Market Brief...
Houston
OFFICE
4Q19 Property Pictured Above: 11451 Katy Freeway | Houston, Texas 77079
HOUSTON OFFICE MARKET BRIEF 4Q 2019
TABLE OF CONTENTS 1. HOUSTON OFFICE TEAM AND SUBMARKETS
1 2 3
2. HOUSTON OFFICE MARKET A. Facts and Figures
2. SUBMARKET INTELLIGENCE
A. CBD B. Katy Freeway West C. West Loop D. The Woodlands E. Westchase F. Greenspoint/IAH G. Greenway Plaza H. FM 1960 Corridor I. Medical Center J. Katy Freeway East K. Sugar Land L. Clear Lake M. Midtown N. San Felipe/Fountain View O. West Belt P. Southwest Beltway 8 Q. East Houston/Pasadena R. North Loop West S. Bellaire T. Northwest/Highway 290 Corridor U. Far West V. Southwest Freeway X. Kingwood Y. Suburban Outliers
1
HOUSTON HLC SUBMARKET COVERAGE
OTHER SUBMARKETS 1 CBD | 49,485,052 SF 2 WEST LOOP | 24,064,782 SF 3 WESTCHASE | 18,026,956 SF 4 GREENWAY PLAZA | 11,111,781 SF 5 MEDICAL CENTER | 10,422,423 SF 6 MIDTOWN | 6,553,631 SF 7 SAN FELIPE/FOUNTAINVIEW | 6,175,155 SF 8 NORTH LOOP WEST | 4,401,624 SF 9 BELLAIRE | 4,243,553 SF 10 SOUTHWEST FREEWAY | 3,713,180 SF TOMBALL
THE WOODLANDS 19,905,007 SF
KINGWOOD 2,328,933 SF
SPRING
FM 1960 CORRIDOR 11,255,695 SF
HUMBLE
GEORGE BUSH INTERCONTINENTAL AIRPORT
CYPRESS
GREENSPOINT/IAH 12,360,355 SF WEST BELT 5,903,441 SF
EAST HOUSTON/ PASADENA 5,337,719 SF
KATY FREEWAY EAST 9,147,266 SF
KATY FREEWAY WEST 26,863,838 SF
KATY
NORTHWEST/ HIGHWAY 290 CORRIDOR 4,186,546 SF
LAKE HOUSTON
8
HOUSTON FAR WEST 4,073,505 SF
2
6
7 3
GALLERIA
10 SOUTHWEST BELTWAY 8 5,922,830 SF
BAY TOWN
1 SHIP CHANNEL
4 9 5
MEDICAL CENTER
PASADENA LA PORTE HOBBY AIRPORT
SUGAR LAND
ELLINGTON AIRPORT
RICHMOND
TRINITY BA
MISSOURI CITY
SUGAR LAND 7,540,702 SF
PEARLAND
CLEAR LAKE 6,907,597 SF
LEAGUE CITY
2
HLC HOUSTON OFFICE MARKET EXPERTS
Tod Harrison joined Holt Lunsford Commercial in 2016, as Director of Management Services for the Houston market, and in 2018 was appointed Managing Principal of the Houston Office Division. Tod is a Houston office specialist representing both private and institutional investors. In addition, he identifies strategic acquisition and disposition opportunities for his clients. Tod began his career in 1988 at Trammell Crow Company, and has extensive experience in office leasing, business development, strategic planning, acquisitions, dispositions, financial reporting, staff development, and building operations. Prior to joining HLC, he served as Associate Director of Property Management at Weingarten Realty, and Vice President at Transwestern. TOD HARRISON Managing Principal tharrison@hlhouston.com 713.602.3766
Tod is a Certified Property Manager (CPMÂŽ), and an active member of Institute of Real Estate Management (IREM). He is also a licensed Real Estate Salesperson in Texas. Tod holds a BA in Political Science from the University of West Florida, and an MBA from Keller Graduate School of Management.
Brad Segreto joined Holt Lunsford Commercial in 2017 and serves as a Market Associate. His primary responsibilities include project leasing, tenant representation, and business development initiatives for HLC’s office portfolio in the Greater Houston market. Prior to HLC, Brad worked as a sales representative for an industrial engineering firm where he assisted clients with their predictive and reliability maintenance needs in the oil and gas sector and beyond. During his time at Holt Lunsford Commercial, Brad has participated in over 90 transactions totaling more than 3.4 million square feet of rentable space.
BRAD SEGRETO Market Associate bsegreto@hlhouston.com 713.602.3758
3
Brad received his Bachelor of Science in Organizational Leadership & Supervision from the University of Houston and is a licensed real estate salesperson in Texas. Originally from The Woodlands, Brad is an active member of NAIOP, Young Professionals in Energy, the Houston Golf Association, and Champions Golf Club.
3
HLC HOUSTON OFFICE OVERALL MARKET
VACANCY - OVERALL HOUSTON 19.0%
17.7%
CONSTRUCTION - OVERALL HOUSTON
20.0%
4,500,000
18.0%
4,000,000
16.0%
3,500,000
14.0%
3,000,000
12.0%
2,500,000
10.0%
2,000,000
8.0%
1,500,000
6.0%
1,000,000
4.0% 1.3%
500,000
2.0% 0.0%
1Q 17
2Q 17
3Q 17
4Q 17
1Q 18
2Q 18
Direct
3Q 18
4Q 18
1Q 19
2Q 19
Sublet
3Q 19
0
4Q 19
1Q 17
2Q 17
3Q 17
4Q 17
1Q 18
2Q 18
3Q 18
Delivered Inventory
Total
1Q 19
2Q 19
3Q 19
4Q 19
Under Construction
OVERVIEW - OVERALL HOUSTON
ABSORPTION - OVERALL HOUSTON 7,000,000
4Q 18
20.0%
2,000,000
6,000,000 5,000,000
1,500,000 19.0% 1,000,000
4,000,000 3,000,000 2,000,000
18.0%
500,000 0
17 .0%
1,000,000
(500,000) 0
16.0% (1,000,000)
(1,000,000) (2,000,000) 1Q 17
2Q 17
3Q 17
4Q 17
1Q 18
Total Net
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
Leasing Activity
4Q 19
15.0%
(1,500,000) 4Q 16
1Q 17
2Q 17
3Q 17
Absorption
4Q 17
1Q 18
2Q 18
3Q 18
Deliveries
4Q 18
1Q 19
2Q 19
3Q 19
4Q 19
Vacancy
Source: CoStar 4Q 2019 Office Report
4
HLC HOUSTON OFFICE OVERALL MARKET
Market
Existing Inventory #Bldgs.
Total RBA
CBD
89
49,485,052
Katy Freeway West
163
26,863,838
West Loop
103
24,064,782
The Woodlands
164
19,905,007
Westchase
104
18,026,956
Vacancy Direct SF
Total SF
Vac. %
8,731,918
9,707,291
19.6%
5,477,974
6,215,095
23.1%
4,261,615
4,479,077
18.6%
1,805,500
1,953,950
9.8%
3,831,836
4,263,392
23.7%
YTD Net Absorption
YTD Deliveries
Under Const. SF
Quoted Rates
491,105
780,341
1,273,699
$41.39
637,302
120,000
0
$30.13
(209,977)
0
340,450
$35.71
280,524
256,340
337,938
$33.02
(118,750)
0
0
$27.40
Greenspoint/IAH
92
12,360,355
5,267,329
5,280,453
42.7%
154,768
0
0
$18.60
Greenway Plaza
58
11,111,781
1,775,445
1,873,934
16.9%
(149,565)
0
0
$31.99
FM 1960 Corridor
144
11,255,695
2,276,797
2,357,830
20.9%
(451,892)
257,080
54,000
$19.58
Medical Center
58
10,422,423
583,620
624,053
6.0%
(88,715)
0
0
$26.29
Katy Freeway East
64
9,147,266
756,984
873,693
9.6%
222,026
102,474
311,280
$33.80
Sugar Land
93
7,540,702
839,218
923,859
12.3%
(85,597)
38,599
254,484
$27.13
Clear Lake
95
6,907,597
1,086,545
1,098,372
15.9%
74,628
0
140,000
$22.13
Midtown
60
6,553,631
671,413
678,107
10.3%
40,947
35,363
359,390
$29.07
San Felipe/Fountain View
55
6,175,155
1,150,227
1,191,554
19.3%
(73,504)
0
0
$27.83
West Belt
68
5,903,441
861,895
1,158,928
19.6%
81,216
0
0
$24.91
Southwest Beltway 8
61
5,922,830
1,186,164
1,244,251
21.0%
(9,179)
0
0
$16.54
East Houston/Pasadena
92
5,337,719
729,404
777,254
14.6%
(95,380)
0
30,500
$22.12
North Loop West
43
4,401,624
933,625
933,625
21.2%
(63,562)
0
114,349
$24.81
Bellaire
33
4,243,553
607,051
624,212
14.7%
59,391
0
52,825
$24.89
Northwest/ Highway 290 Corridor
48
4,186,546
810,276
817,509
19.5%
77,956
64,348
0
$16.92
Far West
54
4,073,505
570,342
610,166
15.0%
(82,563)
50,000
311,120
$28.91
Southwest Freeway
32
3,713,180
922,780
922,780
24.9%
(32,533)
0
0
$15.58
Kingwood
42
2,328,933
275,845
275,845
11.8%
28,328
0
311,230
$25.53
Suburban Outliers
176
10,002,828
1,148,999
1,165,883
11.7%
77,602
234,003
186,363
$25.89
1,991
269,934,399
46,562,802
50,051,113
18.5%
764,576
1,938,548
4,077,628
$29.79
Totals
5
HOUSTON CENTRAL BUSINESS DISTRICT SUBMARKET INTELLIGENCE Absorption 297,334
vs. Prev. Qtr (31,992)
164,190
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
19.6%
20.2%
19.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
421,077
2,307,798
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
513,829 Delivered SF Quoted Rates $41.39
VITAL STATS
vs. 12 Mths Ago
vs. Prev. Qtr
vs. 12 Mths Ago
$41.51
$41.55
22.0%
1,200,000 1,000,000
20.0%
800,000 600,000
18.0%
400,000 200,000
16.0%
0 (200,000)
14.0%
(400,000) (600,000)
12.0%
(800,000) 4Q 16
1Q 17
2Q 17
3Q 17
4Q 17
1Q 18
Absorption
2Q 18
3Q 18
4Q 18
Deliveries
1Q 19
2Q 19
3Q 19
4Q 19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK The Central Business District is the largest Houston office submarket, containing more than 50M SF of class A and B office space in an area totaling less than two square miles. Houston’s CBD continues to command the highest rents in the city with a current average of $41.39 per square foot for class A and B property types. The submarket is home to a large concentration of energy, professional and business services, and government tenants. Recent residential and retail developments, and the existing infrastructure of the underground tunnel system have helped Houston’s CBD become a true live-work-play environment. At the close of 4Q 2019, the CBD submarket had a vacancy rate of 19.6% which was slightly lower than 3Q 2019. Absorption was positive with almost 300K SF, up from the 32K SF of negative absorption in 3Q 2019. Leasing activity remained solid with more than 500K SF of deals completed but activity was still lower than the almost 2.3M SF of deals completed 12 months ago. Currently, 1.2M SF of office space is under construction.
DEALS IN THE MARKET • The Tamborello Building | 1901 Milam Street – a 24K SF class B office building
• 421 Fannin Street – a 20K SF class B office building NEW DEVELOPMENTS • Texas Tower | 845 Texas Avenue – a 1,123,699 SF class A office building
• 401 Franklin Street – a 150K SF class A office building LARGE EXISTING VACANCIES • 800 Bell | 800 Bell Street – 1,314,350 SF • 1001 Fannin Street – 565,856 SF • JP Morgan Chase Tower | 600 Travis Street – 563,883 SF
Place North Tower.
• One City Centre | 1021 Main Street – 512,351 SF • 1600 Smith Street – 493,587 SF • Wells Fargo Plaza | 1000 Louisiana Street – 491,257 SF • Enterprise Plaza | 1100 Louisiana Street – 489,471 SF • Fulbright Tower | 1301 McKinney Street – 486,176 SF • GreenStreet Tower | 1201 Fannin Street – 457,139 SF • 4 Houston Center | 1221 Lamar Street – 445,729 SF • Two Allen Center | 1200 Smith Street – 442,236 SF • TC Energy Center | 700 Louisiana Street – 332,710 SF • Pennzoil Place South Tower | 711 Louisiana Street –
in One Shell Plaza.
309,151 SF • 1801 Smith Street – 308,513 SF
TOP LEASE TRANSACTIONS • Bank of America has signed a 122K SF lease in Pennzoil • Summit Midstream Partners has signed a 48K sublease • DLA Piper has signed a 31K lease in Texas Tower. • Third Coast Midstream has signed a 30K SF sublease in Hess Tower. • Beacon Offshore has signed a 25K SF lease in Three Allen Center.
6
KATY FREEWAY WEST SUBMARKET INTELLIGENCE Absorption 715,251
vs. Prev. Qtr 122,168
240,437
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
23.1%
25.8%
25.2%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
548,295
1,179,534
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$29.95
$29.47
311,813 Delivered SF Quoted Rates $30.13
VITAL STATS
vs. 12 Mths Ago 30.0%
800,000 600,000 400,000
25.0%
200,000 0 20.0%
(200,000)
(400,000) (600,000)
15.0% 4Q 16
1Q 17
2Q 17
3Q 17
4Q 17
1Q 18
Absorption
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
Deliveries
3Q 19
4Q 19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK Other than the Greenspoint submarket, no major Houston office submarket besides the Katy Freeway West submarket was hit harder by the oil downturn. This submarket includes the Energy Corridor which is home to large energy corporations ConocoPhillips, Shell, British Petroleum, among other energy and energy service related organizations. With the downturn of the energy sector, the Katy Freeway West submarket has transformed from a landlord-driven to a tenant-driven submarket. This submarket, along with most of the Metroplex, has experienced a recent and significant flight-to-quality so these large corporations continue to attract a talented workforce. At the close of 4Q 2019, the Katy Freeway West submarket had a vacancy rate of 23.1%, which was over 2% lower than 3Q 2019. Absorption was positive with more than 700K SF, up from the 122K SF absorbed in 3Q 2019. Leasing activity remained strong with more than 300K SF of deals completed but still lower than the almost 1.2M SF of deals 12 months ago. Currently, no office space is under construction.
TOP LEASE TRANSACTIONS • Penn Virginia Corporation has signed a 27K SF lease in The Offices at Park Ten.
• BlueWare has signed a 27K SF lease in The Offices at Park Ten.
• Office Evolution has signed a 12K SF lease in Park Ten Plaza.
• Real Wealth Academy has signed a 11K SF lease in The
HLC Deal
Westchester.
• One Trust Home Loans has signed a 3K SF lease in The
HLC Deal
a 139,834 SF class B office building
• Ashford Place | 1500 South Dairy Ashford Road – a 134,049 SF class B office building
• Ten West Plaza | 15915 Katy Freeway – a 105,459 SF class B office building
• 1250 Woodbranch Park Drive – a 102,956 SF class B office building
• 16900 Park Row – a 77K SF class B office building • Ashford Corner | 1710 South Dairy Ashford Road – a 23,523 SF class B office building
LARGE EXISTING VACANCIES • Three WestLake Park | 550 Westlake Park Boulevard – 417,854 SF
• Two WestLake | 580 Westlake Park Boulevard – 348,787 SF • Three Eldridge Place | 737 North Eldridge Parkway – 306,411 SF • Energy Tower II | 11720 Katy Freeway – 297,919 SF • Eldridge Oaks Phase 1 | 1080 Eldridge Parkway – 278,906 SF • West Memorial Place 2 | 15377 Memorial Drive – 267,087 SF • Republic Square 1 | 13501 Katy Freeway – 242,291 SF • Two Eldridge Place | 757 North Eldridge Parkway – 224,246 SF • Four WestLake Park | 200 Westlake Park Boulevard – 220,447 SF • Energy Center II | 575 North Dairy Ashford Road – 167,607 SF • Energy Center I | 585 North Dairy Ashford Road – 160,907 SF
Westchester.
DEALS IN THE MARKET • Cardinal Health Building | 1330 Enclave Parkway – a 200K SF class A office building
• Atrium at Park Ten | 16340 Park Ten Place Drive –
7
WEST LOOP SUBMARKET INTELLIGENCE Absorption 327,675
vs. Prev. Qtr
vs. 12 Mths Ago
(273,859)
224,592
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
18.6%
20.0%
17.7%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
363,904 Delivered SF Quoted Rate $35.71
379,017
368,919
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$35.49
$34.13
24.0%
VITAL STATS
1,000,000
22.0% 600,000 21.0%
22.0%
350,000
20.0% 19.0%
20.0%
100,000
18.0% (150,000)
17 .0%
18.0% 16.0%
(400,000)
15.0%
16.0%
(650,000)
14.0% 13.0%
14.0% 1Q 16
800,000 600,000 400,000 200,000 0 (200,000)
(900,000) 4Q 1Q 16 2Q 17
16
2Q
3Q
3Q 17 4Q17 16 16 Absorption
Absorption
4Q
1Q17 17
1Q
18 2Q 17
2Q 18 3Q
3Q
184Q 17 17 Deliveries
4Q 1Q 18 1Q 19
18
2Q
3Q
Deliveries
(400,000)
4Q
2Q 19 3Q19 4Q19 18 18Vacancy 18
1Q 19
Vacancy Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK CoStar’s Galleria, Uptown, Post Oak Park, and Riverway submarkets make up HLC’s West Loop submarket. This submarket contains approximately 24M SF of class A and B office space. Thanks to the high-profile location and assets, asking rents here are among the highest in the city. Historically, the West Loop submarket obtains average rents of $35.71/ per square foot, second only to the CBD.
NEW DEVELOPMENTS • Park Place | River Oaks | 4200 Westheimer Road – a 207,202 SF class A office building.
• 1801 Post Oak Boulevard – a 133,248 SF class A office building.
LARGE EXISTING VACANCIES • Marathon Oil Tower | 5555 San Felipe Street – 834,408 SF
At the close of 4Q 2019, the West Loop submarket had a vacancy rate of 18.6%, which was slightly lower than 3Q 2019. Absorption was positive with more than 325K SF, up from the nearly 275K SF of negative absorption in 3Q 2019. Leasing activity remained steady with more than 360K SF of deals completed, slightly lower than the almost 380K SF absorbed in 3Q 2019. Currently, 340K SF of office space is under construction.
TOP LEASE TRANSACTIONS • Parsons Corporation has signed a 57K SF lease in 2200 West Loop.
• Northern Trust has signed a 39K SF lease in 1801 Post
• Williams Tower | 2800 Post Oak Boulevard – 344,413 SF • Sage Plaza | 5151 San Felipe Street – 309,198 SF • Five Post Oak Park | 4400 Post Oak Parkway – 256,217 SF
• Post Oak Central II | 1980 Post Oak Boulevard – 244,290 SF
• One Riverway | 1 Riverway – 197,017 SF • Wells Fargo Bank Tower | 1300 Post Oak Boulevard – 189,472 SF • Three Riverway | 3 Riverway – 175,330 SF • Three Post Oak Central | 1990 Post Oak Boulevard – 171,489 SF
Oak.
• Terra Energy Partners has signed a 33K SF lease in Thirty Fifty Post Oak.
• Common Desk has signed a 29K SF lease in Thirty Forty Post Oak.
• Harper & Pearson Company has signed a 16K SF lease in One Riverway.
• Read King has signed a 12K SF lease in 1900 West Loop South.
8
8
THE WOODLANDS SUBMARKET INTELLIGENCE Absorption 85,471
vs. Prev. Qtr (358,009)
vs. 12 Mths Ago 344,801
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
9.8%
10.2%
10.1%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
119,589 Delivered SF Quoted Rates $33.02
16.0%
250,079
348,634
vs. Prev. Qtr
vs. 12 Mths Ago
48,840
705,202
vs. Prev. Qtr
vs. 12 Mths Ago
$31.22
$31.32
VITAL STATS
300,000
800,000
11.5%
250,000
11.0%
600,000 200,000
10.5%
150,000
14.0%10.0%
400,000
100,000
9.5%
200,000 50,000 9.0%
0
12.0% 8.5%
0
8.0% 7.5%
10.0%
(50,000)
(100,000) (200,000) (150,000)
7.0% 4Q 1Q 2Q 1Q 16 2Q 17 3Q 17
16
16
16
3Q 4Q17
16
Absorption
4Q 1Q17
17
1Q 2Q 18
17
Absorption
2Q 3Q 18
17
3Q 4Q 18
17
Deliveries
Deliveries
4Q 181Q
18
1Q 192Q
18
(400,000) (200,000) 2Q 3Q 4Q 19 3Q 19 4Q 19 1Q
18
18
Vacancy
19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK The Woodlands submarket continues to be one of the most active office markets in Houston. It has grown so much that it now competes with other premiere submarkets such as the CBD, West Loop, Greenway Plaza, and the two Katy Freeway submarkets. This submarket continues to outperform averages in Houston by commanding higher rents and maintaining a vacancy rate well below the city average. At the close of 4Q 2019, the The Woodlands submarket had a vacancy rate of 9.8%, which was slightly lower than 3Q 2019. Absorption was positive with around 85K SF, up from the over 350K SF of negative absorption in 3Q 2019. Leasing activity remained low with about 120K SF of deals completed, which is still lower than the almost 350K SF of deals completed 12 months ago. Currently, more than 335K SF of office space is under construction.
TOP LEASE TRANSACTIONS • Praxair Technology has signed a 14K SF lease in Sierra Pines I.
• Steptoe & Johnson has signed a 10K SF lease in Three Hughes Landing.
• Woodlands Family Institute has signed a 5K SF lease in The Woodstead Building.
DEALS IN THE MARKET • 8800 Technology Forest Place – a 268,950 SF class B
NEW DEVELOPMENTS • Alight Solutions | 8770 New Trails Drive – a 180K SF class A office building
• Building 9 | 9709 Lakeside Boulevard – a 134,938 SF class A office building
• Phase II | 2306 Rayford Road – a 20K SF class B office building
LARGE EXISTING VACANCIES • Hewitt Lake Woodlands | 9500 Lakeside Boulevard – 360K SF
• South Tower | 10000 Energy Drive – 288,609 SF • 24 Waterway | 24 Waterway Avenue – 118,557 SF • CityPlace 1 | 1700 City Plaza Drive – 113,174 SF • 2001 Timberloch Place – 83,008 SF • The Woodlands Medical Plaza 4 | 9180 Pinecroft Drive – 72,635 SF
• Wildwood Corporate Centre I | 460 Wildwood Forest Drive – 70,240 SF
• Two Hughes Landing | 1790 Hughes Landing Boulevard – 65,870 SF
• Lake Front North | 2107 Research Forest Drive – 64,834 SF
• Waterway Plaza Two | 10001 Woodloch Forest Drive – 58,656 SF
• Chase Bank Building | 25025 North I-45 Freeway – 55,416 SF
office building
• The Gateway Building | 26865 I-45 – a 24,350 SF class B office building
9
9
WESTCHASE SUBMARKET INTELLIGENCE Absorption (118,932) Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
89,996
144,812
vs. Prev. Qtr
vs. 12 Mths Ago
23.7%
23.0%
23.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
407,680
232,745
242,805 Delivered SF Quoted Rates $27.40
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$26.88
$27.28
20.0%
VITAL STATS
800,000
24.0%
200,000
18.0% 16.0%
150,000 600,000
22.0%
100,000
14.0% 20.0%
50,000
12.0%
0
18.0%
10.0% 8.0%
400,000 200,000
(50,000)0 16.0%
(100,000)
(200,000)
6.0% 14.0%
(150,000)
4.0%
(200,000)
(400,000)
12.0%
(250,000) (600,000)
2.0% 0.0%
10.0%
1Q 16
(300,000) 4Q 1Q 2Q 16 2Q 17 3Q 17
16
16
3Q
4Q17 16
Absorption
Absorption
4Q
1Q17 17
1Q
2Q 18 17
2Q 3Q 18
17
3Q 184Q
17
Deliveries
Deliveries
4Q 18 1Q
18
1Q 2Q 3Q 19 2Q 19 3Q 19
18
18
4Q
4Q19 18
Vacancy
(800,000)
1Q 19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK The Westchase office submarket is located 15 miles west of the CBD and five miles southeast of the Energy Corridor. Historically, this submarket has been popular with oil, gas, and engineering firms, as it provides an alternative to the nearby Energy Corridor. However, given the concentration of energy related tenants in this submarket, demand in Westchase is affected by changes in the energy sector similar to the Energy Corridor. Westchase surpasses almost all other submarkets with its unrivaled ingress and egress, along with the submarket’s vicinity to Houston’s population center. These attributes make it an attractive alternative to CBD, West Loop, and other competing submarkets. At the close of 4Q 2019, the Westchase submarket had a vacancy rate of 23.7%, which was slightly higher than 3Q 2019. Absorption was negative with almost 120K SF, up from the 90K SF absorbed in 3Q 2019. Leasing activity was weak with just 240K SF of deals completed and about the same as the 230K SF of deals completed 12 months ago. Currently, no office space is under construction.
TOP LEASE TRANSACTIONS • DCP Midstream has signed a 43K SF sublease in CityWest Place Building 2.
• Interface Eap has signed a 5K SF renewal in 2424 Wilcrest.
DEALS IN THE MARKET • Columbia Centre | 11011 Richmond Avenue – a 167,013 SF class A office building
• 2950 South Gessner Road – a 60,532 SF class B office building
• 6650 West Sam Houston Parkway South – a 45K SF class A office building • 2610 West Sam Houston Parkway South – a 26,523 SF class B office building • 10590 Westoffice Drive – a 26,451 SF class B office building
LARGE EXISTING VACANCIES • 10200 Bellaire Boulevard – 568,458 SF • Pinnacle Westchase | 3010 Briarpark Drive – 366,487 SF
• CityWestPlace Building 4 | 2103 CityWest Boulevard – 203,045 SF
• CityWestPlace Building 1 | 2101 CityWest Boulevard – 188,312 SF
• 3250 Briarpark Drive – 164,972 SF • Millennium Tower | 10375 Richmond Avenue – 154,179 SF • 2500 CityWest | 2500 CityWest Boulevard – 151,458 SF • Towers at Westchase I | 10370 Richmond Avenue – 143,074 SF • Towers at Westchase II | 10350 Richmond Avenue – 142,155 SF • Westchase Point | 1250 West Sam Houston Parkway – 145,034 SF • West8 Tower | 10205 Westheimer Road – 134,969 SF • Westchase Park I | 3700 West Sam Houston Parkway – 125,231 SF
• The Colonnade | 11111 Richmond Avenue – a 96,212 SF class B office building
• 10500 Richmond Avenue – a 95,170 SF class B office building
• 3030 South Gessner Road – a 61,599 SF class B office building 10
10
GREENSPOINT/IAH SUBMARKET INTELLIGENCE Absorption 140,718 Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
66,116
(16,760)
vs. Prev. Qtr
vs. 12 Mths Ago
42.7%
43.9%
44.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
137,983
192,587
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
83,180 Delivered SF Quoted Rate $18.60
vs. Prev. Qtr $18.73
vs. 12 Mths Ago $19.21
VITAL STATS
25.0%
200,000
48.0%
300,000
24.5% 100,000
24.0%
46.0%
23.5%
0
200,000
100,000
23.0%44.0% 22.5%
(100,000) 0
22.0%42.0% (200,000) (100,000)
21.5% 40.0%
21.0%
(300,000)
(200,000)
20.5% 38.0%
20.0%
(400,000) 4Q
1Q
1Q 16 2Q 17 16 16
2Q
3Q17 16
3Q
4Q17 16
Absorption
4Q
17 1Q 17
1Q 18 2Q
17
Absorption
2Q 183Q
17
3Q 4Q 1Q 2Q 18 4Q 18 1Q 19 2Q 19
17
Deliveries
18
Deliveries
18
3Q
3Q19 18
4Q
19 4Q 18
Vacancy
(300,000)
1Q 19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK The Greenspoint/IAH office submarket continues to suffer more than any other submarket in Houston and, unfortunately, there is little to suggest this trend will reverse anytime soon. This northern Houston submarket’s vacancy rate was largely affected by the downturn within the energy sector and remains the highest in the city. Rents have fallen significantly and investors have been working persistently to rebrand this submarket. At the close of 4Q 2019, the Greenspoint/IAH submarket had a vacancy rate of 42.7%, which was slightly lower than 3Q 2019. Absorption was positive with about 140K SF absorbed, up from the 66K SF absorbed in 3Q 2019. Leasing activity remained weak with just 80K SF of deals completed, still lower than the nearly 200K SF of deals completed 12 months ago. Currently, no office space is under construction.
TOP LEASE TRANSACTIONS • NuTech has signed a 18K SF lease in the Offices at Interwood.
• Kerr Wilson, PC has signed a 3.5K lease in 16676 Northchase Drive.
11
DEALS IN THE MARKET • EM Houston | 13401 North I-45 – a 143,410 SF class A office building
• Empire Central Tower | 12700 Northborough Drive – a 118,905 class B office building
• Greens Crossing I | 810 Gears Road – a 78,895 SF class B office building
• Sam Houston Plaza | 507 North Sam Houston Parkway East – a 78,622 SF class B office building
• 14450 John F Kennedy Boulevard – a 46,200 SF class B office building
• 1030-1034 Regional Park Drive – a 22,800 class B office building
LARGE EXISTING VACANCIES • CityNorth 5 | 17001 Northchase Drive – 458,331 SF • CityNorth 6 | 12450 Greenspoint Drive – 343,495 SF • CityNorth 1 | 233 Benmar Drive – 253,562 SF • 363 North Sam Houston Parkway East – 233,551 SF • 222 Benmar Drive – 198,256 SF • Glenborough Tower | 100 Glenborough Drive – 181,978 SF • 396 West Greens Road – 164,411 SF • CityNorth 4 | 16945 Northchase Drive – 164,205 SF • North Houston Tech Tower | 12707 North Freeway – 157,276 SF • World Houston Plaza | 15710 John F. Kennedy Boulevard – 153,467 SF
11
GREENWAY PLAZA SUBMARKET INTELLIGENCE Absorption
VITAL STATS
vs. Prev. Qtr
vs. 12 Mths Ago
83,080
122,894
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
24.0%
16.9%
14.9%
15.5%
16.0% 23.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
22.0%
213,710
336,059
vs. Prev. Qtr
vs. 12 Mths Ago
(223,756)
137,499 Delivered SF Quoted Rates $31.99
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$32.16
26.0% 18.0%
300,000 300,000
250,000
25.0% 200,000
17 .0%
100,000
100,000 0
15.0%
21.0%
0 (50,000)
19.0%
(200,000)(100,000)
13.0%
18.0%
(150,000) (300,000)
12.0%
$31.64
50,000
(100,000)
14.0%
20.0%
17.0%
200,000 150,000
4Q 1Q 16
1Q 2Q17
2Q 3Q 17
3Q 4Q 17
4Q 1Q 17
1Q 2Q 18
2Q 183Q
16
16
16
16
17
17
17
Absorption
Absorption
3Q 4Q 1Q 2Q 3Q 18 4Q 18 1Q 19 2Q 19 3Q19
17
Deliveries
Deliveries
18
18
18
4Q 4Q19
18
Vacancy
(200,000)
1Q 19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK The Greenway Plaza office submarket received its name from the eleven (11) building, 50 acre, master-planned complex at the heart of the submarket. Given its convenient location between the West Loop, Medical Center and CBD submarkets, Greenway Plaza continues to be one of the most desirable submarkets in Houston. Recent improvements to the master-planned Greenway Plaza complex and other recent developments have helped breathe life back into this submarket.
LARGE EXISTING VACANCIES • Five Greenway Plaza | 5 Greenway Plaza – 746,070 SF • Phoenix Tower | 3200 Southwest Freeway – 274,019 SF • Twelve Greenway Plaza | 12 Greenway Plaza – 215,241 SF
• Three Greenway Plaza | 3 Greenway Plaza – 201,254 SF
• Nine Greenway Plaza | 9 Greenway Plaza – 125,185 SF • 3737 Buffalo Speedway Avenue – 109,024 SF • Eleven Greenway Plaza | 11 Greenway Plaza – 83,266 SF
At the close of 4Q 2019, the Greenway Plaza submarket had a vacancy rate of 16.9%, which was 2% higher than 3Q 2019. Absorption was negative with almost 225K SF, a big difference from the 80K SF absorbed in 3Q 2019. Leasing activity included about 140K SF of deals completed which was significantly lower than the almost 340K SF of deals completed 12 months ago. Currently, no office space is under construction.
• 3555 West Alabama | 3555 West Alabama Street – 83,147 SF
• Weslayan Tower | 24 Greenway Plaza – 82,852 SF • Eight Greenway Plaza | 8 Greenway Plaza – 69,159 SF • 20 Greenway Plaza – 63,854 SF
TOP LEASE TRANSACTIONS • Occidental Petroleum Corporation has signed a 46K SF lease in Three Greenway Plaza.
• Lilly, Newman, & Van Ness has signed a 11K SF lease in 3355 West Alabama.
• Kroger | Burrus has signed a 7K SF lease in 3100 Weslayan.
12
12
FM 1960INTELLIGENCE CORRIDOR SUBMARKET Absorption 28,922
vs. Prev. Qtr
vs. 12 Mths Ago
(111,413)
19,729
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
20.9%
20.7%
15.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
126,829
126,527
vs. Prev. Qtr
vs. 12 Mths Ago
156,000
-
148,827 Delivered SF 73,000 Quoted Rate $19.58
vs. Prev. Qtr
vs. 12 Mths Ago
$19.89
$20.09
VITAL STATS
20.0%
200,000
200,000
22.0%
150,000 100,000
16.0%20.0%
0
100,000
12.0%18.0% (100,000) 50,000
8.0%16.0%
(200,000)
0
14.0%
4.0%
(300,000)
(50,000)
12.0%
0.0%
(400,000) 4Q
1Q
2Q
1Q 16 2Q 17 3Q 17 16 16 16
3Q
4Q17 16
Absorption
Absorption
4Q
1Q17 17
1Q
2Q
18 2Q 17
18 3Q 17
3Q 18 4Q
4Q 181Q
1Q 192Q
17
18
18
Deliveries
Deliveries
2Q 3Q 4Q 19 3Q 19 4Q 19 1Q
18
18
Vacancy
(100,000)
19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK HLC’s FM 1960 Corridor office submarket includes CoStar’s FM 1960/Highway 249, Champions, and I-45 North submarkets. The submarket follows Farm-to-Market Road 1960 from Clay Road in West Houston up to North East Houston and stops just before George Bush International Airport. This submarket is home to more than 10M SF of class A and B office space.
• Wells Fargo Cypress | 12337 Jones Road – a 85,755 SF class B office building • Northgate Tower | 14511 Falling Creek Drive – a 75K SF class B office building • Champions-Wells Fargo Building | 5625 FM 1960 West – a 64,500 class A office building • Olde Oaks Atrium | 3724 FM 1960 West – a 62,414 SF class B office building • Steeplechase Corner Professional Building | 11301 Fallbrook Drive – a 61,165 SF class B office building
At the close of 4Q 2019, the FM 1960 Corridor had a vacancy rate of 20.9%, which was slightly lower than 3Q 2019. Absorption was positive with almost 30K SF absorbed, up from the 110K SF of negative absorption in 3Q 2019. Leasing activity remained solid with almost 150K SF of deals completed. Currently, 54K SF of office space is under construction.
NEW DEVELOPMENTS
TOP LEASE TRANSACTIONS
LARGE EXISTING VACANCIES
• NCS Multistage has signed a 21K SF lease in Chasewood Crossing Three. • Spirit Environmental has signed a 9K SF lease in Centre Cypress Creek. • Old Republic Title has signed a 4K SF lease in Chasewood Crossing Three.
DEALS IN THE MARKET • 11403 Compaq Center West Drive – a 260,791 SF class B office building • Two Chasewood | 20405 State Highway 249 – a 153,226 SF class A office building • Denmark House | 12777 Jones Road – a 119,388 SF class B office building • One Chasewood | 20333 State Highway 249 – a 107,968 SF class A office building • Four Chasewood | 20329 State Highway 249 – a 105,223 SF class A office building • Three Chasewood | 20445 State Highway 249 – a 97,552 SF class A office building
13
• Point Circle – a 30K SF class B office building • 17910 Coventry Park Drive – a 24K SF class B office building
• University Park Buildings 9 & 10 | 11450 Compaq Center West Drive – 208,841 SF • Noble Energy Center II | 002 Noble Energy Way – 204,480 SF • Creekridge II | 140 Cypress Station Drive – 139,651 SF • Chasewood Crossing III | 19350 State Highway 249 – 119,672 SF • 616 FM 1960 Road West – 67,889SF • Chasewood Crossing II | 19450 State Highway 249 – 66,048 SF • Northwest Medical Plaza | 800 Peakwood Drive – 65,891 SF • Cypress Station Medical Building | 1140 Cypress Station Drive – 52,038 SF • Chasewood Crossing I | 19500 State Highway 249 – 50,747 SF • Two Kuykendahl Place | 15531 Kuykendahl Road – 45K SF • Cypresswood Crossing | 16000 Stuebner Airline Road – 43,356 SF • Texas School of Business | 711 Airtex Drive – 42,890 SF
13
MEDICAL CENTER SUBMARKET INTELLIGENCE Absorption 4,293
vs. Prev. Qtr
vs. 12 Mths Ago
(5,011)
(51,664)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
6.0%
6.0%
5.1%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
80,867
41,368
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
46,915 Delivered SF Quoted Rates $26.29
$26.17
$26.15
14.0%
VITAL STATS
200,000
7.0%
120,000 100,000 150,000
6.5%
80,000
12.0%
60,000 100,000
6.0%
40,000 20,000
10.0%5.5%
50,000
0 (20,000)
5.0%
0
(40,000)
8.0%
(60,000)
4.5%
(50,000)
(80,000) (100,000)
4.0%
6.0%
4Q
1Q 16 16
1Q
2Q 17 16
2Q
3Q17 16
3Q
4Q 17 16
Absorption
Absorption
4Q
1Q 17 17
1Q 2Q 18
17
2Q 183Q
17
3Q 4Q 1Q 2Q 18 4Q 18 1Q 19 2Q 19
17
Deliveries
Deliveries
18
18
3Q
3Q19 18
4Q
4Q19 18
Vacancy
(100,000)
1Q 19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK The Medical Center submarket is located three miles southwest of the CBD and is a specialty market focused heavily on the healthcare sector. It is home to the Texas Medical Center, the largest medical center in the world. More than two-thirds of the roughly 10M SF of office space in this submarket is considered medical office. Major medical institutions, such as the M.D. Anderson Cancer Center and Memorial Hermann Hospital, are among the top medical office tenants in this submarket. This submarket historically holds the lowest vacancy rate in the city.
LARGE EXISTING VACANCIES • Texas Medical Center | 7501 Fannin Street – 83,008 SF • Museum Medical Tower | 1213 Hermann Drive – 65,434 SF
• 7505 Fannin Street – 53,842 SF • Main Link Biotechnology Park | 10301 Stella Link Road – 42,105 SF
• One Fannin | 7400 Fannin Street – 37,288 SF • Houston Medical Plaza – 34,378 SF • 2646 South Loop West – 29,863 SF • Atrium 2656 | 2656 South Loop Freeway West – 28,389 SF
At the close of 4Q 2019, the Medical Center submarket had a vacancy rate of 6.0% which was the same as 3Q 2019. Absorption was positive with about 4K SF of space absorbed, up from the 5K SF of negative absorption in 3Q 2019. Leasing activity remained weak with just 46K SF of deals completed. Currently, no office space is under construction.
TOP LEASE TRANSACTIONS • Metropolitan Dance has signed a 6K lease in the Whitney Bank Building.
14
• Greenpark II Professional Building | 7505 Main Street – 28,224 SF • Greenpark One | 7515 South Main Street – 27,127 SF • 1200 Binz | 1200 Binz Street – 26,613 SF • NRG Office Complex | 2626 South Loop Freeway West – 26,304 SF • Prosperity Bank Plaza | 5020 Montrose Boulevard – 24,621 SF • Memorial Hermann Medical Plaza | 6400 Fannin Street – 22,915 SF
14
KATY FREEWAY EAST SUBMARKET INTELLIGENCE Absorption 44,362
vs. Prev. Qtr
vs. 12 Mths Ago
210,479
61,371
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
9.6%
10.0%
11.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
128,231
301,121
vs. Prev. Qtr
vs. 12 Mths Ago
99,268 Delivered SF Quoted Rates $33.80
102,474
-
vs. Prev. Qtr
vs. 12 Mths Ago
$33.94
$30.77
23.0%
VITAL STATS
1,000,000
15.0%
240,000
22.0%
800,000 200,000
14.0%
21.0%
600,000 160,000
13.0%
120,000 400,000
20.0% 12.0%
80,000 200,000
19.0%
40,000
11.0%
18.0% 17.0% 16.0%
0 10.0%
(40,000) (200,000)
9.0%
1Q 16
0
4Q 1Q 2Q 3Q 16 2Q 17 3Q 17 4Q 17 16 16 16
Absorption
Absorption
4Q 1Q17 17
1Q 2Q 18 17
2Q 3Q 18 17
3Q 4Q 18 17
Deliveries
Deliveries
4Q 181Q 18
1Q 192Q 18
(80,000) (400,000) 2Q 3Q 4Q 19 3Q 19 4Q 19 1Q 18 18 19
Vacancy
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK The Katy Freeway East office submarket benefits greatly from the demographics of the Memorial Villages. The submarket is centrally located along Interstate 10 and Beltway 8 near the Energy Corridor and the rapidly growing western suburbs, and is home to MetroNational’s Memorial City and Midway’s CityCentre mixed use developments.
NEW DEVELOPMENTS • 9753 Katy Freeway – a 161,280 SF class A office building
• 9655 Katy Freeway – a 150K SF class A office building LARGE EXISTING VACANCIES • One Memorial City Plaza | 800 Gessner Road – 124,261 SF
At the close of 4Q 2019, the Katy Freeway East submarket had a vacancy rate of 9.6%, which was slightly higher than 3Q 2019. Absorption was positive with almost 45K SF of space absorbed, down from 210K SF absorbed in 3Q 2019. Leasing activity remained steady with nearly 100K SF of deals completed but still lower than the more than 300K SF of deals completed 12 months ago. Currently, more than 300K SF of office space is under construction.
TOP LEASE TRANSACTIONS • Vinland Energy has signed a 3.5K SF lease in Two Memorial City Plaza.
• Blue Whale has signed a 3.5K SF ease in CityCentre Three.
DEALS IN THE MARKET • Town & Country Central I | 10497 Town & Country Way – a 149,909 SF class A office building
15
• Memorial Hermann Tower | 929 Gessner Road – 100,533 SF • Two Memorial City Plaza | 820 Gessner Road – 87,441 SF • Three Memorial City Plaza | 840 Gessner Road – 82,328 SF • CityCentre Two | 818 Town & Country Boulevard – 77,471 SF • CityCentre One | 800 Town & Country Boulevard – 64,771 SF • 952 Echo Lane – 61,984 SF • 10777 Clay Road – 56,871 SF • Medical Plaza 3 | 915 Gessner Road – 37,636 SF • MetroNational Memorial City | 10100 Katy Freeway – 36,877 SF • 920 Memorial City Way – 36,356 SF • Hedwig Place | 8731 Katy Freeway – 34K SF • Nexen Building | 945 Bunker Hill Road – 32,288 SF
15
SUGAR LAND SUBMARKET INTELLIGENCE Absorption (6,513)
vs. Prev. Qtr
vs. 12 Mths Ago
18,664
37,000
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
12.3%
12.2%
10.7%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
107,984
111,835
vs. Prev. Qtr
vs. 12 Mths Ago
79,318 Delivered SF Quoted Rates $27.13
-
20,681
vs. Prev. Qtr
vs. 12 Mths Ago
$26.51
$26.71
12.0%
VITAL STATS
250,000
14.0%
125,000
200,000
75,000
11.0%
150,000 12.0%
25,000
10.0%
100,000 (25,000)
50,000
9.0% 10.0%
(75,000)
0 8.0%
(125,000)
(50,000)
7.0%
8.0%
1Q 16
(17 5,000) 4Q 1Q 2Q 3Q 16 2Q 17 3Q 17 4Q 17
16
16
16
Absorption
4Q
1Q17 17
1Q
2Q 18 17
Absorption
2Q
3Q 18 17
3Q 4Q 18
17
Deliveries
Deliveries
4Q 181Q
18
1Q 192Q
18
2Q 3Q 4Q 19 3Q 19 4Q 19 1Q
18
18
Vacancy
(100,000)
19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK The Sugar Land office submarket, in Southwest Houston, is home to a variety of energy and engineering firms. Large corporations such as Fluor Enterprises, Schlumberger, Fairfield Technologies, and Nalco Champion call this submarket home. Other non-energy tenants including CocaCola, Imperial Sugar, and Kelsey-Seybold Clinic have large presences as well. The submarket continues to be a great suburban alternative to other major Houston office submarkets such as West Loop, Westchase, and Greenway Plaza with its vicinity to Houston’s growing population centers and workforce. At the close of 4Q 2019, the Sugar Land submarket had a vacancy rate of 12.3%, which was slightly higher than 3Q 2019. Absorption was negative with around 6.5K SF, down from the 18K SF absorbed in 3Q 2019. Leasing activity remained steady with nearly 80K SF of deals completed but was still lower than the more than 110K SF of deals completed 12 months ago. Currently, more than 250K SF of office space is under construction.
TOP LEASE TRANSACTIONS • Griffing & Company has signed a 3K SF sublease in the Comerica Bank Building.
DEALS IN THE MARKET • 13927 South Gessner Road – a 87,720 SF class B office building
• 4690 Sweetwater Boulevard – a 28,739 SF class B
NEW DEVELOPMENTS • 800 Bonaventure Way – 87,500 SF of office condos set to deliver April 2020
• 13151 West Airport Boulevard – a 56K SF class B office building
• 6921 Brisbane Court – a 36,663 SF class A medical office building
• University Boulevard – a 27K SF class B office building • 15500 Voss Road – a 25K SF class B office building • 6921 Brisbane Court – a 22,321 SF class B medical office building
LARGE EXISTING VACANCIES • Sugar Creek on the Lake | 14141 Southwest Freeway – 119,902 SF
• Sugar Creek II | 13131 Dairy Ashford Road – 106,664 SF • Building A | 1 Flour Daniel Drive – 85,927 SF • Sugar Creek Place I | 14100 Southwest Freeway – 80,986 SF
• Two Sugar Creek Center | 77 Sugar Creek Center Boulevard - 46,412 SF
• The Minute Maid Building | 2150 Town Square Place – 44,895 SF
• 12603 Southwest Freeway – 44,427 SF • The Texas Drive Building | 2245 Texas Drive – 42,403 SF • 12808 West Airport Boulevard – 42,380 SF • 7619 Branford Place – 34,732 SF • Comerica Bank Building – 34,091 SF • Commerce Green One | 14090 Southwest Freeway – 28,321 SF
office building
16
16
CLEAR LAKE SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
49,525
(24,637)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
15.9%
15.7%
17.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
87,680
87,584
vs. Prev. Qtr
vs. 12 Mths Ago
(12,617)
85,053 Delivered SF Quoted Rates $22.13
-
28,725
vs. Prev. Qtr
vs. 12 Mths Ago
$22.71
$22.28
VITAL STATS 12.0%18.0%
90,000250,000 70,000
200,000
11.0%
50,000
150,000
16.0%
30,000
10.0%
10,000100,000 (10,000)
50,000
9.0%
14.0%
(30,000)
0
(50,000)
8.0% (70,000) (50,000) 12.0%
7.0%
4Q
1Q
2Q
1Q 16 2Q 17 3Q 17 16 16 16
3Q
4Q17 16
Absorption
4Q
1Q17 17
1Q
2Q
18 2Q 17
18 3Q 17
Absorption
3Q 18 4Q
17
Deliveries
4Q 181Q
18
1Q 192Q
18
Deliveries
(90,000) (100,000) 2Q 3Q 4Q 19 3Q 19 4Q 19 1Q
18
18
Vacancy
19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK Located southeast of the CBD, the Clear Lake office submarket is home to the Lyndon B. Johnson Space Center and large concentration of government jobs. Office space in this submarket relies heavily on the Space Center but is also home to a diverse mix of industries. The area boasts strong demographics given the high volume of NASA scientists, well-paid workers at the Houston Ship Channel, and related downstream industries who choose to live in communities close to the water. At the close of 4Q 2019, the Clear Lake submarket had a vacancy rate of 15.9%, which was slightly higher than 3Q 2019. Absorption was negative with over 12K SF, down from the nearly 50K SF absorbed in 3Q 2019. Leasing activity remained steady with nearly 85K SF of deals completed. Currently, 140K SF of office space is under construction.
TOP LEASE TRANSACTIONS • Intuitive Machines has signed a 22K SF lease in 3700 Bay Area Boulevard. • Simien Commercial has signed a 3K SF lease in Bay Plaza.
NEW DEVELOPMENTS • Tannos Land Holding | 505 South Friendswood Drive – a 51,614 SF class A office building
• Phase I | 13150 Space Center Boulevard – a 53K SF class B office building
• 1400 West Nasa Parkway – a 22K SF class B office building
LARGE EXISTING VACANCIES • Clear Lake Central | 600 Gemini Street – 317,198 SF • Atrium Crest | 18333 Egret Bay Boulevard – 71,974 SF • Boeing | 3700 Bay Area Boulevard – 66,195 SF • Hercules II | 1290 Hercules Avenue – 64K SF • 13100 Space Center Boulevard – 61,110 SF • One Corporate Plaza | 2525 Bay Area Boulevard – 46,520 SF
• 2222 Bay Area Boulevard – 41,008 SF • Clear Lake I | 1300 Hercules Avenue – 31,222 SF • Two Corporate Plaza | 2625 Bay Area Boulevard – 28,937 SF
• Space Park Office Building | 2200 Space Park Drive – 26,984 SF
DEALS IN THE MARKET • Clear Lake Central | 600 Gemini Street – a 363,050 SF class B office building
• Two Corporate Plaza | 2625 Bay Area Boulevard – a 161,467 SF class A office building
• Jacobs | 2224 Bay Area Boulevard – a 138,633 SF class B office building
• One Corporate Plaza | 2525 Bay Area Boulevard – a 114,838 SF class A office building
• Galaxy II | 455 East Medical Center Boulevard – a 107,502 SF class A office building
• 17300 Saturn Lane – a 24,600 SF class B office building 17
17
MIDTOWN SUBMARKET INTELLIGENCE Absorption
VITAL STATS
vs. Prev. Qtr
vs. 12 Mths Ago
22,860
(1,288)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
10.3%
11.6%
10.5%
12.0%12.0%
vs. 12 Mths Ago
10.0%
84,729
Leasing Act. 55,524 Delivered SF Quoted Rate $29.07
vs. Prev. Qtr 128,736
103,983
vs. Prev. Qtr
vs. 12 Mths Ago
35,363
-
vs. Prev. Qtr
vs. 12 Mths Ago
$28.59
$29.53
18.0%14.0%
160,000600,000 140,000
16.0%
500,000
120,000
100,000400,000 80,000
60,000 300,000 40,000 20,000
8.0%
0
200,000 100,000
(20,000)
10.0%
6.0%
(40,000)0
4.0%
(60,000)
2.0%
(100,000) (200,000)
0.0%
(100,000)
(80,000)
(120,000)
8.0% 4Q
1Q
1Q 16 2Q 17 16 16
2Q
3Q 17 16
3Q
4Q17 16
Absorption
4Q
17 1Q 17
1Q
18 2Q 17
Absorption
2Q 18 3Q
17
3Q 184Q
17
Deliveries
Deliveries
4Q 181Q
18
1Q 2Q 3Q 4Q 19 2Q 19 3Q 19 4Q 19
18
18
18
Vacancy
(300,000)
1Q 19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK The Midtown office submarket is centrally located due west of CBD and has recently been dubbed the “Millennial Corridor”. The submarket includes the Heights to the north, Montrose/Museum District, Upper Kirby to the west, and Rice Village to the south. Further west along the Washington Corridor, the submarket has seen considerable interest from developers of all property types along Allen Parkway and Washington Avenue. At the close of 4Q 2019, the Midtown submarket had a vacancy rate of 10.3% which was slightly lower than 3Q 2019. Absorption was positive with more than 80K SF absorbed, up from the 20K SF absorbed in 3Q 2019. Leasing activity trended down with around 55K SF of deals completed, almost half of the activity 12 months ago. Currently, around 360K SF of office space is under construction.
TOP LEASE TRANSACTIONS • BD Advisors has signed a 5K SF lease in Wortham
NEW DEVELOPMENTS • The Ion | 4201 Main Street – a 270K SF class A office building.
• River Oaks Medical | 3720 Westheimer Road – a 130K SF medical office building
• Rethink Co-Working | 1512 Center Street – a 37,046 SF class A office building
LARGE EXISTING VACANCIES • Wortham Tower | 2727 Allen Parkway – 137,596 SF • Central Square | 2100 Travis Street – 115,042 SF • HCC Building | 3100 Main Street – 108K SF • America Tower | 2929 Allen Parkway – 99,987 SF • 2777 Allen Parkway – 55,302 SF • 2000 Crawford | 2000 Crawford Street – 54,805 SF • 100 Waugh | 100 Waugh Drive – 40,508 SF • Buffalo Heights | 3663 Washington Avenue – 35,363 SF • 55 Waugh Drive – 35,291 SF • 2800-2810 San Jacinto Street – 27,484 SF
Tower.
• AvidXchange had signed a 4K SF lease in Central Square.
• Areacon had signed a 3K SF lease in 115 Hyde Park. DEALS IN THE MARKET • 3800 Washington Avenue – a 24K class B office building
• 2303 Smith | 2303 Smith Street – a 23,373 SF class B office building • Washington Place Lofts | 1716-1722 Washington Avenue – a 21,817 SF class B office building
18
18
SAN FELIPE/FOUNTAIN VIEW SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
13,740
59,062
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
19.3%
19.7%
18.1%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
84,949
122,220
vs. Prev. Qtr
vs. 12 Mths Ago
26,940
93,313 Delivered SF Quoted Rate $27.83
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$28.37
$28.59
VITAL STATS 12.0%22.0%
80,000250,000 60,000
200,000
11.0%20.0%
40,000 20,000150,000
10.0%18.0%
0
100,000
(20,000)
50,000 (40,000)
9.0%16.0%
(60,000)
0
14.0%
(80,000)
8.0%
(50,000) (100,000) 12.0%
7.0%
4Q
1Q
1Q 16 2Q 17 16 16
2Q
3Q17 16
3Q
4Q17 16
Absorption
4Q
1Q 17 17
1Q
2Q 18 17
Absorption
2Q 3Q 18
17
3Q 4Q 18
17
Deliveries
Deliveries
4Q 181Q
18
1Q 192Q
18
(120,000) (100,000) 2Q 3Q 4Q 19 3Q 19 4Q 19 1Q
18
18
Vacancy
19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK HLC’s San Felipe/Fountain View office submarket is a smaller submarket with a premier location, just west of the West Loop submarket. This submarket contains about 6M SF of class A and B office space, providing tenants with a great alternative to the higher than average rates of the West Loop and Katy Freeway East submarkets. At the close of 4Q 2019, the San Felipe/Fountain View submarket had a vacancy rate of 19.3%, which was slightly lower than 3Q 2019. Absorption remained positive with over 26K SF absorbed, up from the 13K SF absorbed in 3Q 2019. Leasing activity remained steady with more than 90K SF of deals completed. Currently, no office space is under construction.
TOP LEASE TRANSACTIONS • Greenwood King Properties has signed a 12K SF lease in Memorial Tower I.
• Big 6 Drilling Company has signed a 5K SF lease in Memorial Tower II.
• Mobisoft Infotech has signed a 4K SF lease in 1811
DEALS IN THE MARKET • Woodway Office | 7660 Woodway Drive – a 110,529 SF class B office building
• 5300 Richmond Avenue – a 43,626 SF class B office building
• Westglen Property | 7915 Westglen Drive – a 22,424 SF class B office building
LARGE EXISTING VACANCIES • San Felipe Plaza | 5847 San Felipe Street – 234,892 SF • 5718 Westheimer Road – 166,672 SF • 2000 Bering | 2000 Bering Drive – 98,708 SF • 2603 Augusta Drive – 81,919 SF • Memorial Tower I – 54,632 SF • The Spectrum Office Building | 5858 Westheimer Road – 54,581 SF
• Augusta Place | 2400 Augusta Drive – 53,674 SF • Memorial Tower II – 43,100 SF • 510 Bering Drive – 40,009 SF • 1800 Bering Drive – 38,693 SF • 5850 San Felipe Street - 36,193 SF
Bering Drive.
19
19
WEST BELT SUBMARKET INTELLIGENCE Absorption
VITAL STATS
vs. Prev. Qtr
vs. 12 Mths Ago
5,925
89,992
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
100,000400,000
19.6%
17.9%
21.0%
12.0%
50,000 300,000
vs. 12 Mths Ago
10.0%
(100,624)
Leasing Act. 41,355 Delivered SF Quoted Rate $24.91
vs. Prev. Qtr 51,818
101,998
vs. Prev. Qtr
vs. 12 Mths Ago
-
24,000
vs. Prev. Qtr
vs. 12 Mths Ago
$24.95
$25.08
18.0%26.0%
200,000600,000
16.0%
150,000500,000
24.0%
22.0%
0
100,000
(100,000)
6.0%
0
(150,000)
4.0%18.0%
(100,000)
(200,000)
2.0%
(200,000)
16.0%
0.0%
200,000
(50,000)
8.0%20.0%
(250,000)
4Q 1Q 1Q 16 2Q 17
16
16
2Q 3Q 17
3Q 4Q17
16 16 Absorption
Absorption
4Q 17 1Q
17
1Q 18 2Q
17
2Q 18 3Q
17
3Q 18 4Q
17 Deliveries
Deliveries
4Q 181Q
18
1Q 2Q 3Q 4Q 19 2Q 19 3Q 19 4Q 19
18
18
18 Vacancy
(300,000)
1Q 19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK The West Belt submarket spans a quarter-mile along the West Sam Houston Parkway/Beltway 8, between Clay Road and Highway 249. This submarket houses nearly 7M SF of class A and B office space. The submarket’s proximity to the Energy Corridor makes it one of the most energydriven office markets in Houston. With the submarket’s heavy concentration of energy related tenants, the West Belt submarket felt the oil downturn more than most other submarkets. Notwithstanding this, the outlook for this submarket looks promising given its close proximity to the population center of Houston. At the close of 4Q 2019, the West Belt submarket had a vacancy rate of 19.6%, which was almost 2% higher than 3Q 2019. Absorption turned negative with over 100K SF, down from the nearly 6K SF absorbed in 3Q 2019. Leasing activity remained steady with more than 40K SF of deals completed but was less than half of the activity 12 months ago. Currently, no office space is under construction.
LARGE EXISTING VACANCIES • Westway II | 4424 West Sam Houston Parkway North – 237,246 SF
• Westway Plaza | 11330 Clay Road – 193,673 SF • Beltway Lakes Phase III | 5775 North Sam Houston Parkway West – 154,972 SF • Building Two | 11000 Corporate Centre Drive – 151,908 SF • Westway One | 11220 Equity Drive – 143,960 SF • Tanner Office Building | 11302 Tanner Road – 57,798 SF • Concourse at Westway | 4700 West Sam Houston Parkway North – 56,604 SF • York Centre | 10235 West Little York Road – 49,455 SF • Beltway Lakes Phase I | 5825 North Sam Houston Parkway West – 46,657 SF • Sam Houston Crossing One | 10343 Sam Houston Park Drive – 37,665 SF • Building Four | 4920 Westway Park Boulevard – 35,675 SF
TOP LEASE TRANSACTIONS • Parker Industrial Process has signed a 12K SF lease in 16101 Vallen Drive.
DEALS IN THE MARKET • Concourse at Westway | 4700 West Sam Houston Parkway North – a 130,223 SF class B office building
• Seismic Exchange Building II | 4805 West Way Park Boulevard – a 73,372 SF class B office building • Tanner Office Building | 11302 Tanner Road – a 57,798 SF class B office building • 8400 North Sam Houston Parkway West – a 39,818 SF class B office building • 16060 Dillard Drive – a 24K SF class B office building • 16000 Dillard Drive – a 24K SF class B office building
20
20
SOUTHWEST BELTWAY 8 SUBMARKET INTELLIGENCE Absorption 96,815 Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
(13,638)
(87,736)
vs. Prev. Qtr
vs. 12 Mths Ago
21.0%
22.6%
20.9%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
82,888
113,488
73,699 Delivered SF Quoted Rates $16.54
vs. Prev. Qtr vs. Prev. Qtr $17.01
vs. 12 Mths Ago vs. 12 Mths Ago $17.26
VITAL STATS 12.0%24.0%
250,000 100,000 80,000
200,000
60,000
11.0% 22.0%
40,000150,000 20,000
10.0%
0
20.0%
100,000
(20,000)
50,000
9.0%
(40,000) (60,000) 0
18.0%
(80,000)
8.0%
(50,000) (100,000) 16.0%
7.0%
4Q
1Q
1Q 16 2Q 17 16 16
2Q
3Q17 16
3Q
4Q17 16
Absorption
4Q
17 1Q 17
Absorption
1Q
18 2Q 17
2Q 18 3Q
17
3Q 18 4Q
17
Deliveries
Deliveries
4Q 181Q
18
1Q 192Q
18
(120,000) (100,000) 2Q 3Q 4Q 19 3Q 19 4Q 19 1Q
18
18
Vacancy
19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK HLC’s Southwest Beltway 8 office submarket extends southeast to the tip of Missouri City and northwest to the Buffalo Bayou, just west of the Energy Corridor. The submarket’s geographic boundaries extend much further than those of neighboring West Houston submarkets but deliveries here have been significantly fewer than in other submarkets this cycle, partially due to its distance from the Energy Corridor. At the close of 4Q 2019, the Southwest Beltway 8 submarket had a vacancy rate of 21.0%, which was lower than 3Q 2019. Absorption was positive with about 100K SF absorbed, up from the 13K SF of negative absorption in 3Q 2019. Leasing activity remained steady with over 70K SF of deals completed. Currently, no office space is under construction.
TOP LEASE TRANSACTIONS • Radiant Payment System has signed a 1.3K SF lease in
LARGE EXISTING VACANCIES • Southwest Corporate Center | 9700-9702 Bissonnet Street – 217,957 SF
• 11111 South Wilcrest Drive – 190,398 SF • Houston Technology Center | 5959 Corporate Drive – 90,791 SF • Centre One | 9800 Centre Parkway – 84,232 SF • Westwood Green | 9494 Southwest Freeway – 74,712 SF • The Center | 8323 Southwest Freeway – 71,527 SF • The Center | 8303 Southwest Freeway – 69,283 SF • Merlyn Plaza | 9301 Southwest Freeway – 52,777 SF • 9896 Bissonnet Street – 50,586 SF • Fondren Professional Center – 44,758 SF • Park Green I | 8300 Bissonnet Street – 43,427 SF • 14602 Presidio Square Boulevard – 42,716 SF • The Ranchester Building – 40,695 SF
The Center.
DEALS IN THE MARKET • American First Tower | 9999 Bellaire Boulevard – a 211,587 SF class A office building
• 11111 South Wilcrest Drive – a 190,398 SF class B office building • Westwood Green | 9494 Southwest Freeway – a 139,529 SF class B office building • 6100 Corporate Drive – a 73,045 SF class B office building • 10710 South Sam Houston Parkway West – a 46,622 SF class B office building • 14602 Presidio Square Boulevard – a 42,716 SF class B office building • 9945 Bissonnet Street – a 27,500 SF class B office building
21
21
EAST HOUSTON/PASADENA SUBMARKET INTELLIGENCE VITAL STATS
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(12,706)
(64,588)
33,534
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
14.6%
14.3%
12.8%
12.0%14.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
10.0%
63,380 Delivered SF -
80,554 vs. Prev. Qtr
58,868 vs. 12 Mths Ago
-
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
22.12
21.42
21.99
18.0%16.0%
140,000600,000
16.0%
120,000
500,000
100,000
400,000
80,000
60,000300,000 40,000
200,000
20,000
8.0%
0
100,000
(20,000)
12.0%
6.0%
0
(40,000)
4.0%
(100,000)
(60,000)
(80,000) (200,000)
2.0%
(100,000)
10.0%
0.0%
4Q
1Q
1Q 16 2Q 17 16 16
2Q
3Q17 16
3Q
4Q17 16
Absorption
Absorption
4Q 17 1Q 17
1Q 18 2Q 17
2Q 18 3Q
17
3Q 18 4Q
17
Deliveries
Deliveries
4Q 181Q
18
1Q 2Q 3Q 4Q 19 2Q 19 3Q 19 4Q 19
18
18
18
Vacancy
(300,000)
1Q 19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK HLC’s East Houston/Pasadena office submarket’s location has historically been driven more by industrial than office products. Fundamentals, though somewhat soft, were still healthier than many submarkets across the city. At the close of 4Q 2019, the East Houston/Pasadena submarket had a vacancy rate of 14.6% which was slightly higher than 3Q 2019. Absorption remained negative with over 12K SF, but was lower than the nearly 65K SF of negative absorption in 3Q 2019. Leasing activity remained steady with more than 63K SF of deals completed. Currently, 30K of office space is under construction.
TOP LEASE TRANSACTIONS • Zachry has signed a 14K SF lease in 3737 Red Bluff
LARGE EXISTING VACANCIES • 100 Pasadena Boulevard – 114,356 SF • Phase III | 4460 Highway 225 – 80,613 SF • 5616 Lawndale Street – 67,239 SF • Atrium 10 Tower | 11811 East Freeway – 29,785 SF • Gulf Freeway Plaza | 9333 Bryant Street – 29,750 SF • Bank of America Building | 213 West Southmore Avenue – 27,559 SF
• Bayshore Medical Building | 3333 Bayshore Boulevard – 26,335 SF • BPM Airport | 8031 Airport Boulevard – 25,715 SF • Original US Schlumberger HQ (1938) | 2720 Leeland Street – 25,500 SF • Medical Professional Building I | 908 East Southmore Boulevard – 25,145 SF • 12621 Featherwood Drive – 24,716 SF
Road.
DEALS IN THE MARKET • Texas Citizens Bank Building | 4949 Fairmont Parkway – a 51,836 SF class B office building
• Medical Professional Building I | 908 East Southmore Boulevard – a 41,778 SF class B office building
• Gullett & Associates Engineering | 7135 Office City Drive – a 23,512 SF class B office building
• GSA at Office City Plaza | 7141 Office City Drive – a 21,962 SF class B office building
22
22
NORTH LOOP WEST SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(10,101)
101,567
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
21.2%
22.3%
19.8%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
92,159
49,332
vs. Prev. Qtr
vs. 12 Mths Ago
47,256
87,127 Delivered SF Quoted Rates $24.81
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$25.33
$24.27
VITAL STATS 12.0%24.0%
250,000 150,000 200,000
100,000
11.0%
22.0%
150,000
50,000
10.0%
100,000 0
20.0%
50,000
9.0%
(50,000)
0
18.0%
(100,000)
8.0%
(50,000) (150,000)
16.0%
7.0%
4Q
1Q
1Q 16 2Q 17 16 16
2Q
3Q 17 16
3Q
4Q17 16
Absorption
4Q
1Q17 17
Absorption
1Q
18 2Q 17
2Q 18 3Q
17
3Q 18 4Q
17
Deliveries
Deliveries
4Q 181Q
18
1Q 2Q 3Q 4Q 19 2Q 19 3Q 19 4Q 19 1Q
18
18
18
Vacancy
(100,000)
19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK HLC’s North Loop West office submarket is located northwest of the CBD and is within the transitioning Heights and Oak Forest/Garden Oaks communities. This submarket consists of more than 6M SF with most of the office properties located along the western portion of Interstate 610 North Loop which lends the submarket its name.
LARGE EXISTING VACANCIES • Brookhollow Central II | 2900 North Loop Freeway West – 182,815 SF
• Brookhollow Central III | 2950 North Loop Freeway West – 131,096 SF
• 2727 North Loop Freeway West – 123,103 SF • North Loop Center | 1235 North Loop Freeway West – 70,579 SF
At the close of 4Q 2019, the North Loop West submarket had a vacancy rate of 21.2% which was over 1% lower than 3Q 2019. Absorption was positive with more than 47K SF absorbed, compared to the 10K SF of negative absorption in 3Q 2019. Leasing activity remained steady with almost 90K SF of deals completed. Currently, 114K SF of office space is under construction.
TOP LEASE TRANSACTIONS • Automated Health Management Services has signed a 6K SF lease in 1415 North Loop West.
• Old Republic Title has signed a 3K SF lease in 1225
• Brookhollow Central I | 2800 North Loop Freeway West – 53,172 SF • 1225 North Loop Freeway West – 32,315 SF • 10050 Northwest Freeway – 28,700 SF • 2600 North Loop Freeway West – 28,346 SF • 2707 North Loop Freeway West – 23,928 SF • 2180 North Loop West – 22,929 SF • Brookhollow II | 9800 Northwest Freeway – 20,889 SF • Washington Place North & South – 19,828 SF • 1800 West 26th Street – 19,453 SF • Citadel Plaza | 2600 Citadel Plaza Drive – 17,268 SF
North Loop West.
NEW DEVELOPMENTS • The MKT | 600 North Shepherd Drive – a 89,425 SF class A office park
23
23
SUBMARKETBELLAIRE INTELLIGENCE Absorption
VITAL STATS
vs. Prev. Qtr
vs. 12 Mths Ago
(33,200)
(5,924)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
14.7%
16.1%
16.1%
12.0%14.0%
vs. 12 Mths Ago
10.0%
57,620
Leasing Act. 67,875 Delivered SF Quoted Rates $24.89
vs. Prev. Qtr 141,618
64,997
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$25.47
$22.21
18.0%18.0%
600,000
16.0%
100,000500,000
16.0% 0
400,000 300,000
(100,000)
200,000
12.0%
(200,000)
8.0%
100,000
10.0%
6.0%
0 (300,000)
4.0% 8.0%
(400,000)
(100,000)
2.0% 0.0%
(200,000) (500,000)
6.0% 4Q 1Q 1Q 16 2Q 17
16
16
2Q 3Q 17
3Q 4Q17
16 16 Absorption
Absorption
4Q 17 1Q
17
1Q 18 2Q
17
2Q 18 3Q
17
3Q 184Q
17 Deliveries
4Q 18 1Q
18
1Q 2Q 3Q 4Q 19 2Q 19 3Q 19 4Q 19
18
Deliveries
18
18 Vacancy
(300,000)
1Q 19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK Adjacent to the Galleria/Uptown and the Texas Medical Center, Bellaire is a smaller more mature office submarket. Like much of Houston, a significant amount of Bellaire’s inventory was delivered in the 1970s and 1980s. With the submarket’s proximity to the Texas Medical Center, many medical tenants call this submarkethome. At the close of 4Q 2019, the Bellaire submarket had a vacancy rate of 14.7%, which was nearly 2% lower than 3Q 2019. Absorption was positive with over 50K SF absorbed, up from the 33K SF of negative absorption in 3Q 2019. Leasing activity remained steady with more than 60K SF of deals completed but still lower than the 140K SF of deals completed in 3Q 2019. Currently, 52K SF of office space is under construction.
TOP LEASE TRANSACTIONS • Universal Pegasus International has signed a 20K SF lease in Loop Central II.
• M&A Advanced Healthcare has signed a 4K SF lease in West Tower.
24
DEALS IN THE MARKET • 9009 West Loop South – a 472,847 SF class B office building
• Southwestern AT&T | 6500 West Loop South – a 351,030 SF class B office building
• 5606 South Rice Avenue – a 20,602 SF class B office building
• 4909 Bissonnet Street – a 20,586 SF class B office building
NEW DEVELOPMENTS • Bissonnet Medical Plaza | 4460 Bissonnet Street – a 52,825 SF class A medical office building
LARGE EXISTING VACANCIES • 4800 Fournace Place – 305,202 SF • Houston Chronicle | 4747 Southwest Freeway – 82,200 SF
• West Loop I | 6565 West Loop South – 51,663 SF • Loop Central I | 4888 Loop Central Drive – 42,617 SF • Loop Central III | 4828 Loop Central Drive – 39,116 SF • Bellaire Medical Professional Building | 6550 Mapleridge Street – 30,699 SF • Loop Central II | 4848 Loop Central Drive – 29,982 SF • 4900 Fournace Place – 29K SF • West Loop II | 6575 West Loop South – 26,482 SF
24
NORTHWEST/ HIGHWAY 290 CORRIDOR SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
68,801
(1,175)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
19.5%
19.6%
20.2%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
3,001
90,654 Delivered SF Quoted Rate $16.92
93,336
64,331
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$17.20
$17.11
VITAL STATS 12.0%22.0%
250,000 80,000 60,000
200,000
21.0%
11.0%
40,000
150,000
20.0%
20,000
10.0%
0
100,000
19.0% (20,000)
50,000
9.0%
(40,000)
18.0%
0
(60,000)
8.0%17 .0% (80,000) (50,000) 16.0%
7.0%
4Q
1Q
1Q 16 2Q 17 16 16
2Q
3Q17 16
3Q
4Q17 16
Absorption
Absorption
4Q
1Q 17 17
1Q
2Q 18 17
2Q 3Q 18
17
3Q 4Q 18
17
Deliveries
4Q 181Q
18
1Q 192Q
18
Deliveries
(100,000) (100,000) 2Q 3Q 4Q 19 3Q 19 4Q 19 1Q
18
18
Vacancy
19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK HLC’s Northwest/Highway 290 Corridor office submarket includes CoStar’s Northwest Near and Northwest Far submarkets. The struggles in this submarket over the past few years are primarily attributable to the extensive expansion and reconstruction of U.S. Highway 290 which has impacted traffic flow within the submarket. The 290 project is now complete and the submarket is starting to see an increase in activity, but the recovery is sure to take some time. Most of the more than 4M SF of class A and B office space is located in the vicinity of Highway 290 and Hollister Road. At the close of 4Q 2019, the Northwest Highway 290 Corridor submarket had a vacancy rate of 19.5%, which was slightly lower than 3Q 2019. Absorption was positive with 3K SF absorbed, but significantly lower than the 68K SF absorbed in 3Q 2019. Leasing activity remained steady with more than 90K SF of deals completed. Currently, no office space is under construction.
TOP LEASE TRANSACTIONS • Meredith O’Donnell Furniture has signed a 16K SF lease in building two of the Katy Design Center.
• Texas A&M Agrilife Extension Service has signed a 8K SF lease in Northwest Crossing III.
• Platino Media Group has signed a 4K SF lease in
DEALS IN THE MARKET • Northwest Crossing II | 7676 Hillmont Street – a 143,248 SF class B office building
LARGE EXISTING VACANCIES • Northwest Crossing III | 13105 Northwest Freeway – 79,938 SF
• Northwest Crossing |13333 Northwest Freeway – 76,707 SF
• Northwest One Building | 13100 Northwest Freeway – 71,278 SF
• Wells Fargo Building | 13201 Northwest Freeway – 68,242 SF
• 13111 Northwest Freeway – 67,303 SF • One Northwind Plaza | 7600 West Tidwell Street – 58,613 SF
• Granite Tower at 290 | 13430 Northwest Freeway – 57,088 SF • 7000 Hollister Road – 49K SF • Katy Design Center | 1000 West Loop Freeway North – 28,174 SF • Hollister & Hillmont Building | 5300 Hollister Road – 26,713 SF • Northwest Central Plaza | 5700 Northwest Central Drive – 22,339 SF
Northwest Central Plaza.
• Vantage Precision Machine Tool has signed a 4K SF renewal in 1291 North Post Oak Road.
• Texas Investigate Network has signed a 3K SF lease in Northwest One.
25
25
WEST SUBMARKETFARINTELLIGENCE Absorption
VITAL STATS
vs. Prev. Qtr
vs. 12 Mths Ago
(51,680)
43,807
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
18.0% 14.0%
15.0%
11.7%
11.9%
12.0%
vs. Prev. Qtr
vs. 12 Mths Ago
10.0%
12,222
33,045
(90,447)
Leasing Act. 7,223 Delivered SF 50,000 Quoted Rates $28.91
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$28.93
$28.52
18.0% 20.0%
600,000
16.0%
500,000 150,000 400,000
100,000
300,000
16.0%
50,000200,000
8.0%
100,000
14.0%
0
6.0% 12.0% 4.0%
2.0%
(200,000)
10.0%
0.0%
0
(100,000) (50,000)
4Q 1Q 16
16
1Q 2Q17
16
2Q 17 3Q
3Q 17 4Q
16 16 Absorption
4Q 17 1Q
17
1Q 18 2Q
17
2Q 183Q
Absorption
3Q 4Q 1Q 2Q 18 4Q 18 1Q 19 2Q 19
17 17 Deliveries
Deliveries
18
18
3Q 3Q19
18
4Q 19 4Q
18 Vacancy
(100,000)
(300,000)
1Q 19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK HLC’s Far West office submarket includes CoStar’s Katy Freeway West/Grand Parkway submarket which is about 25 miles west of Houston’s CBD. Growth among all product types in West Houston has been a common theme and the office sector has been no exception, as it is located close to Houston’s fastest-growing population center and the expanded Grand Parkway. Nearly 80% of the metro’s population growth since 2010 has occurred in the unincorporated areas of Harris County covering parts of this and neighboring submarkets. At the close of 4Q 2019, the Far West submarket had a vacancy rate of 15.0%, which was significantly higher than 3Q 2019. Absorption remained negative with over 90K SF, an increase from the 51K SF of negative absorption in 3Q 2019. Leasing activity remained sluggish with just 7K SF of deals completed and still lower than the 33K SF of deals completed 12 months ago. Currently, more than 300K SF of office space is under construction.
NEW DEVELOPMENTS • Katy Ranch Phase II | 24279 Katy Freeway – a 150,920 SF class A office building
• Grand Parkway & Franz Road | Building 3 – a 130,200 SF class A office building
LARGE EXISTING AVAILABILITIES • Mason Creek Office Center II | 21700 Merchants Way – 127,953 SF
• Greenhouse at Park Row | 2051 South Greenhouse Road – 65,627 SF
• 2002 Grand Parkway North | Building 2 – 63,645 SF • Horizon Medical Plaza 2 | 19002 Park Row – 50K SF • Methodist St. Catherine Plaza II | 707 South Fry Road – 36,674 SF
• Det Norske Veritas Phase 2 | 1400 Ravello Drive – 28,836 SF
• Westgreen Professional Building | 750 Westgreen Boulevard – 27,940 SF
DEALS IN THE MARKET • Katy Commerce Center | 1773 Westborough Drive – a 26,984 class B office building
• 21734 Provincial Boulevard – a 20,732 SF class B office building
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26
SOUTHWEST FREEWAY SUBMARKET INTELLIGENCE Absorption 15,075
vs. Prev. Qtr (47,823)
17,945
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
24.9%
25.3%
24.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
75,665
76,761
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$16.03
$18.15
96,844 Delivered SF Quoted Rates $15.58
VITAL STATS
vs. 12 Mths Ago 26.0%
20,000
24.0%
(30,000)
22.0%
20.0%
(80,000)
18.0%
(130,000)
(180,000)
16.0% 4Q 16
1Q 17
2Q 17
Absorption
3Q 17
4Q 17
1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
Deliveries
3Q 19
4Q 19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK The Southwest Freeway office submarket contains a small geographic area in Southwest Houston along Highway 59 South, extending as far north as the Westpark Tollway and as far south as Beechnut. This smaller office submarket consists of about 5M SF of class A and B office space. At the close of 4Q 2019, the Southwest Freeway submarket had a vacancy rate of 24.9% which was slightly lower than 3Q 2019. Absorption was positive with 15K SF absorbed, up from the 47K SF of negative absorption in 3Q 2019. Leasing activity trended up with more than 96K SF of deals completed. Currently, no office space is under construction.
TOP LEASE TRANSACTIONS • Alive Technologies has signed a 2.5K SF lease in Two Arena Place.
LARGE EXISTING VACANCIES • Two Arena Place | 7324 Southwest Freeway – 182,105 SF
• One Arena Place | 7322 Southwest Freeway – 139,509 SF
• 7011 Southwest Freeway – 112,590 SF • 6464 Savoy Drive – 74,896 SF • Southwest Medical Plaza | 7777 South US 59 Highway – 71,455 SF
• Memorial Southwest Professional Building | 7737 Southwest Freeway – 68,580 SF
• Harwin International Plaza | 7171 Harwin Drive – 63K SF
• 6001 Savoy Drive – 48,743 SF • Southwest Center | 6671 Southwest Freeway – 47,864 SF
• 5999-6057 Savoy Drive – 38,337 SF
DEALS IN THE MARKET • Regency Square Tower | 6200 Savoy Drive – a 225,371 SF class A office building
• Hillcroft Plaza | 6065 Hillcroft Avenue – a 61,881 SF class B office building
• 7111 Harwin Drive – a 44,944 SF class B office building • 5999-6057 Savoy Drive – a 38,337 SF class B office building
27
27
KINGWOOD SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(12,726)
95,180
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
11.8%
12.5%
13.1%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
3,849
18,310
15,876
11,908 Delivered SF Quoted Rates $25.53
vs. Prev. Qtr -
VITAL STATS 12.0%16.0%
250,000 140,000
200,000
14.0%
11.0%
90,000
150,000
12.0%
40,000
10.0%
100,000
10.0% (10,000)
50,000
9.0%
8.0%
(60,000)
vs. 12 Mths Ago 65,550
vs. Prev. Qtr
vs. 12 Mths Ago
$25.83
$25.46
0
8.0%6.0%
(110,000)
4.0%
(160,000)
(50,000)
7.0%
4Q
1Q
1Q 16 2Q 17 16 16
2Q
3Q17 16
3Q
4Q17 16
Absorption
Absorption
4Q 17 1Q 17
1Q 18 2Q 17
2Q 18 3Q
17
3Q 18 4Q
17
Deliveries
Deliveries
4Q 181Q
18
1Q 2Q 3Q 4Q 19 2Q 19 3Q 19 4Q 19 1Q
18
18
18
Vacancy
(100,000)
19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK HLC’s Kingwood office submarket is located in Northeast Houston and situated between the Sam Houston Tollway and the Grand Parkway. This smaller outlying office submarket has seen a recent boost in development thanks to the Grand Parkway, Houston’s third loop. The submarket currently contains just over 2M SF of class A and B office space. At the close of 4Q 2019, the Kingwood submarket had a vacancy rate of 11.8% which was slightly lower than 3Q 2019. Absorption was positive with over 15K SF absorbed, up from the nearly 13K SF of negative absorption in 3Q 2019. Leasing activity remained steady with almost 12K SF of deals completed. Currently, more than 300K SF of office space is under construction.
NEW DEVELOPMENTS • 215 Kingwood Executive Drive – 41,230 SF LARGE EXISTING VACANCIES • Northeast Medical Tower II | 18980 North Memorial Drive North – 82,793 SF • Kingwood West Tower | 22999 Highway 59 North – 31,906 SF • Humble Medical Office Building | 1485 FM 1960 Bypass East – 30,810 SF • Three Kingwood Place | 800 Rockmead Drive – 20,778 SF • Four Kingwood Place | 900 Rockmead Drive – 19,512 SF • 2300 Green Oak Drive – 18,854 SF • Kings Harbor | 4501 Magnolia Cove Drive – 16,864 SF
TOP LEASE TRANSACTIONS • Growthforce has signed a 16K SF lease in 22001 Northpark Drive.
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28
SUBURBAN OUTLIERS SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
25,569
28,834
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
11.7%
11.7%
10.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
21,508
49,593
vs. Prev. Qtr
vs. 12 Mths Ago
204
10,651 Delivered SF Quoted Rates $25.89
99,230
-
vs. Prev. Qtr
vs. 12 Mths Ago
$25.70
$25.60
VITAL STATS 12.0%16.0%
250,000 500,000 200,000
400,000
11.0% 14.0%
150,000
300,000
10.0%
100,000 200,000
12.0%
50,000
9.0%
100,000
0
10.0% 0
8.0%
(50,000) (100,000)
8.0%
7.0%
4Q
1Q
1Q 16 2Q 17 16 16
2Q
3Q17 16
3Q
4Q17 16
Absorption
Absorption
4Q
17 1Q 17
1Q
18 2Q 17
2Q 18 3Q
17
3Q 18 4Q
17
Deliveries
4Q 181Q
18
Deliveries
1Q 2Q 3Q 4Q 19 2Q 19 3Q 19 4Q 19 1Q
18
18
18
Vacancy
(100,000)
19
Vacancy
Source: CoStar 4Q 2019 Office Report
HLC OUTLOOK HLC’s Suburban Outliers office submarket consists of the remaining submarkets outside of the major Houston submarkets such as the CBD, Greenway Plaza, Westchase, and The Woodlands. These smaller submarkets are located on the outskirts of Houston and include more than 7.5M SF of class A and B office buildings. At the close of 4Q 2019, the Suburban Outliers submarket had a vacancy rate of 11.7% which was the same as 3Q 2019. Absorption was positive but very small with just 204 SF absorbed, down considerably from the 25K SF absorbed in 3Q 2019. Leasing activity remained steady with just over 10K SF of deals completed but still lower than the almost 50K SF of deals completed twelve months ago. Currently, more than 185K SF of office space is under construction.
DEALS IN THE MARKET • Primary Medical Tower II | 2800 Garth Road – a 128,730 Class B office building
• Magnolia Landmark Building | 18230 FM 1488 Road – a 65K SF class B office building • 301 South First Street – a 58,772 SF class B office building • 32100 Dobbin Huffsmith Road – a 47,161 SF class A office building • The Offices at Greatwood | 6514-6548 Greatwood Parkway – a 42,910 SF class B office building • 2401 Termini Street – a 38K SF class B office building • Texas City Professional Building | 2401 Palmer Highway – a 33,486 SF class B office building • NOV | 10586 Highway 75 North – a 30K SF class B office building • Tomball Bank of America | 1431 Graham Drive – a 28,115 SF class B office building
29
• The Lakes Professional Center | 6455 South Shore Boulevard – a 24,241 SF class B office building
• Midstream Business Park | 2830 FM 565 – a 23,657 SF class A office building • 455 School Street – a 21,593 SF class B office building • 3100 Gulf Freeway – a 21K SF class B office building
NEW DEVELOPMENTS • Towne Lake Office Condos | 10242 Greenhouse Road – 50K SF of class B office condos
• Primeline Pro Office Building | 2941 Broadway Bend Drive – a 31,691 SF class B office building • The Landing at Gleannloch Farms | 9070 Gleannloch Forest Drive – 30K SF of class B medical office condos • Building G @ Cross Creek Ranch – a 27K SF class B office building • West Grand Parkway South – a 25K SF class B office building • 2330 Graeber Road – a 22,672 SF class B office building
LARGE EXISTING VACANCIES • 4005 Technology Drive – 205K SF • 17302 House Hahl Road – 53,826 SF • Memorial Hermann Cypress MOB | 27700 Highway 290 – 53,615SF
• 4001 Technology Drive – 40,681 SF • Oakbend Professional Building | 1601 Main Street – 36,324 SF
• Sugar Land Medical Plaza II | 17520 West Grand Parkway South – 35,291 SF
• 2401 Termini Street – 30,262 SF • 1920 Country Place Parkway – 29,904 SF • 22001 Southwest Freeway – 29,850 SF • Umar Syed Medical Tower/2802 Garth Road – 29,627 SF
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DALLAS
5950 Berkshire Lane Suite 900 Dallas, Texas 75225 T 972.241.8300 F 972.241.7955
FORT WORTH
1200 Summit Avenue Suite 300 Fort Worth, Texas 76102 T 817.710.1110 F 817.810.9017
www.holtlunsford.com
HOUSTON
11451 Katy Freeway Suite 300 Houston, Texas 77079 T 713.850.8500 F 713.850.8550