. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the Company’s control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. You are cautioned to not place undue reliance on forward-looking statements, which reflect management’s view only as of the date of this Form 10-K. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. Factors that could cause actual results to differ materially from any forward-looking statements made in this Form 10-K include changes in general economic conditions, changes in real estate conditions, construction costs that may exceed estimates, construction delays, increases in interest rates, lease-up risks, inability to obtain new tenants upon the expiration of existing leases, and the potential need to fund tenant improvements or other capital expenditures out of operating cash flow. The forward-looking statements should be read in light of these factors and the factors identified in the “Risk Factors” section of the Company’s Registration Statement on Form 10, as previously filed with the Securities and Exchange Commission.

PART I

General Development of Business

Hartman Commercial Properties REIT (the “Company”) is a Texas real estate investment trust organized in August 1998. The Company has made an election to be taxed as a real estate investment trust (“REIT”). The Company invests in and operates retail, industrial and office properties located primarily in the Houston and San Antonio metropolitan areas, and plans to expand its investments to retail, office and industrial properties located in major metropolitan cities in the United States, principally in the Southern United States. The Company intends to lease each respective property to one or more tenants. In addition, the Company may make or invest in mortgage loans consistent with its REIT status.

Substantially all of the Company’s business is conducted through Hartman REIT Operating Partnership, L.P., a Texas limited partnership organized in 1998 (the “Operating Partnership”). The Company is the owner of a 53.37% interest in the Operating Partnership and is the sole general partner of the Operating Partnership.

The Company’s advisor is Hartman Management, L.P. (the “Management Company”), a Texas limited partnership formed in 1990. The Management Company is an affiliate of the Company. The Management Company is responsible for managing the Company’s affairs on a day-to-day basis and for identifying and making acquisitions and investments on behalf of the Company.

As of March 30, 2004, the Company had 4,907,107.16 common shares outstanding. As of such date, the Company had no shares of preferred stock issued and outstanding and no common stock equivalents outstanding. No stock options had been issued as of March 30, 2004.

On December 31, 2003, the Company owned 33 properties. All of the Company’s properties are located in the metropolitan Houston, Texas and San Antonio, Texas areas. The properties primarily consist of retail centers and each is designed to meet the needs of surrounding local communities. A supermarket or one or more nationally

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and/or regionally recognized tenants typically anchors each of the properties. In the aggregate, the properties contain approximately 2,540,000 square feet of gross leasable area.

As of December 31, 2003, the properties were approximately 88.4% leased. As of such date, anchor space at the properties, representing approximately 9.9% of total leasable area, was 100.0% leased, while non-anchor space, accounting for the remaining 90.1% balance, was approximately 87.1% leased. A substantial number of the tenants of the properties are local tenants. Indeed, 71.3% of the tenants are local tenants and 11.3% and 17.4% of the tenants are national and regional tenants, respectively.

Substantially all of the Company’s revenues consist of base rents and percentage rents received under long-term leases. For the year ended December 31, 2003, total rents and other income and percentage rents from the properties were $20,691,048 and $8,884, respectively. Approximately 62.5% of all existing leases provide for annual increases in the base rental payments with a “step up” rental clause.

Acquisition and Investment Policies

The Company primarily invests in community retail centers and office and industrial properties for long-term ownership and for the purpose of producing income. These are properties that generally have premier business addresses in especially desirable locations. Such properties generally are of high quality construction, offer personalized tenant amenities and attract higher quality tenants. It is the belief of the Company’s management that targeting this type of property for investment will enhance the Company’s ability to enter into joint ventures with other institutional real property investors (such as pension funds, public REITs and other large institutional real estate investors), thus allowing greater diversity of investment by increasing the number of properties in which the Company invests. The Company’s management also believes that a portfolio consisting of a preponderance of this type of property enhances the Company’s liquidity opportunities for investors by making the sale of individual properties, multiple properties or the Company’s investment portfolio as a whole attractive to institutional investors and by making a possible listing of the Company’s shares attractive to the public investment community. In addition, the Company may make or invest in mortgage loans consistent with its REIT status.

In making investment decisions for the Company, the Management Company will consider relevant real estate property and financial factors, including the location of the property, its condition and suitability for the current or proposed use of the property and any refurbishment needs, its historical operation and any potential liabilities associated therewith, information learned from surveys, environmental reports, title reports and policies and similar materials, its income-producing history and capacity, the prospects for long-range appreciation, and its liquidity and income tax considerations. In this regard, the Management Company has substantial discretion with respect to the selection of specific investments.

In purchasing, leasing and developing properties, the Company will be subject to risks generally incident to the ownership of real estate, including:

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The Company and its performance will be subject to additional risks as have been listed in the Company’s Registration Statement on Form 10 as previously filed with the Securities and Exchange Commission.

Competition

The Company may experience competition for tenants from owners and managers of similar projects, which may include the Company’s affiliates. The Company will experience competition in the acquisition of real estate and the making of mortgages from similar companies with access to greater resources than those available to the Company. At the time the Company elects to dispose of its properties, the Company will also be in competition with sellers of similar properties to locate suitable purchasers for its properties.

Employees

The Company has no direct employees. The employees of the Management Company and other affiliates of the Company perform a full range of real estate services for the Company, including acquisitions, property management, accounting, asset management, wholesale brokerage and investor relations.

Economic Dependency

The Company is dependent on its affiliates for services that are essential to the Company, including the sale of the Company’s shares of common stock, asset acquisition decisions, property management and other general administrative responsibilities. In the event that these companies were unable to provide these services to the Company, the Company would be required to obtain such services from other sources.

Web Site Address

The Company electronically files its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports with the Securities and Exchange Commission (“SEC”). Copies of the Company’s filings with the SEC may be obtained from the Company’s website at www.hartmanmgmt.com or at the SEC’s website, at http://www.sec.gov. Access to these filings is free of charge. The Company’s code of ethics and certain other corporate governance documentation may also be obtained from the Company’s website at www.hartmanmgmt.com.

Conflicts of Interest

The Company is subject to various conflicts of interest arising out of its relationship with the Management Company and its other affiliates, including conflicts related to the arrangements pursuant to which the Company will compensate the Management Company and its affiliates. All of the Company’s agreements and arrangements with its advisor and its affiliates, including those relating to compensation, are not the result of arm’s-length negotiations. For more information on conflicts of interest, see the “Risk Factors” section of the Company’s Registration Statement on Form 10, as previously filed with the Securities and Exchange Commission.

The Company’s advisor, the Management Company, and its affiliates will try to balance the Company’s interest with their duties to other companies managed by the Management Company. However, to the extent that the Management Company or its affiliates take actions that are more favorable to other entities than to the Company, these actions may have a negative impact on the Company’s financial performance and, consequently, on distributions to investors and on the value of the Company’s common stock.

Recent Developments

On December 31, 2003, Hartman Commercial Properties REIT, a Maryland real estate investment trust organized in December 2003 and affiliated with the Company (the “Maryland REIT”), filed a Registration Statement (the “Registration Statement”) on Form S-11 under the Securities Act of 1933 in order to register a public offering (the “Offering”) of up to 10,000,000 shares of the Maryland REIT’s common stock to be offered at a price of $10 per share. The Registration Statement also covers up to 1,000,000 shares available pursuant to the Maryland REIT’s dividend reinvestment plan. The Offering is proposed to be a best efforts continuous offering that will terminate no later than two years after the effective date of the Offering. Simultaneously with the filing of

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the Registration Statement, the Maryland REIT filed a proxy statement with the Securities and Exchange Commission for the purpose of soliciting shareholder approval of a reorganization of the Company as a Maryland entity via a merger of the Company into the Maryland REIT. The Maryland REIT will not request effectiveness of its Registration Statement and will not commence the public offering of its shares unless the shareholders of the Company approve the reorganization. If the shareholders of the Company do not approve the reorganization of the Company, it is anticipated that the Maryland REIT will either file a pre-effective amendment to its Registration Statement that would significantly alter the terms of the offering or withdraw the Registration Statement altogether. It is anticipated that the proxy statement will be submitted to the shareholders of the Company in connection with the Company’s annual shareholders meeting. For information on the risks related to the Offering, see the “Risk Factors” section of the Company’s Registration Statement on Form S-11, as previously filed with the Securities and Exchange Commission.

On December 31, 2003, the Company owned the 33 properties discussed below. All of the Company’s properties are located in the metropolitan Houston, Texas and San Antonio, Texas areas. The Company’s properties primarily consist of retail centers and each is designed to meet the needs of surrounding local communities. A supermarket or one or more nationally and/or regionally recognized tenants typically anchors each of the Company’s properties. In the aggregate, the Company’s properties contain approximately 2,540,000 square feet of gross leasable area. No individual property in the Company’s portfolio currently accounts for more than 10% of the Company’s aggregate leasable area.

As of December 31, 2003, the Company’s properties were approximately 88.4% leased. Anchor space at the properties, representing approximately 9.9% of total leasable area, was 100.0% leased, while non-anchor space, accounting for the remaining 90.1% balance, was approximately 87.1% leased. A substantial number of the Company’s tenants are local tenants. Indeed, 71.3% of the Company’s tenants are local tenants and 11.3% and 17.4% of the Company’s tenants are national and regional tenants, respectively. The Company defines:

Substantially all of the Company’s revenues consist of base rents and percentage rents received under long-term leases. For the year ended December 31, 2003, total rents and other income and percentage rents from the properties were $20,691,048 and $8,884, respectively. Approximately 62.5% of all existing leases provide for annual increases in the base rental payments with a “step up” rental clause.

The following table lists the five properties that generated the most rents during the year 2003.

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The Company currently does not have any individual properties that are material to its operations. As of December 31, 2003, the Company had no property that accounted for over 10% of either the Company’s total assets or total gross revenue.

The next several pages contain summary information for the properties the Company owned on December 31, 2003.

General Physical Attributes

The following table lists, for all properties the Company owned on December 31, 2003, the year each property was developed or significantly renovated, the total leasable area of each property, the purchase price the Company paid for such property and the anchor or largest tenant at such property.

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General Economic Attributes

The following table lists certain information that relates to the rents generated by each property. All of the information listed in this table is as of December 31, 2003.