Market Brief...
Houston
OFFICE
4Q2020 Property Pictured Above: Pioneer at Telfair | 13310 University Boulevard, Sugar Land, Texas 77479
HOUSTON OFFICE MARKET BRIEF 4Q 2020
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. West Loop C. Katy Freeway West D. The Woodlands E. Westchase F. Greenspoint/IAH G. FM 1960 Corridor H. Greenway Plaza I. Medical Center J. Southwest K. Katy Freeway East L. Northwest M. Sugar Land N. Clear Lake O. Midtown P. West Belt Q. East Houston/Pasadena R. Far West S. Kingwood T. Suburban Outliers
1
2
HOUSTON HLC SUBMARKET COVERAGE
OTHER SUBMARKETS 1 CBD | 49,515,794 SF 2 WEST LOOP | 35,206,644 SF 3 WESTCHASE | 19,118,661 SF 4 GREENWAY PLAZA | 11,053,255 SF 5 MEDICAL CENTER | 10,236,835 SF 6 MIDTOWN | 6,999,279 SF 7 SUBURBAN OUTLIERS | 11,164,348 SF
THE WOODLANDS 20,679,816 SF
TOMBALL
KINGWOOD 2,385,511 SF SPRING
FM 1960 CORRIDOR 11,572,900 SF
HUMBLE
GEORGE BUSH INTERCONTINENTAL AIRPORT
CYPRESS
GREENSPOINT/IAH 12,635,627 SF
WEST BELT 5,904,046 SF
NORTHWEST 8,671,203 SF
KATY FREEWAY WEST 27,037,736 SF
KATY
KATY FREEWAY EAST 9,345,704 SF
FAR WEST 4,355,258 SF
LAKE HOUSTON
HOUSTON 6
EAST HOUSTON/ PASADENA 5,591,235 SF
1
2 3
GALLERIA
SHIP CHANNEL
4 5
SOUTHWEST 9,444,420 SF
BAY TOWN
MEDICAL CENTER
PASADENA LA PORTE HOBBY AIRPORT
SUGAR LAND
SUGAR LAND 7,867,843 SF
ELLINGTON AIRPORT
RICHMOND
TRINITY BAY
MISSOURI CITY PEARLAND
CLEAR LAKE 6,968,833 SF
LEAGUE CITY
3
HLC HOUSTON OFFICE MARKET EXPERTS
Brandon Avedikian joined Holt Lunsford Commercial (HLC) in 2016 as a Market Analyst for the Dallas Office Group. He most recently served the Dallas Office Group as a Market Director, where he was responsible for executing transactions on approximately 2 million square feet of office assets, representing both private and institutional investors. In February 2020, Brandon relocated to Houston to serve as Senior Vice President of the Houston Office Group, where he is responsible for project leasing and growing HLC’s office portfolio. Prior to joining HLC, Brandon was an assurance professional at Ernst & Young, LLP in Fort Worth, where he performed financial statement audits on both public and private organizations in the real estate, oil & gas, and oilfield services industries. During this time, he gained valuable experience working on complicated transactions and providing excellent service to his clients. BRANDON AVEDIKIAN Senior Vice President bavedikian@holtlunsford.com 713.602.3754
Brandon received a BBA in accounting and master’s degree in accounting from Abilene Christian University. Brandon is a Texas Real Estate Commission license holder, a member of NAIOP and The Real Estate Council, and a Certified Public Accountant (CPA).
Brad Segreto joined Holt Lunsford Commercial (HLC) in 2017 and serves as a Market Associate. His primary responsibilities include project leasing and business development initiatives for HLC’s Houston office portfolio. During his time at HLC, Brad has participated in more than 90 transactions totaling more than 3.4 million square feet of rentable space. Prior to HLC, Brad worked as a sales representative for an industrial engineering firm where he assisted clients in a variety of industries with their predictive and reliability maintenance needs. During this time, he gained valuable sales experience and provided excellent customer service to his clients, including many Fortune 500 companies.
BRAD SEGRETO Market Associate bsegreto@holtlunsford.com 713.602.3758
4
Brad received a Bachelor of Science in Organizational Leadership & Supervision from the University of Houston Brad is a Texas Real Estate Commission license holder, a member of NAIOP, the Houston Golf Association, and Champions Golf Club.
TANNER OFFICE BUILDING
NEW LISTING
11302 Tanner Road: 43,000 SF Class B office building in Houston
5
HLC HOUSTON OFFICE OVERALL MARKET
HOUSTON OVERALL At the close of 4Q 2020, the overall Houston office market had a vacancy rate of 20.2% which was slightly higher than the 20.0% at the close of 3Q 2020. Absorption was negative with 500K SF of space given back, up from the 1.5M SF of negative absorption in 3Q 2020. Leasing activity was consistent with 3Q 2020 with 2.4M SF of deals completed. There is currently more than 5.3M SF of class A and B office space under construction with 144K SF of space delivered in 4Q 2020.
VACANCY - OVERALL HOUSTON
CONSTRUCTION - OVERALL HOUSTON
25.0%
6,000,000
20.0% 5,000,000
20.0% 18.9%
4,000,000
15.0%
3,000,000
10.0% 2,000,000
5.0%
1,000,000
1.1% 0.0% 1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
Direct
4Q 19
1Q 20
2Q 20
Sublet
3Q 20
4Q 20
0 1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
Delivered Inventory
Total
6,000,000
1Q 20
2Q 20
3Q 20
4Q 20
Under Construction
OVERVIEW - OVERALL HOUSTON
ABSORPTION - OVERALL HOUSTON 8,000,000
4Q 19
22.0%
4,000,000
20.0%
3,000,000
18.0%
2,000,000
16.0%
1,000,000
14.0%
0
12.0%
(1,000,000)
4,000,000
2,000,000
0
10.0%
(2,000,000) 1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
Total Net
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
Leasing Activity
4Q 20
(2,000,000) 4Q 17
1Q 18
2Q 18
3Q 18
Absorption
4Q 18
1Q 19
2Q 19
3Q 19
Deliveries
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
Vacancy
Source: CoStar 4Q 2020 Office Report
6
HLC HOUSTON OFFICE OVERALL MARKET
Market
Existing Inventory #Bldgs.
Vacancy
Total RBA
Direct SF
Total SF
Vac. %
YTD Net Absorption
YTD Deliveries
Under Const. SF
Quoted Rates
CBD
89
49,515,794
10,104,582
10,793,264
21.8%
(834,551)
0
1,251,856
$41.02
West Loop
197
35,206,644
7,180,192
7,577,410
21.5%
(784,842)
258,454
162,839
$33.68
Katy Freeway West
164
27,037,736
5,608,272
6,307,185
23.3%
(303,827)
0
0
$26.62
The Woodlands
170
20,679,816
2,789,336
2,938,130
14.2%
(718,485)
337,938
603,000
$32.64
Westchase
104
19,118,661
4,401,410
4,582,359
24.0%
(340,969)
0
0
$28.09
Greenspoint/IAH
96
12,635,627
5,429,787
5,454,326
43.2%
222,127
0
0
$18.76
FM 1960 Corridor
148
11,572,900
2,354,523
2,397,041
20.7%
(33,931)
48,000
182,374
$20.60
Greenway Plaza
57
11,053,255
2,119,338
2,228,021
20.2%
(326,349)
0
0
$35.61
Medical Center
58
10,236,835
721,654
731,810
7.1%
(175,303)
0
1,215,780
$27.22
Southwest
88
9,444,420
2,024,296
2,026,714
21.5%
30,968
0
0
$17.56
Katy Freeway East
67
9,345,704
1,002,719
1,129,588
12.1%
9,604
170,000
973,500
$35.29
Northwest
93
8,671,203
1,706,726
1,725,401
19.9%
94,692
114,349
23,200
$21.51
Sugar Land
100
7,867,843
1,063,751
1,121,126
14.2%
(14,567)
180,600
0
$30.49
Clear Lake
97
6,968,833
949,464
990,659
14.2%
107,924
81,446
0
$21.69
Midtown
66
6,999,279
862,564
900,281
12.9%
(178,378)
64,488
493,400
$38.18
West Belt
68
5,904,046
1,366,768
1,551,734
26.3%
(400,198)
0
0
$26.61
East Houston/Pasadena
98
5,591,235
77,758
802,578
14.4%
10,922
0
64,396
$21.29
Far West
58
4,355,258
672,606
745,930
17.1%
28,748
0
20,758
$30.68
Kingwood
44
2,385,511
295,611
295,611
12.4%
53,618
94,106
270,000
$25.48
Suburban Outliers
189
11,164,348
1,407,825
1,424,709
12.8%
(614)
253,277
277,106
$27.01
2,051
275,754,948
52,139,182
55,723,877
20.2%
(3,553,411)
1,602,658
5,538,209
$28.00
Totals
7
HOUSTON CENTRAL BUSINESS DISTRICT SUBMARKET INTELLIGENCE Absorption (222,204)
vs. Prev. Qtr (209,911)
239,411
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
21.8%
21.3%
20.1%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
491,740
771,615
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
471,052 Delivered SF Quoted Rates $41.02
VITAL STATS
vs. 12 Mths Ago
vs. Prev. Qtr
vs. 12 Mths Ago
$40.01
$41.71
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 17
1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
Deliveries
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
Vacancy
Source: CoStar 4Q 2020 Office Report
HLC OUTLOOK The Central Business District (CBD) 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 YTD average of $41 per SF 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 2020, the CBD submarket had a vacancy rate of 21.8%, slightly higher than 3Q 2020. Absorption was negative with 222K SF of space given back, slightly higher than the 210K SF given back in 3Q 2020. Leasing activity included more than 470K SF of deals completed and was similar to the number of deals completed in 3Q 2020. Currently, 1.2M SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • TC Pipelines, LP has signed a 320K SF renewal in TC
Energy Center. • The Houston Fire Department has signed a 56K SF lease in 500 Jefferson Street. • WSP USA has signed a 17K SF renewal in the Esperson Building. • JAMS has signed a 10K SF lease in 609 Main at Texas. • EAG Services has signed a 9K SF lease in 1415 Louisiana. • The BVA Group has signed a 5K SF lease in Wells Fargo Plaza.
8
DEALS IN THE MARKET • 1801 Smith Street – a 458K SF class B office building • 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 1.1M SF class A
office building • Post Houston | 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 – 786,410 SF • Fulbright Tower | 1301 McKinney Street – 549,453 SF • Wells Fargo Plaza | 1000 Louisiana Street – 515,964 SF • 1600 Smith Street – 492,025 SF • GreenStreet Tower | 1201 Fannin Street – 481,442 SF • One City Centre | 1021 Main Street – 467,803 SF • 4 Houston Center | 1221 Lamar Street – 464,168 SF • Two Allen Center | 1200 Smith Street – 443,663 SF • 919 Milam | 919 Milam Street – 429,786 SF • TC Energy Center | 700 Louisiana Street – 405,598 SF • 1000 Main | 1000 Main Street – 318,546 SF • Pennzoil Place South Tower | 711 Louisiana Street – 309,239 SF
• 1801 Smith Street – 308,513 SF • One Allen Center | 500 Dallas Street – 304,912 SF • 1415 Louisiana | 1415 Louisiana Street – 296,651 SF • 2 Houston Center | 909 Fannin Street – 289,102 SF • Wedge Tower | 1415 Louisiana Street – 306,239 SF • 2 Houston Center | 909 Fannin Street – 289,102 SF
WEST LOOP SUBMARKET INTELLIGENCE Absorption 21,539
vs. Prev. Qtr (331,250)
VITAL STATS
vs. 12 Mths Ago 248,801
22.0%
vs. Prev. Qtr
vs. 12 Mths Ago
21.5%
21.6%
18.7%
20.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
278,826
631,136
vs. Prev. Qtr
vs. 12 Mths Ago
462,750 Delivered SF
400,000 300,000
Vacancy
21.0% 200,000 100,000 0 19.0% (100,000) (200,000)
18.0%
(300,000) 17.0%
Quoted Rate $33.68
52,825
-
vs. Prev. Qtr
vs. 12 Mths Ago
$32.92
$33.27
(400,000) (500,000)
16.0% 4Q 17
1Q 18
2Q 18
Absorption
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
Deliveries
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
Vacancy
Source: CoStar 4Q 2020 Office Report
HLC OUTLOOK CoStar’s Galleria, Uptown, Post Oak Park, San Felipe/Voss, Richmond/Fountain View, Riverway, and Bellaire submarkets make up HLC’s West Loop submarket. This submarket contains approximately 35M 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. At the close of 4Q 2020, the West Loop submarket had a vacancy rate of 21.5% which was slightly higher than 3Q 2020. Absorption was positive by 21K SF, opposite the 331K SF of negative absorption in 3Q 2020. Leasing activity nearly doubled with 463K SF of deals completed, much higher than the 278K SF of completed deals in 3Q 2020. Currently, 162K SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Cadence Bank has signed an 82K SF lease in Park Towers.
• JLL has signed an 82K SF lease in 200 Park Place. • First Investors Financial Services has signed a 38K SF renewal in 5757 Woodway.
• Unlive Management Corporation has signed a 19K SF lease in One Riverway.
• Nexus Health Systems has signed a 12K SF sublease in One Riverway.
• Iomosaic has signed an 8K SF renewal in 1900 Saint James Place.
• Firmspace has signed a 4K SF lease in BBVA Plaza. DEALS IN THE MARKET • 9009 West Loop South – a 472K SF class B office building
• 1220 Augusta – a 126K SF class B office building • 5850 San Felipe Street – a 102K SF class B office building
• 6250 Westpark Drive – a 57K SF class B office building
• 5610-5613 Southwest Freeway – a 23K SF class B office building
• 5606 South Rice Avenue – a 20K SF class B office building
NEW DEVELOPMENTS • 4411 San Felipe Street – a 93K SF class A office building
• 1801 Post Oak Boulevard – a 70K SF class A office building
LARGE EXISTING VACANCIES • Marathon Oil Tower | 5555 San Felipe Street – 849,661 SF
• Williams Tower | 2800 Post Oak Boulevard – 389,521 SF • San Felipe Plaza | 5847 San Felipe Street – 342,015 SF • Bellaire Station | 6500 West Loop South – 316K SF • Sage Plaza | 5151 San Felipe Street – 247,597 SF • Two Post Oak Central | 1980 Post Oak Boulevard – 239,290 SF
• Three Riverway | 3 Riverway – 229,471 SF • Thirty Forty Post Oak | 3040 Post Oak Boulevard – 215,580 SF
• Five Post Oak Park | 4400 Post Oak Parkway – 208,494 SF
• TwentyFour25 | 2425 West Loop South – 204,590 SF • 5718 Westheimer | 5718 Westheimer Road – 185,367 SF • Schlumberger Building | 5599 San Felipe Street – 184,892 SF
• Four Oaks Place | 1330 Post Oak Boulevard – 181,717 SF • Three Post Oak Central | 1990 Post Oak Boulevard – 181,689 SF
• 2000 West Loop | 2000 West Loop South – 176,221 SF • One Riverway | 1 Riverway – 171,369 SF
9
KATY FREEWAY WEST SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(470,873)
534,260
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
23.3%
22.8%
22.2%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
130,447
428,166
vs. Prev. Qtr
vs. 12 Mths Ago
(134,011)
242,860 Delivered SF Quoted Rates $26.62
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$27.19
$30.05
24.0%
VITAL STATS
30.0%
1,000,000 500,000
800,000
22.0% 300,000 600,000 25.0%
20.0%
400,000
100,000
200,000
18.0%
(100,000)
20.0%
0
16.0%
(300,000)
(200,000)
14.0%
15.0%
1Q 16
4Q 172Q
16
1Q 183Q
16
2Q 184Q
16
Absorption Absorption
3Q 4Q 1Q 18 1Q 18 2Q 19
17
17
3Q 17
2Q 19
3Q
4Q 19 17
4Q
1Q19 18
Deliveries Deliveries
1Q
2Q20 18
2Q
3Q 20 18
3Q
4Q 20 18
4Q
(500,000) (400,000)
1Q 20 19
Vacancy Vacancy
Source: CoStar 4Q 2020 Office Report
HLC OUTLOOK Other than the Greenspoint submarket, no major Houston office submarket was hit harder by the oil downturn than the Katy Freeway West submarket. This submarket includes the Energy Corridor which is home to large energy corporations including ConocoPhillips, Shell, and 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 metro, has experienced a recent and significant flight-to-quality helping these large corporations to continue attracting a talented workforce. At the close of 4Q 2020, the Katy Freeway West submarket had a vacancy rate of 23.3%, slightly higher than 3Q 2020. Absorption was, once again, negative with 134K SF of space given back, down from the 470K SF of negative absorption in 3Q 2020. Leasing activity increased with 242K SF of deals completed. This reflects more than 100K SF of deals completed in 4Q 2020 than in 3Q 2020. Currently, no office product is under construction in this submarket.
TOP LEASE TRANSACTIONS • Diamond Offshore has signed a 98K SF lease in 15415 Katy Freeway. • Conexus Med Staff has signed a 7K SF lease in Energy Tower IV. • AOC TX has signed a 4K SF lease in Ashford 6 • BP Federal Credit Union has signed a 4K SF lease in Republic Square I.
DEALS IN THE MARKET • Cardinal Health | 1330 Enclave Parkway – a 200K SF class A office building • 15721 Park Row – a 154K SF class A office building • Ten West Plaza | 15915 Katy Freeway – a 105K SF class B office building • 16000 Memorial Drive – a 28K SF class B office building 10
• Ashford Corner | 1710 South Dairy Ashford Road – a 24K SF class B office building
LARGE EXISTING VACANCIES • Three WestLake Park | 550 Westlake Park Boulevard – 407,832 SF • Two WestLake | 580 Westlake Park Boulevard – 367,228 SF • Eldridge Oaks Phase 1 | 1080 Eldridge Parkway – 363,086 SF • Three Eldridge Place | 737 North Eldridge Parkway – 308,182 SF • Energy Center II | 575 North Dairy Ashford Road – 301,486 SF • Enclave on the Lake | 1255 Enclave Parkway – 289,632 SF • West Memorial Place 2 | 15377 Memorial Drive – 263,501 SF • Two Eldridge Place | 757 North Eldridge Parkway – 248,987 SF • Republic Square 1 | 13501 Katy Freeway – 208,461 SF • Energy Tower IV | 11750 Katy Freeway – 195,057 SF • One Eldridge Place | 777 North Eldridge Parkway – 179,019 SF • Energy Center I | 585 North Dairy Ashford Road – 160,907 SF • Schlumberger Building | 1325 South Dairy Ashford Road – 155,320 SF • Ashford 5 | 14701 St. Mary’s Lane – 152,341 SF • 1200 Enclave Parkway – 144,594 SF • Ashford 7 | 900 Threadneedle Street – 140,395 SF • 8 West Center | 3505 West Sam Houston Parkway North – 136,905 SF
10
THE WOODLANDS SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(137,464)
92,029
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.2%
14.8%
9.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
76,436
962,652
vs. Prev. Qtr
vs. 12 Mths Ago
115,407
VITAL STATS
16.0% 16.0%
300,000 800,000 250,000 600,000
200,000
14.0%
400,000 150,000
14.0%
100,000
12.0%
129,547 Delivered SF Quoted Rates $32.64
137,938
-
vs. Prev. Qtr
vs. 12 Mths Ago
$32.58
$32.90
200,000
50,000 0
10.0%
12.0%
0 (50,000)
(200,000)
(100,000)
8.0%
(400,000)
(150,000)
10.0%6.0%
1Q4Q 16 17
2Q1Q 1618
3Q 2Q 1618
4Q 3Q 1618
Absorption Absorption
1Q 4Q 1718
2Q 1Q 19 17
3Q 2Q 19 17
4Q 3Q 19 17
1Q 4Q 19 18
2Q 1Q 20 18
3Q 2Q 2018
Deliveries Deliveries
4Q 3Q 2018
4Q1Q 2019
(200,000) (600,000)
Vacancy
Source: CoStar 4Q 2020 Office Report
HLC OUTLOOK The Woodlands submarket continues to be one of the most active Houston office submarkets. It has grown so much that it now competes with other premier 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 2020, The Woodlands submarket had a vacancy rate of 14.2% which was lower than 3Q 2020. Absorption turned positive, once again, with over 115K SF, much better than the 137K SF of negative absorption in 3Q 2020. Leasing activity consisted of 130K SF of deals completed, nearly double the 76K SF of deals completed in 3Q 2020. Currently, more than 600K SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Better Home and Gardens has signed a 9K SF lease in 8665 New Trails. • Beasley Media Group has signed a 6K SF sublease in Wildwood Corporate Centre.
DEALS IN THE MARKET • Venture Tech VIII | 8708 Technology Forest Drive – a 70K SF class B office building • The Gateway Building | 26865 I-45 North – a 24K SF class B office building • 143 Vision Park Boulevard – a 20K SF class B office building
NEW DEVELOPMENTS • HPE Buildings 3 & 4 | City Place Drive – two (2) 284K SF class A office buildings • LifeTime Co-Work | Six Pine Drive – a 35K SF class B office building
LARGE EXISTING VACANCIES • The Woodlands Towers at The Waterway | 9950 Woodloch Forest Drive – 408,566 SF • Hewitt Lake Woodlands | 9500 Lakeside Boulevard – 360K SF • SWN South Tower | 10000 Energy Drive – 288,609 SF • 24955 I-45 North – 148,104 SF • Hughes Landing | 1725 Hughes Landing Boulevard – 147,525 SF • 9709 Lakeside Boulevard – 137,938 SF • 9201 Pinecroft Drive – 112,299 SF • CityPlace 1 | 1700 City Plaza Drive – 100,036 SF • 2001 Timberloch Place – 81,620 SF • The Woodlands Medical Plaza | 918 Pinecroft Drive – 75,732 SF • Two Hughes Landing | 1790 Hughes Landing Boulevard – 72,506 SF • Wildwood Corporate Centre I | 460 Wildwood Forest Drive – 70,240 SF • Lake Front North | 2107 Research Forest Drive – 64,834 SF • Havenwood Office Park | 25700 I-45 North – 61,607 SF • 3 Waterway Square Place | 3 Waterway Avenue - 58,681 SF • Waterway Plaza Two | 10001 Woodloch Forest Drive – 57,081 SF • Chase Building | 1400 Woodloch Forest Drive – 49,908 SF • Technology Professional Plaza | 4055 Technology Forest Boulevard – 48,328 SF • Town Center II | 1330 Lake Robbins Drive – 47,114 SF
11
11
WESTCHASE SUBMARKET INTELLIGENCE Absorption (58,108) Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
(89,349)
(146,867)
vs. Prev. Qtr
vs. 12 Mths Ago
24.0%
23.7%
22.2%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
134,807
449,049
vs. Prev. Qtr
vs. 12 Mths Ago
266,250 Delivered SF Quoted Rates $28.09
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$27.54
$27.71
20.0%
VITAL STATS
800,000
25.0%
18.0% 16.0%
200,000 600,000
24.0%
100,000
14.0% 23.0% 12.0%
200,000 22.0%
0
10.0% 8.0%
400,000
0
21.0% (100,000)(200,000)
6.0% 20.0% (400,000) 4.0%
(200,000)
19.0%
(600,000)
2.0% 0.0%
18.0%
1Q 16
(300,000) 4Q 1Q 2Q 17 2Q 18 3Q 18
16
16
3Q
4Q18 16
Absorption
Absorption
4Q
1Q18 17
1Q
19 2Q 17
2Q 19 3Q
3Q 19 4Q
4Q 191Q
17
17
18
Deliveries
Deliveries
1Q 2Q 3Q 20 2Q 20 3Q 20
18
18
4Q
4Q 20 18
Vacancy
(800,000)
1Q 19
Vacancy
Source: CoStar 4Q 2020 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, providing 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 other energy dependent submarkets. 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 2020, The Westchase submarket had a vacancy rate of 24%, slightly higher than 3Q 2020. Absorption was negative by 58K SF, down from the 89K SF of negative absorption in 3Q 2020. Leasing activity consisted of 266K SF of deals completed, nearly double the 134K SF of deals completed in 3Q 2020. Currently, no office space is under construction in the submarket.
TOP LEASE TRANSACTIONS • Vroom has signed a 102K SF lease in Westchase Park II. • Yang Ming Marine Transport has signed a 34K SF lease in 3250 Briarpark Drive.
• FlightPro has signed a 6K SF lease in One Oak Park. • FlexTek Resources has signed a 3K SF lease in Westheimer Central Plaza.
• Neo Monitors has signed a 3K SF lease in Westheimer Central Plaza.
• 2929 Briarpark Drive – a 140K SF class B office building
• The Colonnade | 11111 Richmond Avenue – a 96K SF class B office building
• 10590 Westoffice Drive – a 26K SF class B office building
• 2610 West Sam Houston Parkway South – a 26K SF class B office building
LARGE EXISTING VACANCIES • 10200 Bellaire Boulevard – 568,458 SF • Pinnacle Westchase | 3010 Briarpark Drive – 356,648 SF
• Towers at Westchase I | 10370 Richmond Avenue – 177,908 SF
• Millennium Tower | 10375 Richmond Avenue –158,303 SF • 2500 CityWest | 2500 CityWest Boulevard – 155,630 SF
• Towers at Westchase II | 10350 Richmond Avenue – 153,731 SF
• Westchase Point | 1250 West Sam Houston Parkway – 147,403 SF
• West8 Tower | 10205 Westheimer Road – 143,678 SF • CityWestPlace Building 4 | 2103 CityWest Boulevard – 127,711 SF
• 3250 Briarpark Drive – 125,544 SF • Westchase Park I | 3700 West Sam Houston Parkway – 125,231 SF
• One Westchase Center | 10777 Westheimer Road – 123,479 SF
DEALS IN THE MARKET • Columbia Centre | 11011 Richmond Avenue – a 167K SF class A office building
12
• One BriarLake Plaza | 2000 West Sam Houston Parkway – 122,063 SF
• 10333 Richmond | 10333 Richmond Avenue – 115,643 SF 12
GREENSPOINT/IAH SUBMARKET INTELLIGENCE Absorption (21,247) Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
(21,842)
28,027
vs. Prev. Qtr
vs. 12 Mths Ago
43.2%
43.0%
44.9%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
70,558
156,618
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
89,810 Delivered SF Quoted Rate $18.76
vs. Prev. Qtr
vs. 12 Mths Ago
$19.18
$18.48
VITAL STATS
25.0%
48.0%
200,000
300,000
24.5% 100,000
24.0%46.0% 23.5%
200,000
0
100,000
(100,000)
0
(200,000)
(100,000)
23.0% 44.0% 22.5% 22.0% 42.0% 21.5% 21.0%
40.0%
(300,000)
(200,000)
20.5% 20.0%
(400,000)
38.0%
1Q 16
4Q 17
1Q 18
2Q 18
3Q 18
2Q 3Q 4Q 16 Absorption 16 16
Absorption
4Q 18
1Q 17
1Q 19
2Q 17
2Q 19
3Q 19
3Q 4Q 17 17 Deliveries
4Q 19
Deliveries
1Q 18
1Q 20
2Q 18
2Q 20
3Q 20
4Q 20
3Q 4Q 18Vacancy 18
(300,000)
1Q 19
Vacancy Source: CoStar 4Q 2020 Office Report
HLC OUTLOOK The Greenspoint/IAH office submarket continues to suffer more than any other submarket in Houston. 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 the submarket. At the close of 4Q 2020, the Greenspoint/IAH submarket had a vacancy rate of 43.2% which was slightly higher than 3Q 2020. Absorption remained negative with 21K SF of negative absorption, the same as the 21K SF of negative absorption in 3Q 2020. Leasing activity consisted of 90K SF of deals completed, slightly higher than the 70K SF of deals completed in 3Q 2020. Currently, no office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Preventice Services has signed a 20K SF lease in 785 Greens.
• Elite Life Celebrations has signed a 9K SF lease in 14000 Chrisman Road.
DEALS IN THE MARKET • EM Houston | 13401 I-45 North – a 143K SF class A office building
• Northborough Business Park | 220 Meadowfern Drive –
• 1030-1034 Regional Park Drive – a 23K SF class B office building
LARGE EXISTING VACANCIES • CityNorth 5 | 17001 Northchase Drive – 458,331 SF • CityNorth 6 | 12450 Greenspoint Drive – 343,495 SF • 363 North Sam Houston Parkway East – 264,612 SF • CityNorth 1 | 233 Benmar Drive – 253,562 SF • 222 Benmar | 222 Benmar Drive – 198,256 SF • Glenborough Tower | 100 Glenborough Drive – 181,984 SF
• 396 West Greens Road – 164,411 SF • World Houston Plaza | 15710 John F. Kennedy Boulevard – 158,352 SF
• North Houston Tech Tower | 12707 North Freeway – 157,276 SF
• 16666 Northchase Drive – 147,135 SF • 450 Gears | 450 Gears Road – 146,073 SF • EM Houston | 13401 I-45 North – 143,410 SF • Bridgewood II | 652 North Sam Houston Parkway East – 135,253 SF
• Northbelt Office Center V | 500 North Sam Houston Parkway West – 135,030 SF
• CityNorth 4 | 16945 Northchase Drive – 127,834 SF
a 102K SF class B office building
• Intercontinental Park III | 16701 Greenspoint Park Drive – a 86K SF class B office building
• Greens Crossing I | 810 Gears Road – a 79K SF class B office building
• 14450 John F Kennedy Boulevard – a 46K SF class B office building
13
13
FM 1960INTELLIGENCE CORRIDOR SUBMARKET Absorption
VITAL STATS
vs. Prev. Qtr
vs. 12 Mths Ago
(77,168)
52,646
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
24.0%
20.7%
20.7%
20.1%
23.0%20.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
22.0%
214,831
154,120
vs. Prev. Qtr
vs. 12 Mths Ago
(4,470)
73,380 Delivered SF
73,000 Quoted Rate $20.60
vs. Prev. Qtr $20.86
vs. 12 Mths Ago $19.95
26.0%24.0%
200,000
300,000 250,000
25.0% 22.0%
100,000
0
200,000 150,000 100,000
18.0%
(100,000)
21.0%
50,000 0
20.0%16.0%
(200,000)
19.0%
14.0%
(300,000)
18.0%
(50,000) (100,000) (150,000)
12.0%
(400,000)
17.0%
1Q 16
4Q 17
1Q 2Q 18
2Q 3Q18
16
16
3Q 18 4Q
4Q 18 1Q
1Q 19 2Q
16
17
17
Absorption
Absorption
2Q 193Q
3Q 19 4Q
17
4Q 19
17
Deliveries
1Q 18
1Q 20
2Q 2Q 20
3Q 3Q20
18
18
Deliveries
4Q 4Q20
18
Vacancy
(200,000)
1Q 19
Vacancy
Source: CoStar 4Q 2020 Office Report
HLC OUTLOOK
office building
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 Northeast Houston and stops just before George Bush International Airport. This submarket is home to nearly 12M SF of class A and B office space.
• Falling Creek II | 3910 FM 1960 West – a 23K SF class B office building
At the close of 4Q 2020, the FM 1960 Corridor had a vacancy rate of 20.7% which was the same as 3Q 2020. Absorption was once again negative with 4K SF of space given back. Leasing activity fell with 73K SF of deals completed compared to the 214K SF of deals completed in 3Q 2020. Currently, 182K SF of office space is under construction in this submarket.
• 6810 FM 1960 West – a 20K SF class B office building
TOP LEASE TRANSACTIONS • Danfure, Inc. has signed a 5K SF sublease in 9808 Whithorn Drive. • University Title has signed a 3K SF lease in Cypresswood Crossing.
HLC Deal
• Infectious Disease Specialists has signed a 4K SF lease in Lakewood Forest Medical Plaza. • Houston Northwest Chamber of Commerce has signed a 3K SF lease in One Northchase Park. • Bieyl Interests has signed a 3K SF lease in 10515 Rodgers Road.
DEALS IN THE MARKET
• Falling Creek II | 3910 FM 1960 West – a 23K SF class B office building • Butte Creek Professional Building | 17154 Butte Creek Road – a 21K SF class B office building • Copperfield Professional Building | 8711 Highway 6 North – a 20K SF class B office building
NEW DEVELOPMENTS • North Cypress Physician Office Building III – a 110K SF class B office building • 8900 Point Six Circle – a 48K SF class B office building • 17910 Coventry Park Drive – a 24K SF class B office building
LARGE EXISTING VACANCIES • Noble Energy Center II | 1002 Noble Energy Way – 437,793 SF • 11403 Compaq Center West Drive – 260,790 SF • University Park Buildings 9 & 10 | 11450 Compaq Center West Drive – 208,841 SF
• Denmark House | 12777 Jones Road – a 119K SF class B office building
• Creekridge II | 140 Cypress Station Drive – 120,966 SF
• Wells Fargo Cypress | 12337 Jones Road – a 85K SF class B office building
• 616 FM 1960 West – 82,192 SF
• Champions Forest Office Building | 13231 Champion Forest Drive – a 64K SF class B office building
• Chasewood Crossing I | 19500 State Highway 249 – 68,027 SF
• Steeplechase Corner Professional Building | 11301 Fallbrook Drive – a 61K SF class B office building • 3648 Cypress Creek Parkway – a 61K SF class B office building • Texas School of Business | 711 Airtex Drive – a 43K SF class B office building • Park at Champions I | 13910 Champion Forest Drive – a 32K SF class B office building
• Chasewood Crossing III | 19350 State Highway 249 – 108,250 SF • 7310 Eldridge Parkway – 81,800 SF • Cypress Station Medical Building | 1140 Cypress Station Drive – 52,038 SF • Northwest Medical Plaza | 800 Peakwood Drive – 51,633 SF • Chasewood Crossing II | 19450 State Highway 249 – 48,605 SF • The Willowbrook Building | 7915 FM 1960 West – 46,344 SF • 3648 FM 1960 West – 44,335 SF • One Northchase Park | 4201 FM 1960 West – 44,074 SF
• Park at Champions II | 13810 Champion Forest Drive – a 32K SF class B office building
• 14405 Walters Road – 43,217 SF
• Cairnway Plaza | 16125 Cairnway Drive – a 28K SF class B office building
• Northchase Center | 14550 Torrey Chase Boulevard – 42,358 SF
• Building One | 8403 Louetta Road – a 25K SF class B office building
• Willowchase Atrium | 8203 Willow Place Drive South – 40,317 SF
• Texas School of Business | 711 Airtex Drive – 42,890 SF • 9720 Cypresswood Drive – 41,003 SF
• West Road Office Building | 14025 West Road – a 23K SF class B
14
14
GREENWAY PLAZA SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(158,459)
(233,754)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
20.2%
17.9%
17.2%
(252,579)
Leasing Act. 55,210 Delivered SF Quoted Rates $35.61
vs. Prev. Qtr
vs. 12 Mths Ago
124,144
172,519
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$35.04
VITAL STATS
20.0% 21.0%
200,000
300,000 250,000
20.0%
150,000 200,000
16.0% 19.0%
150,000
18.0%
12.0%
100,000 100,000
17 .0%
50,000
16.0%
0
15.0%
50,000
(50,000)
8.0% 14.0%
(100,000)
0
13.0%
(150,000)
4.0% 12.0%
(200,000)
11.0%
(250,000)
0.0%
(50,000)
10.0%
1Q 16
$32.33
4Q 1Q 2Q 17 2Q 18 3Q 18
16
16
3Q
4Q18 16
Absorption Absorption
4Q
1Q18 17
1Q
19 2Q 17
2Q
19 3Q 17
3Q 19 4Q
4Q 191Q
1Q 202Q
2Q 203Q
17
18
18
18
Deliveries Deliveries
(300,000) (100,000) 3Q 4Q 20 4Q 20 1Q
18
Vacancy Vacancy
19
Source: CoStar 4Q 2020 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 in the area have helped breathe life back into this submarket. At the close of 4Q 2020, the Greenway Plaza submarket had a vacancy rate of 20.2% which was 2.3% higher than 3Q 2020. Absorption remained negative with 252K SF of space given back, up from the 158K SF given back in 3Q 2020. Leasing activity fell with just 55K SF of deals completed, which was less than half of the 124K SF of deals in 3Q 2020. Currently, no office space is under construction in the submarket.
LARGE EXISTING VACANCIES • Nine Greenway Plaza | 9 Greenway Plaza – 261,521 SF • Four Greenway Plaza | 4 Greenway Plaza – 242,628 SF • Phoenix Tower | 3200 Southwest Freeway – 236,540 SF • Twelve Greenway Plaza | 12 Greenway Plaza – 209,916 SF
• Three Greenway Plaza | 3 Greenway Plaza – 204,620 SF
• Eight Greenway Plaza | 8 Greenway Plaza – 128,525 SF • Eleven Greenway Plaza | 11 Greenway Plaza – 100,490 SF
• Weslayan Tower | 24 Greenway Plaza – 97,299 SF • 3737 Buffalo Speedway Avenue – 94,746 SF • 20 Greenway Plaza – 94,327 SF • Five Greenway Plaza | 5 Greenway Plaza – 85,356 SF • 3800 Buffalo Speedway – 83,686 SF • 3355 West Alabama | 3355 West Alabama Street – 75,621 SF
TOP LEASE TRANSACTIONS • Lane Staffing has signed a 2K SF lease in Nitya Tower.
15
• 3555 Timmons Lane – 68,991 SF • 3900 Essex | 3900 Essex Lane – 66K SF • Two Greenway Plaza | 2 Greenway Plaza – 64,808 SF
15
MEDICAL CENTER SUBMARKET INTELLIGENCE Absorption 2,181 Vacancy 7.1% Leasing Act. 45,386 Delivered SF Quoted Rates $27.22
vs. Prev. Qtr
vs. 12 Mths Ago
11,033
1,104
vs. Prev. Qtr
vs. 12 Mths Ago
7.2%
vs. 12 Mths Ago
36,910
56,545
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$26.97
200,000
8.0%
150,000
7.5%
12.0%
5.4%
vs. Prev. Qtr
VITAL STATS
14.0%
100,000
7.0%
50,000
150,000
100,000
6.5% 0
10.0% 6.0%
50,000 (50,000)
5.5%
8.0%
(100,000)
5.0%
(150,000)
4.5%
6.0%
(200,000)
4.0% 4Q
1Q
1Q 17 2Q 18 16 16
$26.30
2Q
3Q18 16
3Q
4Q18 16
Absorption
Absorption
4Q
18 1Q 17
1Q 19 2Q
17
2Q 193Q
17
3Q 19 4Q
4Q 19
17
Deliveries
Deliveries
1Q
2Q
1Q 20 2Q 20 18 18
3Q
3Q20 18
4Q
20 4Q 18
Vacancy
0
(50,000)
(100,000)
1Q 19
Vacancy
Source: CoStar 4Q 2020 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 10M SF of office space in this submarket is considered medical office space. 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. Historically, this submarket holds the lowest vacancy rate in the city. At the close of 4Q 2020, the Medical Center submarket had a vacancy rate of 7.1% which was slightly higher than 3Q 2020. Absorption was positive with just 2K SF absorbed. Leasing rose slightly with 45K SF of deals completed. Currently, 1.2M SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Texas Laparoscopic Consultants has signed a 9K SF lease in Museo Plaza Office Building.
LARGE EXISTING VACANCIES • 6624 Fannin Tower | 6624 Fannin Street – 152,920 SF • Texas Medical Center | 7501 Fannin Street – 92,562 SF • Museum Medical Tower | 1213 Hermann Drive – 73,019 SF
• 800 Greenbriar Drive – 52,180 SF • One Fannin | 7400 Fannin Street – 49,096 SF • 7807 Main Street – 48K SF • 7125 Ardmore Street – 44,776 SF • Greenpark II Professional Building | 7505 Main Street – 41,398 SF
• US Pain & Spine Institute | 5445 La Branch Street – 36,394 SF
• Memorial Hermann Medical Plaza | 6400 Fannin Street – 36,024 SF
• 1200 Binz | 1200 Binz Street – 33,960 SF • 7900 Fannin | 7900 Fannin Street – 32,406 SF • 7505 Fannin Street – 32,002 SF • Atrium 2656 | 2656 South Loop Freeway West – 29,508 SF
NEW DEVELOPMENTS • Horizon Tower | 6929 Main Street – a 512K SF class A office building
• Greenpark One | 7515 South Main Street – 29,220 SF • Prosperity Bank Plaza | 5020 Montrose Boulevard – 26,950 SF
• O’Quinn Medical Tower | 7200 Cambridge Street – a
• NRG Office Complex | 2626 South Loop Freeway West
• Museo Plaza Office Building | 5115 Fannin Street – a
• Southside Medical Plaza | 7700 Main Street – 22K SF
427K SF class A office building
– 26,245 SF
160K SF class A office building
• 7500 Fannin Street – a 126K SF class B office building
16
16
SOUTHWEST SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(98,482)
110,663
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
21.5%
21.8%
21.8%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
31,523
46,843 Delivered SF Quoted Rates $17.56
165,175
151,831
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$17.60
VITAL STATS
23.0%
1,000,000 200,000
24.0%
22.0%
800,000 100,000
21.0%
600,000
22.0% 0
20.0% 19.0%
20.0%
18.0%
0
18.0%
(200,000)
17.0% 16.0%
400,000
200,000 (100,000)
(200,000) (300,000)
16.0% 4Q
1Q
1Q 17 2Q 18 16 16
$16.73
2Q
3Q 18 16
3Q
4Q18 16
Absorption Absorption
4Q
1Q18 17
1Q
2Q 19 17
2Q
3Q 19 17
3Q 4Q 19
17
Deliveries Deliveries
4Q 191Q
18
1Q 202Q
18
2Q 203Q
18
3Q 4Q 20 4Q 20 1Q
18
(400,000)
19
Vacancy Vacancy
Source: CoStar 4Q 2020 Office Report
HLC OUTLOOK
• Harwin International Plaza | 7171 Harwin Drive – a 73K
HLC’s Southwest office submarket includes CoStar’s Southwest Freeway and Southwest Beltway 8 submarkets. The submarket extends to 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 recently.
• 9945 Bissonnet Street – a 28K SF class B office
SF class B office building building
• 9200 West Sam Houston Parkway South – a 23K SF class B office building
LARGE EXISTING VACANCIES • Houston Technology Center | 5959 Corporate Drive – 250,578 SF
At the close of 4Q 2020, the Southwest submarket had a vacancy rate of 21.5% which was slightly lower than 3Q 2020. Absorption turned positive with 31K SF of space absorbed, up from the 98K SF given back in 3Q 2020. Leasing activity fell with 47K SF of deals completed compared to the 165K SF of activity in 3Q 2020. Currently, no office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Royal Cement has signed a 6K SF lease in Mission
• Southwest Corporate Center | 9700-9702 Bissonnet Street – 210,558 SF
• 11111 South Wilcrest Drive – 190,398 SF • Arena Place Two | 7324 Southwest Freeway – 184,814 SF
• Arena Place One | 7322 Southwest Freeway – 140,853 SF
• 7011 Southwest Freeway – 112,590 SF • Centre One | 9800 Centre Parkway – 74,985 SF • Southwest Medical Plaza 1 | 7777 Southwest Freeway – 73,078 SF
Office Plaza.
• Westwood Green | 9494 Southwest Freeway – 72,533
Regency Square Office Building.
• Southwest Medical Plaza 2 | 7737 Southwest Freeway –
• Hunt & Hunt Engineering has signed a 3K SF renewal in
SF
70,072 SF
building
• 6464 Savoy Drive – 56,454 SF • The Center | 8323 Southwest Freeway – 55,788 SF • The Center | 8303 Southwest Freeway – 55,459 SF • 9896 Bissonnet Street – 50,794 SF • 6001 Savoy Drive – 45,510 SF • The Atrium Tower | 9894 Bissonnet Street – 44,668 SF • Merlyn Plaza | 9301 Southwest Freeway – 43,022 SF • The Ranchester Building | 10333 Harwin Drive – 42,559
SF class B office building
• US Pain & Spine Institute | 8111 Southwest Freeway -
DEALS IN THE MARKET • Regency Square Tower | 6200 Savoy Drive – a 225K SF class A office building
• American First Tower | 9999 Bellaire Boulevard – a 212K SF class A office building
• 11111 South Wilcrest Drive – a 190K SF class B office • Westwood Green | 9494 Southwest Freeway – a 140K • 6100 Corporate Drive – a 73K SF class B office
SF
35,459 SF
building
17
17
KATY FREEWAY EAST SUBMARKET INTELLIGENCE Absorption (1,057)
vs. Prev. Qtr
vs. 12 Mths Ago
(74,630)
(31,186)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
12.1%
12.1%
10.6%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
133,509
164,509
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$34.75
$35.77
52,475 Delivered SF Quoted Rates $35.29
VITAL STATS
12.0%
250,000
16.0%
160,000
200,000
15.0% 11.0%
120,000
150,000
14.0%
80,000
10.0%
100,000
13.0%
40,000
50,000
9.0%
12.0%
0
0
8.0%11.0%
(40,000)
10.0%
(80,000)
(50,000)
7.0%
1Q 16
4Q 1Q 2Q 3Q 4Q 17 2Q 18 3Q 18 4Q 18 1Q 18 16 16 16 17 Absorption Absorption
1Q
2Q 19 17
2Q
3Q 4Q 4Q 19 191Q 17 18 Deliveries Deliveries
3Q 19 17
1Q 2Q 3Q 4Q 202Q 20 3Q 20 4Q 20 1Q 18 18 18 19 Vacancy Vacancy
(100,000)
Source: CoStar 4Q 2020 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 Houston’s western suburbs. It is home to MetroNational’s Memorial City and Midway’s CityCentre mixed-use developments. At the close of 4Q 2020, the Katy Freeway East submarket had a vacancy rate of 12.1%, identical to 3Q 2020. Absorption remained negative with 1K SF of space given back, down considerably from the 75K SF given back in 3Q 2020. Leasing activity consisted of 52K SF of deals completed which was less than half the 134K SF of deals completed in 3Q 2020. Currently, more than 970K SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Kelsey Seybold Clinic has signed a 13K SF sublease in Memorial Hermann Tower.
• Avanade Inc. has signed a 10K SF renewal in Town Centre One.
NEW DEVELOPMENTS • Marathon Oil HQ | 990 Town & Country Boulevard – a 440K SF class A office building
• 8020 Katy Freeway – a 420K class A office building • 9753 Katy Freeway – a 190K SF class A office building • Village Tower II | 9655 Katy Freeway – a 150K SF class A office building
18
LARGE EXISTING VACANCIES • 10777 Clay Road – 227,484 SF • Two Memorial City Plaza | 820 Gessner Road – 158,020 SF
• One Memorial City Plaza | 800 Gessner Road – 124,411 SF
• 920 Memorial City Way – 112,408 SF • Memorial Hermann Tower | 929 Gessner Road – 110,579 SF
• Three Memorial City Plaza | 840 Gessner Road – 98,522 SF
• CityCentre One | 800 Town & Country Boulevard – 64,772 SF
• 950 Corbindale Road – 52,935 SF • CityCentre Two | 818 Town & Country Boulevard – 51,959 SF
• Medical Plaza 3 | 915 Gessner Road – 45,480 SF • Memorial City Place | 9821 Katy Freeway – 33,978 SF • CityCentre Four | 840 West Sam Houston Parkway North – 30,648 SF
• Hedwig Place | 8731 Katy Freeway – 28,656 SF • Town & Country Central I | 10497 Town & Country Way – 27,977 SF
• 952 Echo Lane – 27,290 SF • 8584-8588 Katy Freeway – 26,678 SF • Nexen Building | 945 Bunker Hill Road – 25,076 SF • Park Laureate | 10000 Memorial Drive – 24,889 SF • Piney Point Offices II | 2500 Fondren Road – 24,225 SF • Park Centre I | 9950 Westpark Drive – 22,921 SF
18
NORTHWEST SUBMARKET INTELLIGENCE Absorption 12,420 Vacancy 19.9% Leasing Act. 89,602 Delivered SF Quoted Rates $21.51
vs. Prev. Qtr
vs. 12 Mths Ago
75,622
75,737
vs. Prev. Qtr
vs. 12 Mths Ago
20.0% vs. Prev. Qtr 157,449 vs. Prev. Qtr 114,349
19.9% vs. 12 Mths Ago 250,231
VITAL STATS 12.0%23.0%
vs. Prev. Qtr
vs. 12 Mths Ago
$21.73
$20.90
200,000
22.0%
11.0%
90,000 21.0%
150,000 40,000
10.0%
20.0%
100,000 (10,000)
19.0%
50,000
9.0%
(60,000)
18.0%
vs. 12 Mths Ago -
250,000
140,000
8.0%
7.0%
0
17 .0%
(110,000)
16.0%
(160,000)
(50,000)
4Q
1Q
1Q 17 2Q 18 16 16
2Q
3Q 18 16
3Q
4Q18 16
Absorption
Absorption
4Q
1Q18 17
1Q
19 2Q 17
2Q
19 3Q 17
3Q 19 4Q
17
Deliveries
Deliveries
4Q 191Q
18
1Q 202Q
18
2Q 3Q 4Q 20 3Q 20 4Q 20 1Q
18
18
Vacancy
(100,000)
19
Vacancy
Source: CoStar 4Q 2020 Office Report
HLC OUTLOOK HLC’s Northwest office submarket is located northwest of the CBD and starts at the transitioning Heights and Oak Forest/Garden Oaks communities. It also 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 the major freeways which have impacted traffic flow within the submarket. The 290 project is now complete and the submarket is starting to see an increase in activity but recovery is sure to take some time. Most of the more than 10M SF of class A and B office space is located at Loop 610 and Highway 290 or in the vicinity of Highway 290 and Hollister Road. At the close of 4Q 2020, the Northwest submarket had a vacancy rate of 19.9% which was slightly higher than 3Q 2020. Absorption was positive with 12K SF of space absorbed, but down from the 76K SF of absorbed in 3Q 2020. Leasing activity included 90K SF of deals completed. Currently, there is currently 23K SF office space under construction in this submarket.
TOP LEASE TRANSACTIONS • SunDrill Energy Services has signed a 7K SF lease in One Northwind Plaza.
• No Limit Construction has signed a 2K SF lease in the Katy Design Center.
DEALS IN THE MARKET • Washington Place | 7155 Old Katy Road – a 90K SF class B office building
• 10050 Northwest Freeway – a 43K SF class B office building
NEW DEVELOPMENTS • 1224 North Post Oak – a 23K SF class B office building 19
LARGE EXISTING VACANCIES • Brookhollow Central II | 2900 North Loop Freeway
West – 134,281 SF • 2727 North Loop Freeway West – 123,103 SF • Brookhollow Central III | 2950 North Loop Freeway West – 117,721 SF • Brookhollow Central I | 2800 North Loop Freeway West – 90,793 SF • Northwest Crossing | 13333 Northwest Freeway – 90,527 SF • 1800 West 26th Street – 81,152 SF • 13111 Northwest Freeway – 67,303 SF • North Loop Center | 1235 North Loop Freeway West – 65,984 SF • Granite Tower at 290 | 13430 Northwest Freeway – 65,780 SF • Northwest One Building | 13100 Northwest Freeway – 65,730 SF • One Northwind Plaza | 7600 West Tidwell Road – 64,503 SF • Wells Fargo Building | 13201 Northwest Freeway – 60,795 SF • 5252 Hollister Road – 56,316 SF • Northwest Crossing III | 13105 Northwest Freeway – 49,428 SF • Physician Specialty Center | 1900 North Loop West – 35,789 SF • Hollister & Hillmont Building | 5300 Hollister Street – 32,236 SF • 1919 North Loop West Building | 1919 North Loop West – 30,347 SF • 2180 North Loop West – 29,200 SF • 2600 North Loop West – 28,660 SF • Washington Place | 7155 Old Katy Road – 28,204 SF
19
SUGAR LAND SUBMARKET INTELLIGENCE Absorption
VITAL STATS
vs. Prev. Qtr
vs. 12 Mths Ago
54,583
(5,995)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
14.2%
13.4%
12.0%
12.0%
vs. 12 Mths Ago
10.0%
(16,166)
Leasing Act. 43,019 Delivered SF 56,000 Quoted Rates $30.49
vs. Prev. Qtr 55,087 vs. Prev. Qtr
171,113 vs. 12 Mths Ago
60,937
-
vs. Prev. Qtr
vs. 12 Mths Ago
$27.20
$26.78
18.0% 16.0%
125,000600,000
16.0%
500,000 75,000
400,000
14.0% 25,000
300,000 200,000
12.0%
(25,000)
8.0%
100,000 (75,000)
6.0%
0
10.0%
4.0%
(100,000)
(125,000)
2.0% 0.0%
(200,000) 8.0%
1Q 16
(17 5,000) 4Q 17
2Q 16
1Q 18
2Q 3Q 18
16
3Q 4Q18
16
Absorption
4Q 1Q18
17
1Q 19 2Q
17
Absorption
2Q 19 3Q
17
3Q 19 4Q
17
Deliveries
4Q 191Q
18
1Q 2Q 3Q 202Q 20 3Q 20
Deliveries
18
18
4Q 4Q 20
18
Vacancy
(300,000)
1Q 19
Vacancy
Source: CoStar 4Q 2020 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, and Nalco Champion have a large presence in this submarket. The submarket is also home to a variety of non-energy tenants including Coca-Cola, Imperial Sugar, and Kelsey-Seybold Clinic. With its proximity to Houston’s growing population centers and workforce, the submarket continues to be a great suburban alternative to other major Houston office submarkets such as West Loop, Westchase, and Greenway Plaza. At the close of 4Q 2020, the Sugar Land submarket had a vacancy rate of 14.2% which was nearly 1% higher than 3Q 2020. Absorption turned negative with 16K SF of space given back, much different than the 55K SF of positive absorption in 3Q 2020. Leasing activity included 43K SF of deals completed. Currently there is no office space under construction in this submarket.
LARGE EXISTING VACANCIES • Sugar Creek on the Lake | 14141 Southwest Freeway – 274,778 SF
• Sugar Creek Tower II | 13131 Dairy Ashford Road – 104,864 SF
• Sugar Creek Tower I | 13135 Dairy Ashford Road – 103,632 SF
• Sugar Creek Place I | 14100 Southwest Freeway – 72,568 SF
• ABB Network Management | 1601 Industrial Boulevard – 69,250 SF
• Two Sugar Creek Center | 77 Sugar Creek Center Boulevard – 56,938 SF
• The Texas Drive Building | 2245 Texas Drive – 46,316 SF • Comerica Office Tower | 1 Sugar Creek Center Boulevard – 41,979 SF
• The Minute Maid Building | 2150 Town Square Place – 38,540 SF
• Commerce Green One | 14090 Southwest Freeway – TOP LEASE TRANSACTIONS • Hogam Chiropractic Clinic has signed a 4K SF lease in 16035 Lexington Boulevard.
• In Light has signed a 3K SF lease in Sugar Creek Tower I.
DEALS IN THE MARKET • Wells Fargo Fort Bend Building | 2440 Texas Parkway –
37,212 SF
• 12603 Southwest Freeway – 35,998 SF • 7619 Branford Place – 35,031 SF • The Glenn Lakes Professional Building | 3634 Glenn Lakes Lane – 27,969 SF
• Building A | 1 Fluor Daniel Drive – 27K SF • Imperial Medical Plaza | 1111-1211 Highway 6 – 26,255 SF
• Sugar Land Physicians Center | 7616 Branford Place –
• The Plaza Building | 2277 Plaza Drive – 24,796 SF • Comerica Office Tower | 1 Sugar Creek Center
• Offices at Telfair | 300 Promenade Way – a 20K SF
• 7619 Branford Place – 35,031 SF
a 64K SF class B office building
a 56K SF class A office building
Boulevard – 36,237 SF
class A office building
20
20
CLEAR LAKE SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
27,201
(12,175)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.2%
14.3%
14.8%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
60,130
97,581
vs. Prev. Qtr
vs. 12 Mths Ago
8,370
37,868 Delivered SF Quoted Rates $21.69
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$21.44
$22.11
VITAL STATS 12.0% 16.0%
90,000250,000 70,000200,000
11.0% 15.0%
50,000150,000
10.0%
30,000100,000 14.0% 10,00050,000
9.0%
(10,000)
0
13.0%
8.0%
(30,000)
(50,000)
7.0%
12.0%
(50,000) 4Q
1Q
1Q 17 2Q 18 16 16
2Q
3Q 18 16
3Q
4Q18 16
Absorption
Absorption
4Q
1Q18 17
1Q
19 2Q 17
2Q
19 3Q 17
3Q 19 4Q
17
Deliveries
4Q 191Q
18
1Q 202Q
18
Deliveries
2Q 203Q
18
3Q 4Q 20 4Q 20 1Q
18
Vacancy
(100,000)
19
Vacancy
Source: CoStar 4Q 2020 Office Report
HLC OUTLOOK Located southeast of the CBD, the Clear Lake office submarket is home to the Lyndon B. Johnson Space Center and a 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 4Q2020, the Clear Lake submarket had a vacancy rate of 14.2% which was slightly lower than 3Q 2020. Absorption was positive with 8K SF of space absorbed, down from the 27K SF absorbed in 3Q 2020. Leasing activity fell with 38K SF of deals completed, lower than the 60K SF of deals completed in 3Q 2020. Currently, there is no office space under construction in this submarket.
DEALS IN THE MARKET
LARGE EXISTING VACANCIES • Clear Lake Central | 600 Gemini Street – 317,198 SF • 13100 Space Center Boulevard – 91,747 SF • Boeing Building | 3700 Bay Area Boulevard – 66,195 SF • Atrium Crest | 18333 Egret Bay Boulevard – 54,828 SF • Two Corporate Plaza | 2625 Bay Area Boulevard – 47,521 SF • One Corporate Plaza | 2525 Bay Area Boulevard – 42,162 SF • Clear Lake Tech Center | 17146 Feathercraft Laned – 38,474 SF • Hercules I | 1300 Hercules Avenue – 37,941 SF • Hercules II | 1290 Hercules Avenue – 32,389 SF • 16055 Space Center Boulevard – 29,152 SF • Space Park Office Building | 2200 Space Park Drive – 24,525 SF • Camino Center I | 17629 El Camino Real – 21,014 SF • 1322 Space Park Drive – 20,841 SF
• Two Corporate Plaza | 2625 Bay Area Boulevard – a 163K SF class A office building
• Bay Plaza | 711 West Bay Area Boulevard – 19,684 SF
• Gemini Plaza | 1150 Gemini Street – a 158K SF class B office building
• East Building | 251 Medical Center Boulevard – 18,348 SF
• Jacobs Building | 2224 Bay Area Boulevard – a 139K SF class B office building
• Camino Center II | 17625 El Camino Real – 18,920 SF • Marina Plaza | 2450 South Shore Boulevard – 17,478 SF
• One Corporate Plaza | 2525 Bay Area Boulevard – a 114K SF class A office building • 2222 Bay Area Boulevard – a 65K SF class B office building • 17300 Saturn Lane – a 24K SF class B office building
21
21
MIDTOWN SUBMARKET INTELLIGENCE Absorption (18,837)
vs. Prev. Qtr
vs. 12 Mths Ago
VITAL STATS 18.0%
(1,188)
48,404
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
12.9%
12.6%
9.5%
12.0%
vs. 12 Mths Ago
10.0%
Leasing Act. 118,648 Delivered SF Quoted Rate $38.18
vs. Prev. Qtr 13,185 vs. Prev. Qtr
114,279 vs. 12 Mths Ago
64,488
200,000 600,000
14.0%
16.0%
500,000 13.0% 100,000 12.0%
300,000
11.0%
0
8.0% 6.0% 4.0%
vs. 12 Mths Ago
$32.04
$29.26
200,000 100,000
10.0%
0
(100,000)
(100,000)
9.0%
2.0%
vs. Prev. Qtr
400,000
(200,000) 8.0%
0.0% 1Q 16
(200,000) 4Q 17
1Q 18
2Q 18
3Q 18
2Q 3Q 4Q 16 Absorption 16 16
Absorption
4Q 18
1Q 17
1Q 19
2Q 17
2Q 19
3Q 19
3Q 4Q 17 17 Deliveries
Deliveries
4Q 19
1Q 18
1Q 20
2Q 18
2Q 20
3Q 20
4Q 20
3Q 4Q 18 Vacancy 18
(300,000) 1Q 19
Vacancy
Source: CoStar 4Q 2020 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, the Museum District, and 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 2020, the Midtown submarket had a vacancy rate of 12.9% which was slightly higher than 3Q 2020. Absorption was negative with 19K SF of space given back, higher than the 1K SF of negative absorption in 3Q 2020. Leasing activity increased with 119K SF of deals completed. Currently, 493K SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Common Desk has signed a 58K SF lease in The Ion. • Microsoft has signed a 25K SF lease in The Ion. DEALS IN THE MARKET • Washington Place Lofts | 1716-1722 Washington Avenue – a 25K SF class B office building
• 2303 Smith | 2303 Smith Street – a 23K SF class B office building
22
NEW DEVELOPMENTS • The Ion | 4201 Main Street – a 288K SF class A office building
• Montrose Collective | 888 Westheimer Road – a 170K SF class A office building
• 190 TC Jester Boulevard – a 35K SF class B office building
LARGE EXISTING VACANCIES • America Tower | 2929 Allen Parkway – 152,478 SF • Wortham Tower | 2727 Allen Parkway – 148,074 SF • Central Square | 2100 Travis Street – 112,490 SF • HCC Building | 3100 Main Street – 108K SF • 2777 Allen Parkway – 79,849 SF • 2000 Crawford | 2000 Crawford Street – 40,863 SF • 100 Waugh | 100 Waugh Drive – 40,508 SF • 2302 Fannin Street – 37,881 SF • River Oaks Medical | 3720 Westheimer Road – 30,861 SF
• The Bellevue | 2323 South Shepherd Drive – 30,765 SF • 55 Waugh Drive – 28K SF • 2800-2810 San Jacinto Street – 27,484 SF • 5300 Memorial Drive – 24,339 • River Oaks Bank Building | 2001 Kirby Drive – 24,328 SF • Midtown Plaza | 5225 Katy Freeway – 24,254 SF • Buffalo Heights | 3663 Washington Avenue – 23,642 SF • 602 Sawyer Street – 21,979 SF • 5900 Memorial | 5900 Memorial Drive – 21,270 SF
22
WEST BELT SUBMARKET INTELLIGENCE Absorption 14,391 Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
(11,805)
(98,645)
vs. Prev. Qtr
vs. 12 Mths Ago
26.3%
26.5%
19.5%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
27,162 Delivered SF Quoted Rate $26.60
39,596
70,881
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$25.48
$24.57
VITAL STATS 12.0%28.0%
250,000 200,000 150,000
200,000
26.0%
100,000
11.0%
50,000150,000
24.0%
0
10.0% 22.0%
100,000
(50,000)
50,000 (100,000)
9.0% 20.0%
(150,000)
0
(200,000)
8.0%18.0%
(50,000) (250,000) 16.0%
7.0%
(300,000) 4Q
1Q 17 16
1Q
2Q 18 16
2Q
3Q18 16
3Q
4Q18 16
Absorption Absorption
4Q
18 1Q 17
1Q
19 2Q 17
2Q
19 3Q 17
3Q 19 4Q
17
Deliveries Deliveries
4Q 191Q
18
1Q 202Q
18
2Q 20 3Q
18
3Q 20
4Q
(100,000)
4Q 20 1Q 18 19
Vacancy Vacancy
Source: CoStar 4Q 2020 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. However, the outlook for this submarket looks promising given its close proximity to the population center of Houston. At the close of 4Q 2020, the West Belt submarket had a vacancy rate of 26.3% which was slightly lower than 3Q 2020. Absorption turned positive with 14K SF of space absorbed, opposite the 12K SF of negative absorption in 3Q 2020. Leasing activity remained flat with 27K SF of deals completed, lower than the 40K SF of completed deals in 3Q 2020. Currently, no office space is under construction in this submarket.
DEALS IN THE MARKET • 11100 Brittmoore Park Drive – a 76K SF class B office building
• 4805 Westway Park Boulevard – a 73K SF class B office building
• 7102 North Sam Houston Parkway West – a 55K SF class A office building
• 8400 North Sam Houston Parkway West – a 40K SF
LARGE EXISTING VACANCIES • Westway II | 4424 West Sam Houston Parkway North – 231,666SF
• Beltway Lakes Phase III | 5775 North Sam Houston Parkway West – 150,613 SF
• Westway One | 11220 Equity Drive – 143,960 SF • Westway Plaza | 11330 Clay Road – 118,450 SF • Westway Building Two | 11000 Corporate Centre Drive – 88,394 SF
• Sam Houston Crossing One | 10343 Sam Houston Park Drive – 87,932 SF
• Beltway Lakes Phase I | 5825 North Sam Houston Parkway West – 79,908 SF
• Sam Houston Crossing Two | 10344 Sam Houston Park Drive – 62,329 SF
• Concourse at Westway | 4700 West Sam Houston Parkway North – 56,993 SF
• Heron Lakes | 10740 North Gessner Drive – 53,196 SF • 10603 West Sam Houston Parkway North – 50,597 SF • Beltway 8 Corporate Centre | 5300 West Sam Houston Parkway North – 50K SF
• York Centre | 10235 West Little York Road – 35,388 SF • Westway Building Three | 10930 West Sam Houston Parkway North – 32,724 SF
• Tanner Office Building | 11302 Tanner Road – 30,240 SF
class B office building
• 15000 Northwest Freeway – a 38K SF class B office building
• 6221 West Sam Houston Parkway North – a 25K SF class B office building
• 16060 Dillard Drive – a 24K SF class B office building
23
23
EAST HOUSTON/PASADENA SUBMARKET INTELLIGENCE VITAL STATS
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
10,922
(66,897)
(38,123)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
14.4%
14.5%
14.4%
12.0%
vs. 12 Mths Ago
10.0%
Leasing Act. 34,445 Delivered SF -
vs. Prev. Qtr 21,604
81,361
vs. Prev. Qtr
vs. 12 Mths Ago
30,500
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
21.29
21.06
22.05
18.0% 16.0%
130,000600,000
16.0%
110,000 500,000 90,000 14.0% 70,000
400,000 300,000
50,000 12.0%
30,000
8.0%
10,000
6.0%
200,000 100,000
(10,000)0 10.0% (30,000)(100,000)
4.0%
(50,000)
2.0% 0.0%
(200,000)
8.0%
1Q 16
(70,000) 4Q 1Q 17 2Q 18
16
2Q 3Q 18
16
3Q 4Q 18
16
Absorption
4Q 1Q18
17
1Q 19 2Q
17
Absorption
2Q 19 3Q
17
3Q 19 4Q
17
4Q 191Q
Deliveries
18
1Q 202Q
18
2Q 3Q 20 3Q 20
Deliveries
18
4Q 4Q 20
18
Vacancy
(300,000)
1Q 19
Vacancy
Source: CoStar 4Q 2020 Office Report
HLC OUTLOOK HLC’s East Houston/Pasadena office submarket’s location has, historically, been driven more by industrial product than office. Fundamentals, though somewhat soft, were still healthier than many submarkets across the city. At the close of 4Q 2020, the East Houston/Pasadena submarket had a vacancy rate of 14.4% which was slightly lower than 3Q 2020. Absorption turned positive with 11K SF of space absorbed, much better than the 67K SF of space given back in 3Q 2020. Leasing activity increased with 34K SF of deals completed, slightly better than 3Q 2020. Currently, 64K SF office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Dedicated Texas Holdings has signed a 3K SF lease in Broadway Plaza. • Progressive Learning has signed a 3K SF lease in 7135 Office City Drive. • Triton Industries has signed a 3K SF lease in 10910 Spencer Highway.
NEW DEVELOPMENT • 4400 Harrisburg Boulevard – a 32K SF class B office building • 2351 Oleander Drive – a 32K SF class B office building
LARGE EXISTING VACANCIES • 100 Pasadena Boulevard – 114,356 SF • Atrium 10 Tower | 11811 East Freeway – 32,360 SF • 1001 Shaw Avenue – 30,938 SF • Vibe Hobby | 8866 Gulf Freeway – 30,518 SF • Gulf Freeway Plaza | 9333 Bryant Street – 29,750 SF • Bank of America East Freeway | 12605 East Freeway – 28,305 SF • BPM Airport | 8031 Airport Boulevard – 28,058 SF • Land Park | 11821 East Freeway – 27,613 SF • EaDo | 2339 Commerce Street – 25,549 SF • Original US Schlumberger HQ (1938) | 2720 Leeland Street – 25,500 SF • 12600 North Featherwood Drive – 24,417 SF • 3737-3743 Red Bluff Road – 23,934 SF
DEALS IN THE MARKET • Vibe Hobby | 8866-8876 Gulf Freeway – a two (2) building 90K SF class B office complex
• The 1200 Building | 1200 Highway 146 South – 22,915 SF • The Fuqua Professional Center | 12505-12563 Gulf Freeway – 22,877
• Bank of America East Freeway | 12605 East Freeway – a 86K SF class B office building • Atrium 10 Tower | 11811 East Freeway – a 85K SF class B office building • 12650 North Featherwood Drive – a 58K SF class B office building • 12727 Featherwood Drive – a 50K SF class B office building • 1702 Strawberry Road – a 22K SF class B office building
24
24
WEST SUBMARKETFARINTELLIGENCE Absorption 28,748 Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
28,053
(88,126)
vs. Prev. Qtr
vs. 12 Mths Ago
VITAL STATS 12.0% 20.0%
250,000 150,000
200,000
11.0% 18.0% 100,000
17.1%
17.8%
15.2%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
129,724
12,109
vs. Prev. Qtr
vs. 12 Mths Ago
13,471 Delivered SF Quoted Rates $30.68
152,645
50,000
vs. Prev. Qtr
vs. 12 Mths Ago
$28.90
$29.10
150,000
10.0% 16.0%
9.0%
50,000 100,000
50,000
14.0%
0
0 8.0%
12.0%
(50,000)
10.0%
(100,000)
(50,000) 7.0%
1Q 16
4Q 1Q 2Q 17 2Q 18 3Q 18
16
16
3Q
4Q18 16
Absorption
4Q
1Q18 17
1Q
19 2Q 17
Absorption
2Q
19 3Q 17
3Q 19 4Q
17
Deliveries
Deliveries
4Q 191Q
18
1Q 202Q
18
2Q 3Q 4Q 20 3Q 20 4Q 20
18
18
Vacancy
(100,000)
1Q 19
Vacancy
Source: CoStar 4Q 2020 Office Report
HLC OUTLOOK HLC’s Far West office submarket includes CoStar’s Katy Freeway/Grand Parkway submarket 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.
LARGE EXISTING VACANCIES • Katy Ranch Phase II | 24279 Katy Freeway – 128,401 SF • Mason Creek Office Center II | 21700 Merchants Way – 127,955 SF
• The Offices at Greenhouse | 19219 Katy Freeway – 84,378 SF
• Det Norske Veritas Phase 2 | 1400 Ravello Drive – 70,031 SF
• Greenhouse at Park Row | 2051 South Greenhouse Road – 53,753 SF
At the close of 4Q 2020, the Far West submarket had a vacancy rate of 17.1% which was lower than 3Q 2020. Absorption remained positive with 29K SF of space absorbed. Leasing activity was much lower than 3Q 2020 with just 13K SF of deals completed compared to 3Q 2020. Currently, 21K SF is under construction in this submarket.
• Katy MOB II | 707 South Fry Road – 50,359 SF • Offices at 410 | 410 West Grand Parkway South – 43,393 SF
• Horizon Medical Plaza 2 | 19002 Park Row – 41,500 SF • Westgreen Professional Building | 750 Westgreen Boulevard – 27,940 SF
TOP LEASE TRANSACTIONS • DSWi has signed a 3K SF lease in The Offices at Greenhouse.
DEALS IN THE MARKET • PetroSkills | 25403 Katy Mills Parkway – a 32K SF class
• Katy Medical Plaza I | 23510 Kingsland Boulevard – 27,874 SF
• Katy Ranch Phase I | 24275 Katy Freeway – 27,815 SF • Katy MOB I | 705 South Fry Road – 23,368 SF • Kingsland Medical Plaza | 777 South Fry Road – 22,950 SF
B office building
NEW DEVELOPMENTS • 25220 Kingsland Boulevard – a 21K SF class B office building
25
25
KINGWOOD SUBMARKET INTELLIGENCE Absorption
VITAL STATS
vs. Prev. Qtr
vs. 12 Mths Ago
6,532
15,876
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
12.4%
12.9%
11.1%
12.0% 12.0%
vs. 12 Mths Ago
10.0%
11,803
Leasing Act. 27,839 Delivered SF Quoted Rates $25.48
vs. Prev. Qtr 6,790
11,908
vs. Prev. Qtr
vs. 12 Mths Ago
39,106
-
vs. Prev. Qtr
vs. 12 Mths Ago
$25.49
$25.55
18.0% 16.0%
600,000
16.0%
140,000 500,000 14.0% 90,000
400,000 300,000
40,000
200,000
10.0% (10,000)
8.0% 6.0%
8.0%
4.0% 6.0%
(100,000)
(110,000)
2.0% 0.0%
100,000
(60,000)0
(200,000) 4.0%
1Q 16
(160,000) 4Q 17
1Q 18
2Q 18
3Q 18
2Q 3Q 4Q 16 Absorption 16 16
4Q 18
1Q 17
Absorption
1Q 19
2Q 17
2Q 19
3Q 19
3Q 4Q 17 17 Deliveries
4Q 19
Deliveries
1Q 18
1Q 20
2Q 18
2Q 20
3Q 20
4Q 20
3Q 4Q 18 Vacancy 18
(300,000)
1Q 19
Vacancy
Source: CoStar 4Q 2020 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 2020, the Kingwood submarket had a vacancy rate of 12.4% which was slightly lower than 3Q 2020. Absorption remained positive with 12K SF of space absorbed, double the amount of absorption in 3Q 2020. Leasing activity increased with 28K SF of deals completed, compared to the 7K SF of deals completed in 3Q 2020. Currently, 270K SF is under construction in this submarket.
TOP LEASE TRANSACTIONS • Wagner Law Firm has signed a 2K SF lease in 8 North Main Street.
LARGE EXISTING VACANCIES • Northeast Medical Tower II | 18980 North Memorial Drive North – 73,043 SF
• Kingwood West Tower | 22999 Highway 59 North – 31,906 SF
• 215 Kingwood Executive Drive – 27,859 SF • Four Kingwood Place | 900 Rockmead Drive – 27,760 SF
• Three Kingwood Place | 800 Rockmead Drive – 23,135 SF
• BRB Medical Office Building | 22751 Professional Drive – 21,354 SF
• Humble Medical Office Building | 1485 FM 1960 Bypass East – 18,856 SF
• Two Kingwood Place | 700 Rockmead Drive – 18,467 SF • Kings Harbor | 4501 Magnolia Cove Drive – 17,678 SF • 22710-22720 Professional Drive – 14,468 SF • Kingwood Medical Plaza I | 22698 Professional Drive – 12,940 SF
NEW DEVELOPMENTS • Insperity Campus Building 5 | US-50 & Kingwood Drive – a 270K SF class A office building
• Woodforest National Bank Building | 1710 West Lake Houston Parkway – 11,063 SF
• Citizens Bank Building | 8811 FM 1960 Bypass Road – 9,6629 SF
• 12,940 SF • Woodforest National Bank Building | 1710 West Lake Houston Parkway – 11,063 SF
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SUBURBAN OUTLIERS SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(95)
25,529
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
12.8%
11.8%
10.7%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
61,381
119,971
vs. Prev. Qtr
vs. 12 Mths Ago
(33,153)
50,984 Delivered SF 88,133 Quoted Rates $27.01
31,672
33,284
vs. Prev. Qtr
vs. 12 Mths Ago
$26.54
$26.33
VITAL STATS 12.0%16.0%
500,000 250,000
200,000 400,000
11.0%
14.0%
150,000
300,000
10.0%
100,000
12.0%
200,000
50,000
9.0%
100,000
0
10.0%
8.0%
0
(50,000) 7.0%
8.0%
(100,000) 4Q
1Q 17 16
1Q
2Q 18 16
2Q
3Q18 16
3Q
4Q18 16
Absorption Absorption
4Q
18 1Q 17
1Q
19 2Q 17
2Q
19 3Q 17
3Q 19 4Q
17
4Q 191Q
Deliveries Deliveries
18
1Q 202Q
18
2Q 3Q 4Q 20 3Q 20 4Q 20 1Q
18
18
Vacancy Vacancy
(100,000)
19
Source: CoStar 4Q 2020 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 just under 10.5M SF of class A and B office buildings. At the close of 4Q 2020, the Suburban Outliers submarket had a vacancy rate of 12.8% which was 1.0% higher than 3Q 2020. Absorption remained negative with 33K SF of space given back, much higher than in 3Q 2020. Leasing activity remained steady with 51K SF of deals completed. Currently, 277K SF is under construction in this submarket.
TOP LEASE TRANSACTIONS • Matt Mabr has signed a 14K SF lease in 24130 State Highway 249.
DEALS IN THE MARKET
• Baylor St. Luke’s Emergency Center | 4019 Interstate 45 North – a 20K SF class B office building
NEW DEVELOPMENTS • Towne Lake Office Condos | 10242 Greenhouse Road – 50K SF of class B office condos • HCA Healthcare | 11200 Broadway Street – a 48K SF class A office building • I45 & Crescent Campus Boulevard – a 45K SF class B office building • 2080 Central Pine Street – a 42K SF class B office building • 2510 South Loop 336 West – a 40K SF class B office building • Conroe Medical Plaza | 603 South Conroe Medical Drive – a 27K class B office building • 12280 Broadway Street – a 25K SF class A office building
LARGE EXISTING VACANCIES
• Primary Medical Tower II | 2800 Garth Road – a 129K Class B office building
• 4005 Technology Drive – 257,399 SF
• Magnolia Landmark Building | 18230 FM 1488 Road – a 65K SF class B office building
• Cypress Medical Office Building | 27700 Highway 290 – 43,411 SF
• 301 South First Street – a 59K SF class B office building • Umar Syed Medical Tower | 2802 Garth Road – a 51K SF class B office building • Towne Lake Office Condos | 10242 Greenhouse Road – a 50K SF office condo community • The Offices at Greatwood | 6514-6548 Greatwood Parkway – a 43K SF class B office building
• Westland Bunker | 550 Club Drive – 54,071 SF • UT Physicians Facilities | 1517 Thompson Road – 42,551 SF • 4001 Technology Drive – 40,681 SF • 2765-2785 Gulf Freeway South – 39,112 SF • Oakbend Professional Building | 1601 Main Street – 36,767 SF • Pearland Medical Plaza 1 | 10905 Memorial Hermann Drive – 35,088 SF • 17302 House Hahl Road – 33,956 SF
• Bank of America | 4000 Garth Road – a 33K SF class B office building
• Primeline Pro Office Building | 2941 Broadway Bend Drive – 31,691 SF
• NOV | 10586 Highway 75 North – a 30K SF class B office building
• NOV | 10586 Highway 75 North – 30K SF
• Tomball Bank of America Building | 1431 Graham Drive – a 28K SF class B office building • 12280 Broadway Street – a 25K SF class A office building • Pearland Medical Commons | 8540 Broadway Street – a 25K SF class A office building
• 2401 Termini Street – 30,262 SF • Umar Syed Medical Tower/2802 Garth Road – 29,627 SF • 7830 West Grand Parkway South – 28,218 SF • 1920 Country Place Parkway – 25,237 SF • 10970 Shadow Creek Parkway – 25,100 SF
• The Lakes Professional Center | 6455 South Shore Boulevard – a 24K SF class B office building
• Pearland Medical Commons | 8540 Broadway Street – 25K SF
• Hughes Court Professional Building | 3828 Hughes Court – a 23K SF class B office building
• Conroe Medical Office Building | 1501 River Pointe Drive – 22,393 SF
• Magnolia Landmark Building | 18230 FM 1488 Road – 24,169 SF
• Baker Road Professional Building | 1010 Baker Road – a 22K SF class B office building • 455 School Street – a 22K SF class B office building • Northpoint Crossing Office Building | 24445 State Highway 249 – a 21K SF class B office building 27
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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