Market Brief...
Houston
OFFICE
2Q2021 Property Pictured Above: 2020 Dairy Ashford | Houston, Texas 77077
HOUSTON OFFICE MARKET BRIEF 2Q 2021
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 | 49,818,045 SF 2 WEST LOOP | 35,231,810 SF 3 WESTCHASE | 18,016,991 SF 4 GREENWAY PLAZA | 11,103,633 SF 5 MEDICAL CENTER | 10,685,885 SF 6 MIDTOWN | 7,053,149 SF 7 SUBURBAN OUTLIERS | 11,274,537 SF
THE WOODLANDS 20,727,996 SF
TOMBALL
KINGWOOD 2,666,103 SF SPRING
FM 1960 CORRIDOR 12,128,573 SF
HUMBLE
GEORGE BUSH INTERCONTINENTAL AIRPORT
CYPRESS
GREENSPOINT/IAH 12,723,535 SF
WEST BELT 5,922,833 SF
NORTHWEST 8,504,228 SF
KATY FREEWAY WEST 27,048,118 SF
KATY
KATY FREEWAY EAST 9,385,540 SF
FAR WEST 4,326,949 SF
LAKE HOUSTON
HOUSTON 6
EAST HOUSTON/ PASADENA 5,739,374 SF
1
2 3
GALLERIA
SHIP CHANNEL
4 5
SOUTHWEST 9,548,347 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 6,976,007 SF
LEAGUE CITY
3
4
HLC HOUSTON OFFICE MARKET EXPERTS
Brandon Avedikian joined Holt Lunsford Commercial (HLC) in 2016 and serves as Managing Principal of the Houston Office Group. Brandon was originally in HLC’s Dallas Office Group, 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, where is he responsible for growing HLC’s office portfolio and providing exceptional service to clients. 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. BRANDON AVEDIKIAN Managing Principal 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 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
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.
Skyler Seidman joined Holt Lunsford Commercial in 2021 and serves as a Market Analyst in the Houston Office Group. His responsibilities include gathering market intelligence, producing competitive market sets, producing weekly analysis reports, assisting brokers in lease negotiations and marketing HLC properties. Prior to joining HLC full-time, Skyler completed an internship with HLC in the summer of 2020. During this time, he gained valuable experience by assisting in leasing activities, investments, asset management, and construction services. SKYLER SEIDMAN Market Analyst sseidman@holtlunsford.com 713.602.3767
5
Skyler graduated from Abilene Christian University where he received a BBA in Marketing and Management. While at Abilene Christian, Skyler was a tour guide in the university’s admissions office. Skyler is a Texas Real Estate Commission License Holder.
5
NEW LISTING THE GLENN LAKES PROFESSIONAL BUILDING
3634 Glenn Lakes Lane: 46,823 SF class B office building in Missouri City
6
NEW LISTING
DAIRY ASHFORD PLAZA
2020 Dairy Ashford Road: 107,890 SF class B office building in Houston
7
HLC HOUSTON OFFICE OVERALL MARKET
HOUSTON OVERALL At the close of 2Q 2021, the overall Houston office market had a vacancy rate of 21.2% which was slightly higher than the 20.9% at the close of 1Q 2021. Absorption remained negative with 651K SF of space given back, up from the 561K SF of negative absorption in 1Q 2021. Leasing activity increased from 1Q 2021 with 2.6M SF of deals completed. There is currently more than 5.1M SF of class A and B office space under construction with nearly 520K SF of space delivered in 1Q 2021.
VACANCY - OVERALL HOUSTON
CONSTRUCTION - OVERALL HOUSTON
25.0%
6,000,000
21.2% 18.5%
19.9%
16.9%
5,000,000
20.0%
4,000,000
15.0%
3,000,000
10.0% 2,000,000
5.0% 1.6%
0.0% 2Q 18
1,000,000
1.3% 3Q 18
4Q 1Q 18 19 Direct
2Q 19
3Q 19
4Q 19
1Q 20 Sublet
2Q 20
3Q 20
4Q 20
1Q 21 Total
2Q 21
0 2Q 18
6,000,000
4Q 18
1Q 2Q 3Q 4Q 19 19 19 19 Delivered Inventory
1Q 20
2Q 3Q 4Q 20 20 20 Under Construction
1Q 21
2Q 21
OVERVIEW - OVERALL HOUSTON
ABSORPTION - OVERALL HOUSTON 7,000,000
3Q 18
22.0%
1,500,000
21.0%
1,000,000
20.0%
500,000
19.0%
0
18.0%
(500,000)
17 .0%
(1,000,000)
16.0%
(1,500,000)
5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 (1,000,000) (2,000,000) 2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
Total Net
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
Leasing Activity
1Q 21
2Q 21
15.0%
(2,000,000) 2Q 18
3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
Deliveries
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Vacancy
Source: CoStar 2Q 2021 Office Report
8
HLC HOUSTON OFFICE OVERALL MARKET
Market
Existing Inventory
Vacancy
YTD Net Absorption
YTD Deliveries
Under Const. SF
Quoted Rates
(557,224)
0
1,621,829
$40.09
(402,259)
70,000
77,189
$32.66
#Bldgs.
Total RBA
Direct SF
Total SF
Vac. %
CBD
89
49,818,045
10,515,000
11,356,873
22.8%
West Loop
197
35,231,810
7,513,617
8,015,282
22.8%
Katy Freeway West
164
27,048,118
5,732,561
6,445,181
23.8%
(87,422)
0
0
$27.42
The Woodlands
172
20,727,996
3,069,128
3,291,602
15.9%
(353,839)
0
603,000
$33.62
Westchase
103
18,016,991
4,652,304
4,858,469
27.0%
(143,482)
0
0
$26.97
Greenspoint/IAH
97
12,723,535
5,548,896
5,608,071
44.1%
28,986
0
0
$18.15
FM 1960 Corridor
154
12,128,573
2,358,231
2,432,439
20.1%
37,834
77,664
155,124
$20.74
Greenway Plaza
57
11,103,633
2,230,767
2,501,771
22.5%
(304,471)
0
0
$34.98
Medical Center
61
10,685,885
1,004,963
1,025,055
9.6%
(141,596)
0
1,327,780
$31.13
Southwest
88
9,548,347
2,160,399
2,161,249
22.6%
45,767
0
0
$17.26
Katy Freeway East
69
9,385,540
862,828
970,967
10.3%
248,630
193,500
767,059
$34.44
Northwest
92
8,504,228
1,778,144
1,806,164
21.2%
(131,050)
0
132,700
$20.52
Sugar Land
100
7,867,843
1,282,825
1,386,574
17.6%
(160,554)
0
0
$30.95
Clear Lake
97
6,976,007
861,649
892,184
12.8%
92,175
0
0
$21.94
Midtown
66
7,053,149
920,275
958,620
13.6%
29,606
35,400
436,000
$34.19
West Belt
67
5,922,833
1,347,217
1,540,832
26.0%
(81,959)
0
0
$24.97
East Houston/Pasadena
101
5,739,374
764,567
793,550
13.8%
31,781
24,382
89,473
$22.31
Far West
60
4,326,949
669,104
798,665
18.5%
64,174
61,625
25,000
$30.91
Kingwood
45
2,666,103
315,793
315,793
11.8%
263,076
270,000
0
$25.18
Suburban Outliers
192
11,274,537
1,620,505
1,641,187
14.6%
15,837
110,106
222,195
$27.67
2,071
276,749,496
55,208,773
58,800,528
21.2%
(1,505,990)
842,677
5,457,349
$29.92
Totals
9
HOUSTON CENTRAL BUSINESS DISTRICT SUBMARKET INTELLIGENCE Absorption (184,739)
vs. Prev. Qtr
VITAL STATS
vs. 12 Mths Ago 24.0%
(154,679)
(134,748)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
22.0%
22.8%
22.4%
21.2%
21.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
20.0%
212,843
272,630
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
309,106
1,200,000 1,000,000
23.0%
800,000 600,000 400,000 200,000 0
19.0%
(200,000)
Delivered SF Quoted Rates $39.97
vs. Prev. Qtr
vs. 12 Mths Ago
$40.17
$41.33
18.0% (400,000) 17 .0%
(600,000)
16.0%
(800,000) 2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
Absorption
4Q 19
1Q 20
Deliveries
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Vacancy
Source: CoStar 2Q 2021 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 $40 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 2Q 2021, the CBD submarket had a vacancy rate of 22.8%, slightly higher than 1Q 2021. Absorption remained negative with 185K SF of space given back, higher than the 155K SF given back in 1Q 2021. Leasing activity included 309K SF of deals completed and was almost 100K SF more than the number of deals completed in 1Q 2021. Currently, more than 1.6M SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • The Harris County District Attorney Office has signed a 158K SF renewal in Jefferson Towers.
• Shackelford, Bowen, McKinley & Norton has signed a 11K SF lease in 717 Texas Avenue.
• Cabello, Hall, & Zinda Law has signed a 2K SF lease in 801 Travis Street.
DEALS IN THE MARKET • Esperson | 808 Travis Street – a 600K SF class B office building
• Theatre District | 720 Rusk Street – a 25K SF class B office building
• The Tamborello Building | 1901 Milam Street – a 24K SF class B office building
10
NEW DEVELOPMENTS • Texas Tower | 845 Texas Avenue – a 1.1M SF class A office building
• 1550 on the Green | 1550 Lamar Street – a 386K SF class A office building
• PostHouston | 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 – 797,782 SF • Wells Fargo Plaza | 1000 Louisiana Street – 652,955 SF • Fulbright Tower | 1301 McKinney Street – 599,265 SF • 4 Houston Center | 1221 Lamar Street – 580,565 SF • Two Allen Center | 1200 Smith Street – 523,387 SF • 1600 Smith Street – 490,492 SF • GreenStreet Tower | 1201 Polk Street – 481,442 SF • One City Centre | 1021 Main Street – 480,014 SF • 919 Milam | 919 Milam Street – 436,986 SF • One Allen Center | 500 Dallas Street – 434,499 SF • 1801 Smith Street – 429,210 SF • TC Energy Center | 700 Louisiana Street – 418,830 SF • North Tower | 700 Milam Street – 342,494 SF • JP Morgan Chase Tower | 600 Travis Street – 338,177 SF
• 1301 Fannin Office Tower | 1301 Fannin Street – 327,018 SF
• Three Allen Center | 333 Clay Street – 319,717 SF • South Tower | 711 Louisiana Street – 309,737 SF • 2 Houston Center | 909 Fannin Street – 306,030 SF • 1000 Main | 1000 Main Street – 298,713 SF • 1415 Louisiana Street – 293,257 SF • 1100 Louisiana Street – 276,206 SF
WEST LOOP SUBMARKET INTELLIGENCE Absorption (158,641)
vs. Prev. Qtr
VITAL STATS
vs. 12 Mths Ago 24.0%
300,000
23.0%
200,000
(37,083)
(270,476)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
22.8%
22.3%
20.4%
21.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
20.0%
476,791
774,509
vs. Prev. Qtr
vs. 12 Mths Ago
70,000
205,629
570,076 Delivered SF Quoted Rates $32.90
vs. Prev. Qtr
vs. 12 Mths Ago
$33.04
$33.68
22.0%
100,000
0
(100,000) 19.0% (200,000)
18.0%
(300,000)
17 .0%
(400,000)
16.0% 2Q 18
3Q 18
4Q 18
Absorption
1Q 19
2Q 19
3Q 19
4Q 19
1Q 20
Deliveries
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Vacancy
Source: CoStar 2Q 2021 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 2Q 2021, the West Loop submarket had a vacancy rate of 22.8% which was slightly higher than 1Q 2021. Absorption remained negative with 159K SF of space given back, more than four times the 37K SF of space given back in 1Q 2021. Leasing activity remained similar to 1Q 2021 with 570K SF of deals completed. Currently, 77K SF of office space is under construction in this submarket.
NEW DEVELOPMENTS • 4411 San Felipe Street – a 77K SF class A office building
LARGE EXISTING VACANCIES • Marathon Oil Tower | 5555 San Felipe Street – 943,018 SF
• Williams Tower | 2800 Post Oak Boulevard – 423,395 SF
• San Felipe Plaza | 5847 San Felipe Street – 267,576 SF • Two Post Oak Central | 1980 Post Oak Boulevard – 261,110 SF
• Galleria Tower I | 2700 Post Oak Boulevard – 241,586 TOP LEASE TRANSACTIONS • Colliers International has signed a 37K SF renewal in 1233 West Loop South.
• Third Coast Bank has signed a 11K SF renewal in 1800 West Loop South.
• City Street Residential has signed a 8K SF renewal in 1300 Post Oak Boulevard.
• Bank of Houston has signed a 5K SF lease at 4400 Post Oak Boulevard.
• Institute of International Education has signed a 5K SF renewal at 1800 West Loop South.
• Presenture LLC has signed a 3K SF renewal at 1 Riverway.
SF
• 2000 West Loop | 2000 West Loop South – 236,808 SF • Three Riverway | 3 Riverway – 234,545 SF • Galleria Tower 2 | 5051 Westheimer Road – 213,343 SF • TwentyFour25 | 2425 West Loop South – 204,590 SF • Five Post Oak Park | 4400 Post Oak Parkway – 202,600 SF
• Thirty Forty Post Oak | 3040 Post Oak Boulevard – 201,591 SF
• One Riverway | 1 Riverway – 197,026 SF • Three Post Oak Central | 1990 Post Oak Boulevard – 181,098 SF
• Four Oaks Place | 1330 Post Oak Boulevard – 181,047 SF
DEALS IN THE MARKET • 9009 West Loop South – a 472K SF class B office
• Wells Fargo Bank Tower | 1300 Post Oak Boulevard – 177,333 SF
building
• 50 Briar Hollow Lane – two (2) class B office buildings totaling 202K SF
• 5610-5613 Southwest Freeway – a 23K SF class B office building
• 5606 Rice Avenue – a 20K SF class B office building
11
KATY FREEWAY WEST SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(46,115)
23,578
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
23.8%
23.6%
21.1%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
223,305
339,645
vs. Prev. Qtr
vs. 12 Mths Ago
(50,349)
272,495 Delivered SF Quoted Rates $27.24
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$27.49
$29.41
24.0%
VITAL STATS
26.0%
1,000,000 500,000
22.0%
800,000
25.0%
300,000 600,000 24.0%
20.0%
400,000
100,000
23.0%
200,000
18.0%
(100,000)
22.0%
0 16.0%
14.0%
(300,000)
21.0%
(200,000)
20.0%
1Q 16
2Q 2Q 18
16
3Q 3Q 18
16
4Q 4Q 18
16
Absorption Absorption
1Q 19
1Q 17
2Q 2Q 3Q 19 19
17
3Q 4Q 4Q 1Q 19 20 17 17
Deliveries Deliveries
1Q2Q 20 18
2Q3Q 20 18
4Q 3Q 20 18
1Q 4Q 21 18
2Q 1Q 21 19
(500,000) (400,000)
Vacancy Vacancy
Source: CoStar 2Q 2021 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 landlorddriven to a tenant-driven submarket. This submarket, along with most of the metro, has experienced a recent and significant flightto-quality helping these large corporations to continue attracting a talented workforce. At the close of 2Q 2021, the Katy Freeway West submarket had a vacancy rate of 23.8%, slightly higher than 1Q 2021. Absorption remained negative with 50K SF of space given back, up from the 46K SF of negative absorption in 1Q 2021. Leasing activity increased with 272K SF of deals completed. Currently, no office product is under construction in this submarket.
TOP LEASE TRANSACTIONS • AES Drilling Fluids has signed a 27K SF lease in 575 North Dairy Ashford. • Enventure Global Technology has signed a 18K SF lease in 1311 Broadfield Boulevard. • Ansys Inc has signed a 7K SF renewal in 15915 Katy Freeway. • Petrofac has signed a 6K SF lease in 16340 Park Ten Place Drive. • American Shipping has signed a 3K SF renewal in The Westchester.
HLC Deal
LARGE EXISTING VACANCIES • Two WestLake | 580 Westlake Park Boulevard – 455,142 SF • Three WestLake Park | 550 Westlake Park Boulevard – 407,832 SF • Eldridge Oaks Phase 1 | 1080 Eldridge Parkway – 363,086 SF • Energy Tower III | 11740 Katy Freeway – 350,813 SF • Three Eldridge Place | 737 North Eldridge Parkway – 308,186 SF • Enclave on the Lake | 1255 Enclave Parkway – 289,632 SF • 8 West Centre | 3505 West Sam Houston Parkway North – 273,810 SF • West Memorial Place 2 | 15377 Memorial Drive – 265,761 SF • Republic Square 1 | 13501 Katy Freeway – 250,813 SF • Two Eldridge Place | 757 North Eldridge Parkway – 233,763 SF • Energy Center II | 575 North Dairy Ashford Road – 219,490 SF • Energy Center I | 585 North Dairy Ashford Road – 160,907 SF • Energy Tower IV | 11750 Katy Freeway – 160,201 SF • Ashford 5 | 14701 St. Mary’s Lane – 155,727 SF • One Eldridge Place | 777 North Eldridge Parkway – 151,949 SF
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 • Ashford Place | 1500 South Dairy Ashford Road – a 132K SF class B office building • Ten West Plaza | 15915 Katy Freeway – a 105K SF class B office building • 14511 Old Katy Road – a 36K SF class B office building • 16000 Memorial Drive – a 28K SF class B office building 12
12
THE WOODLANDS SUBMARKET INTELLIGENCE Absorption 81,189
vs. Prev. Qtr
vs. 12 Mths Ago
(385,045)
(597,379)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
15.9%
16.3%
13.6%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
255,071
169,540
vs. Prev. Qtr
vs. 12 Mths Ago
-
20,000
vs. Prev. Qtr
vs. 12 Mths Ago
$33.13
$33.89
135,655 Delivered SF Quoted Rates $33.49
VITAL STATS
16.0% 17 .0%
300,000 800,000
16.0%
250,000 600,000
15.0%
200,000
14.0%
400,000 150,000
14.0% 13.0%
100,000
12.0%
200,000
50,000
11.0% 0
10.0% 9.0% 12.0%
(100,000)
7.0%
(400,000)
(150,000)
6.0%
10.0%5.0%
0
(50,000) (200,000)
8.0%
1Q2Q 18 16
2Q3Q 18 16
4Q 3Q 18
16
1Q 4Q 19
16
Absorption Absorption
2Q 1Q 19
17
3Q 2Q 19
17
4Q 3Q 19
17
1Q 4Q 20
17
2Q 1Q 20
18
3Q 2Q 20
18
4Q 3Q 20
18
Deliveries
1Q 4Q 21
18
2Q 1Q 21
(600,000) (200,000)
19
Vacancy Vacancy
Source: CoStar 2Q 2021 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 2Q 2021, The Woodlands submarket had a vacancy rate of 15.9% which was lower than 1Q 2021. Absorption turned positive with over 81K SF of space absorbed compared to the 385K SF of space given back in 1Q 2021. Leasing activity consisted of 136K SF of deals completed, over 100K SF less than in 1Q 2021. Currently, more than 600K SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Continental Land & Fur Company has signed a 5K SF
lease in CityPlace I. • Colliers has signed a 4K SF lease in The Woodlands Towers at The Waterway. • Prevailion has signed a 3K SF lease in The Woodlands Towers at The Waterway.
DEALS IN THE MARKET • One Northgate | 28420 Hardy Toll Road – a 59K SF
class A office building • The Gateway Building | 26865 I-45 – a 24K SF class B office building • 143 Vision Park Boulevard – a 20K SF class B office building
LARGE EXISTING VACANCIES • The Woodlands Towers at The Waterway | 9950 Woodloch Forest Drive – 402,337 SF
• Hewitt Lake Woodlands | 9500 Lakeside Boulevard – 360K SF
• SWN South Tower | 10000 Energy Drive – 288,609 SF • Hughes Landing | 1725 Hughes Landing Boulevard – 149,088 SF
• 24955 I–45 North – 148,104 SF • 9709 Lakeside Boulevard – 140,938 SF • 8800 Technology Forest Boulevard – 128,790 SF • 2001 Timberloch Place – 126,502 SF • CityPlace 1 | 1700 City Plaza Drive – 108,920 SF • 3831 Technology Forest Boulevard – 95,078 SF • One Hughes Landing | 1800 Hughes Landing Boulevard – 92,368 SF
• Lake Front North | 2107 Research Forest Drive – 90,937 SF
• 9201 Pinecroft Drive – 82,034 SF • Two Hughes Landing | 1790 Hughes Landing Boulevard – 68,277 SF
• Town Center I | 1450 Lake Robbins Drive – 64,036 SF • 460 Wildwood Forest Drive – 63,823 SF • 3 Waterway Square Place | 3 Waterway Avenue – 58,681 SF
• Waterway Plaza Two | 10001 Woodloch Forest Drive – 58,054 SF
• The Woodlands Medical Plaza | 9180 Pinecroft Drive – 53,961 SF
• City Place | 1401 Lake Plaza Drive – 51,488 SF
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
13
13
WESTCHASE SUBMARKET INTELLIGENCE Absorption (192,729)
vs. Prev. Qtr
vs. 12 Mths Ago
39,188
3,361
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
27.0%
25.9%
24.9%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
173,391
156,395
vs. Prev. Qtr
vs. 12 Mths Ago
53,317 Delivered SF Quoted Rates $26.92
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$27.07
$27.96
20.0%
VITAL STATS 30.0%
300,000
16.0% 28.0%
200,000
18.0%
800,000 600,000 400,000
14.0%
26.0%
100,000
12.0% 10.0% 24.0%
0
8.0%
200,000 0 (200,000)
22.0%
(100,000)
4.0% 20.0%
(200,000)
6.0% (400,000) (600,000)
2.0% 0.0%
18.0%
1Q 16
(300,000) 2Q 3Q 18 2Q 18
16
4Q 3Q 18
1Q 4Q 19
2Q 1Q19
16
16
17
Absorption
Absorption
3Q 19 2Q
4Q 19 3Q
1Q 20 4Q
2Q 201Q
17
17
17
18
Deliveries
3Q 4Q 20 2Q 20
18
Deliveries
3Q 18
1Q 21
2Q 4Q 21
18
Vacancy
(800,000)
1Q 19
Vacancy
Source: CoStar 2Q 2021 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 2Q 2021, The Westchase submarket had a vacancy rate of 27.0%, over one percent higher than 1Q 2021. Absorption turned negative with 193K SF of space given back, opposite the 39K SF of positive absorption in 1Q 2021. Leasing activity consisted of 53K SF of deals completed, less than a third of the 173K SF of deals completed in 1Q 2021. Currently, no office space is under construction in the submarket.
LARGE EXISTING VACANCIES • 10200 Bellaire Boulevard – 568,458 SF • Pinnacle Westchase | 3010 Briarpark Drive – 356,648 SF • City West Place Building 3 | 2105 CityWest Boulevard – 200,782 SF • Towers at Westchase II | 10350 Richmond Avenue – 175,791 SF • One BriarLake Plaza | 2000 West Sam Houston Parkway – 175,440 SF • Millennium Tower | 10375 Richmond Avenue –174,663 SF • Westchase Point | 1250 West Sam Houston Parkway – 147,403 SF • 2500 CityWest | 2500 CityWest Boulevard – 144,779 SF • West8 Tower | 10205 Westheimer Road – 143,507 SF • Towers at Westchase I | 10370 Richmond Avenue – 138,336 SF • One Westchase Center | 10777 Westheimer Road – 137,276 SF • 3250 Briarpark Drive – 125,544 SF
DEALS IN THE MARKET • Columbia Centre | 11011 Richmond Avenue – a 167K SF class A office building
• 10333 Richmond | 10333 Richmond Avenue – 123,368 SF • Westchase Oaks | 10111 Richmond Avenue – 111,983 SF
• 2929 Briarpark Drive – a 140K SF class B office building
• CityWestPlace Building 4 | 2103 CityWest Boulevard – 109,330 SF
• The Mosing Building | 10260 Westheimer Road – a 130K SF class B office building
• Two BriarLake Plaza | 2050 West Sam Houston Parkway – 108,410 SF
• 10000 Richmond Avenue – a 127K SF class B office building
• Westchase Park I | 3700 West Sam Houston Parkway – 106,522 SF
• 3990 Rogerdale Road – a 123K SF class B office building • 10255 Richmond Avenue – a 103K 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
14
14
GREENSPOINT/IAH SUBMARKET INTELLIGENCE Absorption 13,900 Vacancy 44.1% Leasing Act. 55,279 Delivered SF Quoted Rates $18.15
vs. Prev. Qtr
vs. 12 Mths Ago
(70,442)
183,004
vs. Prev. Qtr
vs. 12 Mths Ago
44.2%
43.1%
vs. Prev. Qtr
vs. 12 Mths Ago
111,701
184,491
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$18.12
$18.91
VITAL STATS
25.0%
46.0%
200,000
300,000
24.5% 100,000
24.0% 23.5%
0 44.0%
23.0%
200,000
100,000
(100,000)
22.5%
0 (200,000)
22.0% 42.0%
(300,000)
21.5% 21.0%
(400,000)
(100,000)
(200,000)
20.5% (500,000)
40.0%
20.0%
1Q 16
2Q 18
3Q 18
4Q 18
1Q 19
2Q 3Q 4Q 16 Absorption 16 16
Absorption
2Q 19
1Q 17
3Q 19
2Q 17
4Q 19
1Q 20
3Q 4Q 17 17 Deliveries
2Q 20
Deliveries
1Q 18
3Q 20
2Q 18
4Q 20
1Q 21
2Q 21
3Q 4Q 18Vacancy 18
(300,000)
1Q 19
Vacancy Source: CoStar 2Q 2021 Office Report
HLC OUTLOOK
• Greens Crossing I | 810 Gears Road – a 79K SF class B
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.
• 397 North Sam Houston Parkway – a 68K SF class B
At the close of 2Q 2021, the Greenspoint/IAH submarket had a vacancy rate of 44.1% which was slightly higher than 1Q 2021. Absorption was positive with 14K SF of absorption, opposite the 70K SF of negative absorption in 1Q 2021. Leasing activity consisted of 55K SF of deals completed, less than half of the 112K SF of deals completed in 1Q 2021. Currently, no office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Prep at Home has signed a 1K SF lease in Greenbriar HLC Deal
Place.
office building office building
• 14450 John F Kennedy Boulevard – a 46K SF class B office building
• 1030–1034 Regional Park Drive – a 23K SF class B office building
• 3808 World Houston Parkway – a 22K SF class A 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 – 222,500 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
DEALS IN THE MARKET • CityNorth 1 | 233 Benmar Drive – a 253K SF class A
office building • Northpoint Central | 2 Northpoint Drive – a 180K SF class A office building • EM Houston | 13401 I-45 North – a 143K SF class A office building • Cross Continents I | 3838 North Sam Houston Parkway East – a 118K SF class A office building • Heritage Park | 390 Benmar Drive – a 104K SF class B office building • Northborough Business Park | 220 Meadowfern Drive – a 102K SF class B office building • WorldCom Call Center | 3200 FM 1960 Road West – a 95K SF class B office building
15
• Greens Crossing II | 820 Gears Road – 157,790 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 • Northbelt Office Center V | 500 North Sam Houston Parkway West – 135,030 SF
• Bridgewood II | 652 North Sam Houston Parkway East – 134,646 SF
• 333 Northbelt | 333 North Sam Houston Parkway East – 133,069 SF
15
FM 1960INTELLIGENCE CORRIDOR SUBMARKET Absorption
VITAL STATS
vs. Prev. Qtr
vs. 12 Mths Ago
86,368
74,150
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
24.0%
20.1%
19.5%
19.2%
23.0%20.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
22.0%
95,256
144,469
vs. Prev. Qtr
vs. 12 Mths Ago
(62,793)
164,453 Delivered SF Quoted Rates $20.74
77,664 vs. Prev. Qtr $21.06
48,000 vs. 12 Mths Ago $20.49
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)
(50,000)
19.0%
14.0%
(300,000)
18.0%
(100,000) (150,000)
12.0%
(400,000)
17.0%
1Q 16
2Q 18
3Q 2Q 18
4Q 3Q18
16
16
1Q 19 4Q
2Q 19 1Q
3Q 19 2Q
16
17
17
Absorption
Absorption
4Q 193Q
17
1Q 204Q
2Q 20
17
Deliveries
1Q 18
3Q 20
4Q 2Q 20
1Q 3Q21
18
18
Deliveries
2Q 4Q21
18
Vacancy
(200,000)
1Q 19
Vacancy
Source: CoStar 2Q 2021 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 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. At the close of 2Q 2021, the FM 1960 Corridor had a vacancy rate of 20.1% which was slightly higher than 1Q 2021. Absorption was once again negative with 63K SF of space given back. Leasing activity increased with 154K SF of deals completed compared to the 95K SF of deals completed in 1Q 2021. Currently, 155K SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Bardy Diagnostics has signed a 20K SF lease in Center at Cypress Creek. • Chase Bank has signed a 19K SF lease in 616 FM 1960 Road. • DPIS has signed a 10K SF lease in Chasewood Crossing Three. • Fidelity Medical Associates has signed a 7K SF lease in Lantern Bend Medical Plaza. • D&S Community has signed a 3K SF lease in Klein Creek Professional Plaza. • Quality Life Physical Therapy has signed a 3K SF lease in Northchase Center.
DEALS IN THE MARKET • Wells Fargo Cypress | 12337 Jones Road – a 85K SF class B office building • Cornerstone North | 3303 FM 1960 West – a 70K SF class B office building • Champions Forest Office Building | 13231 Champion Forest Drive – a 64K SF class B office building • 3648 Cypress Creek Parkway – a 61K SF class B office building • 18750 Interstate 45 – a 44K SF class A 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 • Park at Champions II | 13810 Champion Forest Drive – a 32K SF class B office building
16
• Timberdale Medical Arts | 607 Timberdale Lane – a 27K SF class B office building • Building One | 8403 Louetta Road – a 25K SF class B office building • West Road Office Building | 14025 West Road – a 23K SF class B office building • Butte Creek Professional Building | 17154 Butte Creek Road – a 21K SF class B office building • 6810 FM 1960 West – a 20K 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
LARGE EXISTING VACANCIES • Noble Energy Center II | 1002 Noble Energy Way – 437,793 SF • 11403 Compaq Center West Drive – 246,341 SF • University Park Buildings 9 & 10 | 11450 Compaq Center West Drive – 208,841 SF • Creekridge II | 140 Cypress Station Drive – 123,604 SF • Chasewood Crossing III | 19350 State Highway 249 – 97,877 SF • 616 FM 1960 West – 83,102 SF • 7310 Eldridge Parkway – 81,800 SF • 21212 Northwest Freeway – 66,117 SF • Chasewood Crossing I | 19500 State Highway 249 – 61,611 SF • Two Chasewood | 20405 State Highway 249 – 56,740 SF • Cy-Fair Medical Office Building | 13114 FM 1960 West – 51,846 SF • Northwest Medical Plaza | 800 Peakwood Drive – 51,633 SF • Cypress Station Medical Building | 1140 Cypress Station Drive – 49,533 SF • 21216 Northwest Freeway – 46,769 SF • Willowchase Atrium | 8203 Willow Place Drive South – 46,584 SF • Willowbrook Medical Arts Building | 13215 Dotson Road – 46,091 SF
16
GREENWAY PLAZA SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(23,871)
51,311
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
22.5%
20.0%
16.4%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
90,016
1,000,701
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$33.92
$35.30
(277,419)
34,174 Delivered SF Quoted Rates $34.94
VITAL STATS
20.0% 26.0%
200,000
300,000 250,000
24.0%
150,000 200,000
16.0%
150,000
22.0%
100,000 100,000 12.0%
20.0%
50,000 0
18.0%
(100,000) 0 (150,000)
14.0%
4.0%
(200,000) (50,000)
12.0%
0.0%
(250,000)
10.0% 2Q 3Q 4Q 1Q 18 2Q 18 3Q 18
16
50,000
(50,000)
8.0% 16.0%
16
16
1Q 4Q19
16
Absorption Absorption
2Q 1Q19
17
3Q 2Q 19
17
4Q 3Q 19
17
1Q 4Q 20
17
Deliveries Deliveries
2Q 1Q 20
18
3Q 202Q
18
4Q 203Q
18
(300,000) (100,000) 1Q 2Q 21 4Q 21 1Q
18
Vacancy
19
Vacancy
Source: CoStar 2Q 2021 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 2Q 2021, the Greenway Plaza submarket had a vacancy rate of 22.5% which was 2.5% higher than 1Q 2021. Absorption remained negative with 277K SF of space given back, up considerably from the 24K SF given back in 1Q 2021. Leasing activity fell with 34K SF of deals completed, which was less than half the 90K SF of deals in 1Q 2021. Currently, no office space is under construction in the submarket.
TOP LEASE TRANSACTIONS • The Guess Group has signed a 2K SF lease in 3100 Timmons.
17
LARGE EXISTING VACANCIES • Nine Greenway Plaza | 9 Greenway Plaza – 309,464 SF • Phoenix Tower | 3200 Southwest Freeway – 246,841 SF • Four Greenway Plaza | 4 Greenway Plaza – 242,628 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 – 110,306 SF • Eleven Greenway Plaza | 11 Greenway Plaza – 103,351 SF
• 20 Greenway Plaza – 102,969 SF • 3737 Buffalo Speedway Avenue – 86,710 SF • Five Greenway Plaza | 5 Greenway Plaza – 85,356 SF • 3800 Buffalo Speedway – 82,167 SF • 3555 Timmons Lane – 80,263 SF • Weslayan Tower | 24 Greenway Plaza – 75,617 SF • 3355 West Alabama | 3355 West Alabama Street – 72,931 SF
• Two Greenway Plaza | 2 Greenway Plaza – 69,056 SF • 3900 Essex | 3900 Essex Lane – 66K SF • Nitya Tower | 2211 Norfolk Street – 65,786 SF
17
MEDICAL CENTER SUBMARKET INTELLIGENCE Absorption (89,152) Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
(97,411)
(168,244)
vs. Prev. Qtr
vs. 12 Mths Ago
9.6%
8.8%
8.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
72,419
77,420
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
49,529
VITAL STATS
14.0%
200,000
10.0%
200,000
9.5%
12.0%
150,000
9.0% 100,000 8.5%
100,000
8.0%
10.0%
7.5%
0
0
6.5%
Delivered SF Quoted Rates $30.73
vs. Prev. Qtr $28.37
vs. 12 Mths Ago
50,000
7.0%
8.0%
(100,000) 6.0%
(50,000)
5.5% 5.0%
6.0% 1Q 16
$27.13
(200,000) 2Q 18
3Q 18
4Q 18
1Q 19
2Q 3Q 4Q 16 Absorption 16 16
Absorption
2Q 19
1Q 17
3Q 19
2Q 17
4Q 19
3Q
1Q 20
4Q
2Q 20
17 17 Deliveries
Deliveries
1Q 18
3Q 20
2Q 18
4Q 20
1Q 21
2Q 21
3Q 4Q 18 18 Vacancy
(100,000) 1Q 19
Vacancy Source: CoStar 2Q 2021 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 2Q 2021, the Medical Center submarket had a vacancy rate of 9.6% which was slightly higher than 1Q 2021. Absorption remained negative with 89K SF of space given back. Leasing consisted of 50K SF of deals completed. Currently, 1.3M SF of office space is under construction in this submarket.
LARGE EXISTING VACANCIES • 6624 Fannin Tower | 6624 Fannin Street – 153,054 SF • TMC Innovation | 2450 Holcombe Road – 119,260 SF • Texas Medical Center | 7501 Fannin Street – 74,908 SF • 1919 Pressler Street – 68,607 SF • Museum Medical Tower | 1213 Hermann Drive – 60,948 SF
• 8000 Greenbriar Drive – 52,180 SF • 7807 Main Street – 47,916 SF • Greenpark One | 7515 South Main Street – 43,777 SF • 7505 Fannin Street – 38,401 SF • One Fannin | 7400 Fannin Street – 39,129 SF • Greenpark II Professional | 7505 Main Street – 37,405 SF
• Memorial Hermann Medical Plaza | 6400 Fannin Street – 35,214 SF
NEW DEVELOPMENTS • Horizon Tower | 6929 Main Street – a 512K SF class A office building
• 7900 Fannin Street – 31,854 SF • Atrium 2656 | 2656 South Loop Freeway West – 27,162 SF
• O’Quinn Medical Tower | 7200 Cambridge Street – a
• Prosperity Bank Plaza | 5020 Montrose Boulevard –
• Museo Plaza Office Building | 5115 Fannin Street – a
• NRG Office Complex | 2626 South Loop Freeway West
• 7500 Fannin Street – a 126K SF class A office building • Old Spanish Trail – a 112K SF class A office building
• 1200 Binz | 1200 Binz Street – 25,503 SF • 3003 South Loop West Freeway – 22,918 SF • 2636 South Loop Freeway West – 21,358 SF
427K SF class A office building 160K SF class A office building
18
26,950 SF
– 25,839 SF
18
SOUTHWEST SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(13,361)
(2,261)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
22.6%
22.6%
20.7%
(2,041)
Leasing Act. 77,384 Delivered SF Quoted Rates $17.19
vs. Prev. Qtr
vs. 12 Mths Ago
113,369
238,394
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$17.34
VITAL STATS
23.0%26.0%
1,000,000 120,000 100,000
22.0%
800,000
80,000
24.0%
60,000
21.0%
600,000
40,000 22.0%
20,000
20.0%
400,000
0
19.0%20.0%
(20,000) 200,000 (40,000)
18.0%
0 (60,000) 18.0%
(80,000)
17.0% 16.0%
(200,000)
(100,000) 16.0%
(120,000) 2Q
3Q
1Q 18 2Q 18 16 16
$17.42
4Q
3Q 18 16
1Q
4Q19 16
Absorption Absorption
2Q
1Q19 17
3Q
2Q 19 17
4Q
3Q 19 17
1Q 4Q 20
2Q 1Q 20
3Q 202Q
4Q 203Q
17
18
18
18
Deliveries Deliveries
1Q 2Q 21 4Q 21 1Q
18
(400,000)
19
Vacancy Vacancy
Source: CoStar 2tQ 2021 Office Report
HLC OUTLOOK 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.
LARGE EXISTING VACANCIES • Houston Technology Center | 5959 Corporate Drive – 333,332 SF
• Arena Place Two | 7324 Southwest Freeway – 239,357 SF
• Southwest Corporate Center | 9700-9702 Bissonnet Street – 217,837 SF
• 11111 South Wilcrest Drive – 190,398 SF • Arena Place One | 7322 Southwest Freeway – 176,273 SF
At the close of 2Q 2021, the Southwest submarket had a vacancy rate of 22.6% which was the same as 1Q 2021. Absorption remained negative with 2K SF of space given back, down from the 13K SF of space given back in 1Q 2021. Leasing activity fell with 77K SF of deals completed compared to the 113K SF of activity in 1Q 2021. Currently, no office space is under construction in this submarket.
• 7011 Southwest Freeway – 112,590 SF • Southwest Medical Plaza 1 | 7777 Southwest Freeway –
TOP LEASE TRANSACTIONS • Texas Remodeling Group has signed a 3K SF lease in
• The Center | 8303 Southwest Freeway – 53,730 SF • The Ranchester Building | 10333 Harwin Drive – 45,598
DEALS IN THE MARKET • American First Tower | 9999 Bellaire Boulevard – a
• The Center | 8323 Southwest Freeway – 44,298 SF • 9896 Bissonnet Street – 50,794 SF • Merlyn Plaza | 9301 Southwest Freeway – 43,022 SF • Wells Fargo Tower | 6161 Savoy Drive – 37,201 SF
the Regency Square Office Building.
212K SF class A office building
79,722 SF
• Centre One | 9800 Centre Parkway – 77,932 SF • Westwood Green | 9494 Southwest Freeway – 74,253 SF
• Southwest Medical Plaza 2 | 7737 Southwest Freeway – 70,703 SF SF
• 11111 South Wilcrest Drive – a 190K SF class B office building
• Westwood Green | 9494 Southwest Freeway – a 140K SF class B office building
• 6100 Corporate Drive – a 73K SF class B office building
• Harwin International Plaza | 7171 Harwin Drive – a 73K SF class B office building
• 7850 Parkwood Circle Drive – a 34K SF class B office building
• 9945 Bissonnet Street – a 28K SF class B office building
• 9200 West Sam Houston Parkway South – a 23K SF class B office building
19
19
KATY FREEWAY EAST SUBMARKET INTELLIGENCE Absorption 314,372
vs. Prev. Qtr
vs. 12 Mths Ago
(8,487)
60,117
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
10.3%
11.9%
10.8%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
98,741
205,925
vs. Prev. Qtr
vs. 12 Mths Ago
-
150,000
vs. Prev. Qtr
vs. 12 Mths Ago
$35.63
$36.65
253,594 Delivered SF 193,500 Quoted Rates $35.17
VITAL STATS
12.0%
250,000
14.0%
400,000
11.0%13.0%
300,000
12.0%
200,000
200,000 150,000
10.0%
100,000
11.0%
100,000 50,000
9.0%
10.0%
0 0
8.0%9.0%
(100,000)
8.0%
(200,000)
(50,000) 7.0%
1Q 16
2Q 3Q 4Q 1Q 18 2Q 18 3Q 18 4Q 19 16 16 16 Absorption
2Q
1Q 19 17
Absorption
3Q
2Q 19 17
4Q 3Q 19 17
1Q 2Q 3Q 4Q 1Q 2Q 4Q 20 201Q 20 2Q 20 3Q 21 4Q 21 17 18 18 18 18
Deliveries
Deliveries
Vacancy
(100,000)
1Q 19
Vacancy
Source: CoStar 2Q 2021 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 2Q 2021, the Katy Freeway East submarket had a vacancy rate of 10.3%, down from 11.9% in 1Q 2021. Absorption turned positive with 314K SF of space absorbed, up considerably from the 8K SF of negative absorption in 1Q 2021. Leasing activity consisted of 254K SF of deals completed which was more than double the 99K SF of deals completed in 1Q 2021. Currently, more than 767K SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Jacobs has signed a 26K SF lease in CityCentre Two. • Wildfire Energy has signed a 26K SF lease in 920 Memorial City Way.
• Spruce has signed a 22K SF lease in Two Memorial City Plaza.
• SilverBow Resources has signed a 15K SF lease in 920 Memorial City Way.
• Brunel Energy has signed a 8K SF lease in 10100 Katy Freeway.
• Alliance Residential Company has signed a 8K SF lease in Two Memorial City Plaza.
DEALS IN THE MARKET • Old Katy Road Building | 9180 Old Katy Road – a 30K SF class B office building
NEW DEVELOPMENTS • One MRO | 990 Town & Country Boulevard – a 440K SF class A office building
• 9753 Katy Freeway – a 186K SF class A office building • Village Tower II | 9655 Katy Freeway – a 141K SF class A office building
LARGE EXISTING VACANCIES • Three Memorial City Plaza | 840 Gessner Road – 143,684 SF
• Memorial Hermann Tower | 929 Gessner Road – 117,212 SF
• Two Memorial City Plaza | 820 Gessner Road – 96,752 SF
• 920 Memorial City Way – 72,947 SF • One Memorial City Plaza | 800 Gessner Road – 70,710 SF
• CityCentre One | 800 Town & Country Boulevard – 64,772 SF
• 950 Corbindale Road – 52,935 SF • Medical Plaza 3 | 915 Gessner Road – 45,480 SF • 9900 Westpark Drive – 44,649 SF • 8584-8588 Katy Freeway – 40,022 SF • CityCentre Three | 842 West Sam Houston Parkway – 36,636 SF
• Town & Country Central I | 10497 Town & Country Way – 33,872 SF
• 952 Echo Lane – 30,396 SF • Hedwig Place | 8731 Katy Freeway – 28,656 SF • Nexen Building | 945 Bunker Hill Road – 25,076 SF • Murphy Building | 9805 Katy Freeway – 24,500 SF • Park Laureate | 10000 Memorial Drive – 22,588 SF • CityCentre Two | 818 Town & Country Boulevard – 21,462 SF
20
20
NORTHWEST SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(75,746)
(6,222)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
21.2%
20.1%
19.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
106,627
156,081
vs. Prev. Qtr
vs. 12 Mths Ago
(95,796)
150,642 Delivered SF Quoted Rates $20.96
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$20.96
$21.00
VITAL STATS 12.0%23.0%
250,000 200,000 150,000200,000
11.0%22.0%
100,000
150,000 50,000
10.0% 21.0%
100,000 0
50,000
20.0%
9.0%
(50,000)
(100,000) 0 19.0%
8.0%
(150,000)
(50,000)
18.0%
7.0% 1Q 16
(200,000) 2Q 18
2Q 16
3Q 18
4Q 18
3Q 16
1Q 19
4Q 16
Absorption
Absorption
2Q 19
1Q 17
3Q 19
2Q 17
4Q 19
3Q 17
1Q 20
4Q 17
2Q 20
Deliveries
1Q 18
3Q 20
2Q 18
Deliveries
4Q 20
3Q 18
1Q 21
4Q 18
2Q 21
Vacancy
(100,000) 1Q 19
Vacancy
Source: CoStar 2Q 2021 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 2Q 2021, the Northwest submarket had a vacancy rate of 21.2% which was slightly higher than 1Q 2021. Absorption remained negative with 96K SF of space given back, compared to the 76K SF of negative absorption in 1Q 2021. Leasing activity included 151K SF of deals completed. Currently, there is 133K SF of office space under construction in this submarket.
TOP LEASE TRANSACTIONS • Bowen, Miclette & Britt Insurance Agency has signed a 36K SF lease in Brookhollow Central I. • McGrath & Co has signed a 5K SF lease in Brookhollow Central II.
DEALS IN THE MARKET
LARGE EXISTING VACANCIES • Brookhollow Central II | 2900 North Loop Freeway West – 142,787 SF • Brookhollow Central III | 2950 North Loop Freeway West – 142,706 SF • Northwest Crossing | 13333 Northwest Freeway – 90,527 SF • North Loop Center | 1235 North Loop Freeway West – 89,535 SF • Northwest One Building | 13100 Northwest Freeway – 77,569 SF • 7000 Hollister Street – 71,372 SF • Granite Tower at 290 | 13430 Northwest Freeway – 65,780 SF • Northwest Crossing II | 7676 Hillmont Street – 62,242 SF • One Northwind Plaza | 7600 West Tidwell Road – 61,819 SF • Wells Fargo Building | 13201 Northwest Freeway – 60,795 SF • 13111 Northwest Freeway – 60,780 SF • Northwest Crossing III | 13105 Northwest Freeway – 60,099 SF • 5252 Hollister Road – 56,316 SF • Brookhollow Central I | 2800 North Loop Freeway West – 54,867 SF • Washington Place North & South | 7155 Old Katy Road – 49,563 SF
• One Northwind Plaza | 7600 West Tidwell Road – a 141K SF class B office building
• Park Central Plaza One | 1111 North Loop Freeway West – 48,172 SF
• Northwest Plaza | 550 Northwest Central Drive – a 75K SF class B office building
• 1919 North Loop West Building | 1919 North Loop West – 44,986 SF
• 10050 Northwest Freeway – a 43K SF class B office building
• Hollister & Hillmont Building | 5300 Hollister Street – 44,787 SF
NEW DEVELOPMENTS
• Brookhollow II | 9800 Northwest Freeway – 34,823 SF
• 1737 North Loop West – a 109K SF class B office building
• 2600 North Loop West – 31,737 SF
• 1224 North Post Oak – a 23K SF class B office building
• 2180 North Loop West – 31,492 SF
21
21
SUGAR LAND SUBMARKET INTELLIGENCE Absorption
VITAL STATS
vs. Prev. Qtr
vs. 12 Mths Ago
(81,103)
(100,771)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
17.6%
16.9%
15.4%
12.0%
vs. 12 Mths Ago
10.0%
(56,051)
Leasing Act. 88,942 Delivered SF Quoted Rates $30.62
vs. Prev. Qtr 49,584
114,116
vs. Prev. Qtr
vs. 12 Mths Ago
-
63,663
vs. Prev. Qtr
vs. 12 Mths Ago
$30.47
$29.10
18.0% 20.0%
125,000 600,000
16.0%
500,000 18.0%
75,000
16.0%
400,000 300,000
25,000
200,000
14.0%
8.0% 6.0% 4.0%
(25,000)100,000 12.0%
0 (75,000)
(100,000)
10.0%
2.0% 0.0%
(200,000) 8.0%
1Q 16
(125,000) 2Q 18
3Q 18
4Q 18
1Q 19
2Q 3Q 4Q 16 Absorption 16 16
Absorption
2Q 19
1Q 17
3Q 19
2Q 17
4Q 19
1Q 20
3Q 4Q 17 17 Deliveries
2Q 20
1Q 18
3Q 20
2Q 18
Deliveries
4Q 20
1Q 21
2Q 21
3Q 4Q 18 Vacancy 18
(300,000)
1Q 19
Vacancy
Source: CoStar 2Q 2021 Office Report
HLC OUTLOOK
LARGE EXISTING VACANCIES
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.
• Sugar Creek on the Lake | 14141 Southwest Freeway – 291,365 SF
At the close of 2Q 2021, the Sugar Land submarket had a vacancy rate of 17.6% which was slightly higher than 1Q 2021. Absorption remained negative with 56K SF of space given back, down from the 81K SF given back in 1Q 2021. Leasing activity included 89K SF of deals completed. Currently, there is no office space under construction in this submarket.
• The Minute Maid Building | 2150 Town Square Place – 77,055 SF
TOP LEASE TRANSACTIONS
• Sugar Creek Tower II | 13131 Dairy Ashford Road – 104,846 SF • Sugar Creek Tower I | 13135 Dairy Ashford Road – 103,632 SF • Three Sugar Creek | 3 Sugar Creek Center Boulevard – 86,801 SF • Sugar Creek Place I | 14100 Southwest Freeway – 78,191 SF
• Comerica Office Tower | 1 Sugar Creek Center Boulevard – 57,567 SF • ABB Network Management | 1601 Industrial Boulevard – 47,544 SF • The Glenn Lakes Professional Building | 3634 Glenn Lakes Lane – 45,228 SF
• Optimum Physical Therapy has signed a 3K SF lease in the Rotunda Building.
• Two Sugar Creek Center | 77 Sugar Creek Center Boulevard – 44,262 SF
• Gutier has signed a 2K SF lease in Timber Falls Business Park.
• Commerce Green One | 14090 Southwest Freeway – 40,415 SF
HLC Deal
DEALS IN THE MARKET
• The Texas Drive Building | 2245 Texas Drive – 34,297 SF • 7619 Branford Place – 32,472 SF
• 1410 Gillingham Lane – a 150K SF class B office building
• Building A | 18722 University Boulevard – 27K SF
• Wells Fargo Fort Bend Building | 2440 Texas Parkway – a 64K SF class B office building
• Imperial Medical Plaza | 1111–1211 Highway 6 – 25,481 SF
• Sugar Land Physicians Center | 7616 Branford Place – a 56K SF class A office building
• 12808 West Airport Boulevard – 24,376 SF
22
• The Plaza Building | 2277 Plaza Drive – 25,358 SF
22
CLEAR LAKE SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(3,086)
16,545
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
12.8%
14.0%
14.5%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
76,790
67,257
vs. Prev. Qtr
vs. 12 Mths Ago
86,872
48,636 Delivered SF Quoted Rates $21.91
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$21.82
$21.56
VITAL STATS 12.0% 16.0%
90,000250,000 70,000200,000
11.0% 15.0%
50,000
150,000
30,000
10.0%
100,000 14.0%
10,000
50,000
9.0%
(10,000)
0 (30,000)
13.0%
8.0%
(50,000)
(50,000)
7.0%
12.0%
(70,000) 2Q
3Q
1Q 18 2Q 18 16 16
4Q
3Q 18 16
1Q
4Q19 16
Absorption
Absorption
2Q
1Q19 17
3Q
4Q
19 2Q 17
19 3Q 17
1Q 20 4Q
17
Deliveries
Deliveries
2Q 20 1Q
18
3Q 202Q
18
4Q 203Q
18
1Q 21
2Q
(100,000)
4Q 21 1Q 18 19
Vacancy
Vacancy
Source: CoStar 2Q 2021 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 2Q 2021, the Clear Lake submarket had a vacancy rate of 12.8% which was much lower than 1Q 2021. Absorption turned positive with 87K SF of space absorbed, up from the 3K SF given back in 1Q 2021. Leasing activity decreased with 49K SF of deals completed, lower than the 77K SF of deals completed in 1Q 2021. Currently, there is no office space under construction in this submarket.
DEALS IN THE MARKET • Gemini Plaza | 1150 Gemini Street – a 158K SF class B office building
• 12000 Aerospace | 12000 Aerospace Avenue – an 80K SF class B office building
• 2222 Bay Area Boulevard – a 65K SF class B office building
• 17300 Saturn Lane – a 24K SF class B office building
23
LARGE EXISTING VACANCIES • Clear Lake Central | 600 Gemini Street – 317,198 SF • 13100 Space Center Boulevard – 99,062 SF • Two Corporate Plaza | 2625 Bay Area Boulevard – 47,521 SF
• Atrium Crest | 18333 Egret Bay Boulevard – 46,937 SF • Boeing | 3700 Bay Area Boulevard – 42,876 SF • One Corporate Plaza | 2525 Bay Area Boulevard – 42,163 SF
• 1322 Space Park Dr | 1322 Space Park Drive – 38,513 SF • Hercules I | 1300 Hercules Avenue – 37,941 SF • NASA/Clear Lake | 16055 Space Center Boulevard – 29,152 SF
• Camino Center I | 17629 El Camino Real – 20,612 SF • Bay Plaza | 711 West Bay Area Boulevard – 19,915 SF • Space Park Office Bldg | 2200 Space Park Drive – 19,227 SF
• Camino Center II | 17625 El Camino Real – 18,920 SF • Boxer Property | 1120 Nasa Parkway – 17,692 SF • Marina Plaza | 2450 South Shore Boulevard – 17,478 SF • East Building | 251 Medical Center Boulevard – 16,188 SF
• Medical Plaza at Clear Lake | 250 Blossom Street – 15,135 SF
23
MIDTOWN SUBMARKET INTELLIGENCE Absorption 10,846
vs. Prev. Qtr
vs. 12 Mths Ago
VITAL STATS 18.0%
25,490
(121,629)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
13.6%
13.7%
12.1%
12.0%
vs. 12 Mths Ago
10.0%
Leasing Act. 64,338 Delivered SF Quoted Rates $34.29
vs. Prev. Qtr 38,001
123,017
vs. Prev. Qtr
vs. 12 Mths Ago
35,400
-
vs. Prev. Qtr
vs. 12 Mths Ago
$33.42
$32.01
120,000
14.0%
100,000
16.0%
80,000
13.0%
60,000 40,000
12.0%
20,000 0
11.0%
500,000 400,000 300,000 200,000
(20,000)
8.0% 6.0%
600,000
(40,000) 10.0%
(60,000)
100,000 0
(80,000)
4.0% 2.0%
(100,000)(100,000)
9.0%
(120,000)
(200,000)
8.0%
(140,000) 2Q 18
0.0% 1Q 16
3Q 18
4Q 18
1Q 19
2Q 3Q 4Q 16 Absorption 16 16
Absorption
2Q 19
1Q 17
3Q 19
2Q 17
4Q 19
1Q 20
3Q 4Q Deliveries 17 17
Deliveries
2Q 20
1Q 18
3Q 20
4Q 20
2Q 18
1Q 21
2Q 21
3Q 4Q 18Vacancy 18
(300,000) 1Q 19
Vacancy
Source: CoStar 2Q 2021 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 2Q 2021, the Midtown submarket had a vacancy rate of 13.6% which was slightly lower than 1Q 2021. Absorption was positive with 11K SF of space absorbed, down from the 26K SF absorbed in 1Q 2021. Leasing activity increased with 64K SF of deals completed compared to the 38K SF of deals completed in 1Q 2021. Currently, 436K SF of office space is under construction in this submarket.
NEW DEVELOPMENTS • The Ion | 4201 Main Street – a 266K SF class A office building
• Montrose Collective | 888 Westheimer Road – a 170K SF class A office building
24
LARGE EXISTING VACANCIES • America Tower | 2929 Allen Parkway – 207,287 SF • The Ion | 4201 Main Street – 172,493 SF • Wortham Tower | 2727 Allen Parkway – 148,089 SF • Central Square | 2100 Travis Street – 108,537 SF • Montrose Collective | 888 Westheimer Road – 105,462 SF
• HCC Building | 3100 Main Street – 91,820 SF • 2000 Crawford | 2000 Crawford Street – 78,735 SF • 2777 Allen Parkway – 72,301 SF • 100 Waugh Drive | 100 Waugh Drive – 40,508 SF • River Oaks Bank Building | 2001 Kirby Drive – 31,460 SF • 55 Waugh Drive – 30,650 SF • 2800-2810 San Jacinto Street – 27,484 SF • 5300 Memorial Drive – 27,440 SF • Midtown Plaza | 5225 Katy Freeway – 24,254 SF • Buffalo Heights | 3663 Washington Avenue – 23,642 SF • Bienville Bldg | 3401 Louisiana Street – 23,019 SF • 5900 Memorial | 5900 Memorial Drive – 21,270 SF • Campanile South | 4306 Yoakum Boulevard – 19,706 SF • The Bellevue | 2323 South Shepherd Drive – 19,337 SF • 550 Westcott Street – 18,357 SF
24
WEST BELT SUBMARKET INTELLIGENCE Absorption 6,598 Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
(24,128)
(262,359)
vs. Prev. Qtr
vs. 12 Mths Ago
26.0%
26.1%
25.8%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
81,028 Delivered SF Quoted Rates $25.44
44,010
38,870
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$26.36
$25.95
VITAL STATS 12.0%28.0%
250,000 200,000 150,000
200,000
26.0%
11.0%
100,000 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%
2Q
3Q
1Q 18 2Q 18 16 16
4Q
3Q18 16
1Q
4Q19 16
Absorption Absorption
2Q
19 1Q 17
3Q
19 2Q 17
4Q
19 3Q 17
1Q 20 4Q
17
Deliveries Deliveries
2Q 201Q
18
3Q 202Q
18
(300,000) (100,000) 4Q 1Q 2Q 20 3Q 21 4Q 21 1Q
18
18
Vacancy Vacancy
19
Source: CoStar 2Q 2021 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 energy-driven 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.
LARGE EXISTING VACANCIES • Westway II | 4424 West Sam Houston Parkway – 229,454 SF • Westway Plaza | 11330 Clay Road – 210,519 SF • Beltway Lakes Phase III | 5775 North Sam Houston Parkway – 150,613 SF • Westway One | 11210 Equity Drive – 143,960 SF • Sam Houston Crossing One | 10343 Sam Houston Park Drive – 91,449 SF • 11000 Corporate Centre Drive – 87,637 SF
At the close of 2Q 2021, the West Belt submarket had a vacancy rate of 26.0% which was slightly lower than 1Q 2021. Absorption turned positive with 7K SF of space absorbed, opposite the 24K SF given back in 1Q 2021. Leasing activity increased with 81K SF of deals completed, nearly double the 44K SF of completed deals in 1Q 2021. Currently, no office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Lummis Technology has signed a 35K SF lease at Beltway Lakes Phase I.
• Sam Houston Crossing II | 10344 Sam Houston Park Drive – 62,329 SF • 10603 West Sam Houston Parkway – 58,216 SF • Beltway Lakes Phase II | 5875 North Sam Houston Parkway – 56,770 SF • Beltway 8 Corporate Centre Building 1 | 5300 West Sam Houston Parkway – 50K SF • Concourse at Westway | 4700 West Sam Houston Parkway – 42,137 SF • 9949 West Sam Houston Parkway – 36,116 SF • Heron Lakes | 10740 North Gessner Drive – 35,571 SF • York Centre | 10235 West Little York Road – 34,933 SF
DEALS IN THE MARKET • 4650 Westway Park Boulevard – a 161K SF class B office building • 11100 Brittmoore Park Drive – a 76K SF class B office building • 4805 Westway Park Boulevard – a 73K SF class B office building • 8400 North Sam Houston Parkway West – a 40K SF class B office building
• Tanner Office Building | 11302 Tanner Road – 33K SF • 10930 West Sam Houston Parkway – 31,459 SF • 7840 North Sam Houston Parkway – 29,581 SF • Willowbrook Place II | 17350 State Highway 249 – 27,862 SF • 10613 West Sam Houston Parkway – 27,387 SF • 6221 West Sam Houston Parkway – 25,050 SF
• 16060 Dillard Drive – a 24K SF class B office building
25
25
EAST HOUSTON/PASADENA SUBMARKET INTELLIGENCE Absorption (11,805)
vs. Prev. Qtr
vs. 12 Mths Ago
VITAL STATS 18.0%
30,932
67,481
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
13.8%
13.6%
12.5%
12.0%
vs. 12 Mths Ago
10.0%
Leasing Act. 31,593 Delivered SF Quoted Rates $22.72
vs. Prev. Qtr 43,143
112,486
vs. Prev. Qtr
vs. 12 Mths Ago
24,382
-
vs. Prev. Qtr
vs. 12 Mths Ago
$22.38
$22.17
600,000
16.0%
120,000
16.0% 15.0%
100,000
500,000
80,000
400,000
60,000 40,000 14.0%
8.0%
300,000
20,000
200,000
0
100,000
(20,000)
6.0%
(40,000)
13.0%
4.0%
0
(60,000) (100,000) (80,000)
2.0% 12.0%
0.0% 1Q 16
(200,000)
(100,000) 2Q 18
2Q 16
3Q 18
3Q
4Q 18
1Q 19
4Q
16 16 Absorption
2Q 19
1Q 17
3Q 19
2Q 17
Absorption
4Q 19
1Q 20
3Q 4Q 17 17 Deliveries
2Q 20
1Q 18
3Q 20
2Q 18
Deliveries
4Q 20
1Q 21
2Q 21
3Q 4Q 18Vacancy 18
(300,000) 1Q 19
Vacancy
Source: CoStar 2Q 2021 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 2Q 2021, the East Houston/Pasadena submarket had a vacancy rate of 13.8% which was slightly higher than 1Q 2021. Absorption turned negative with 12K SF of space given back, down from the 31K SF of space absorbed in 1Q 2021. Leasing activity decreased slightly with 32K SF of deals completed. Currently, 89K SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Home Health Holdings of America has signed a 3K SF lease in Vibe Hobby.
DEALS IN THE MARKET • 3737-3743 Red Bluff Road – a 85K SF class B office building • 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
NEW DEVELOPMENT • 4400 Harrisburg Boulevard – a 32K SF class B office building • 2351 Oleander Drive – a 32K SF class B office building • 5025 Preston Avenue – a 25K SF class B office building
LARGE EXISTING VACANCIES • 12301 Kurland Drive – 55,734 SF • Atrium 10 Tower | 11811 East Freeway – 32,360 SF • 1001 Shaw Avenue – 30,938 SF • Gulf Freeway Plaza | 9333 Bryant Street – 29,750 SF • BPM Airport | 8031 Airport Boulevard – 28,058 SF • Featherwood | 12727 Featherwood Drive – 26,171 SF • EaDo | 2339 Commerce Street – 25,549 SF • Original US Schlumberger Headquarters (1938) | 2720 Leeland Street – 25,500 SF • Medical Professional Building I | 908 East Southmore Boulevard – 25,448 SF • Bank of America East Freeway | 12605 East Freeway – 25,426 SF • 4400 Highway 225 – 24,877 SF • Vibe Hobby | 8866 Gulf Freeway – 24,539 SF
• 1001 Shaw Avenue – a 80K SF class B office building
• 2327 Commerce Street – 23,067 SF
• East Houston MOB | 1140 Westmont Drive – a 49K SF class B office building
• The 1200 Building | 1200 Highway 146 South – 22,915 SF
• 2807 Little York Road – a 35K SF class B office building
• Bayshore Medical Building | 3333 Bayshore Boulevard – 22,659 SF
• 1702 Strawberry Road – a 22K SF class B office building
• Land Park | 11821 East I-10 Freeway – 20,714 SF • East Houston MOB | 1140 Westmont Drive – 20,249 SF • Vibe Hobby | 8876 Gulf Freeway – 18,813 SF • 11550 Fuqua Street – 18,265 SF • Wilson Road Building | 5810 Wilson Road – 18,002 SF
26
26
WEST SUBMARKETFARINTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(42,360)
(3,343)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
18.5%
18.5%
15.8%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
37,499
50,259
vs. Prev. Qtr
vs. 12 Mths Ago
52,738
67,143 Delivered SF 61,625 Quoted Rates $31.14
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$31.10
$28.28
VITAL STATS 12.0% 20.0%
250,000 150,000
200,000 11.0% 18.0% 100,000
150,000
10.0% 16.0%
9.0%
50,000 100,000
14.0%
0
50,000 0
8.0%
12.0%
(50,000)
(50,000) 10.0%
7.0% 1Q 16
(100,000) 2Q 18
2Q 16
3Q 18
3Q 16
4Q 18
1Q 19
4Q 16
Absorption
Absorption
2Q 19
1Q 17
3Q 19
2Q 17
4Q 19
3Q 17
1Q 20
4Q 17
Deliveries
Deliveries
2Q 20
1Q 18
3Q 20
2Q 18
4Q 20
3Q 18
1Q 21
4Q 18
2Q 21
Vacancy
(100,000) 1Q 19
Vacancy
Source: CoStar 2Q 2021 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. At the close of 2Q 2021, the Far West submarket had a vacancy rate of 18.5% which was the same as 1Q 2021. Absorption turned positive with 53K SF of space absorbed. Leasing activity increased compared to 1Q 2021 with 67K SF of deals completed. Currently, 25K SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Compass Real Estate has signed a 10K SF lease in Katy Ranch Phase I.
• Sierra Classic Custom Homes has signed a 2K SF lease in Katy Ranch Phase I.
LARGE EXISTING VACANCIES • Katy Ranch Phase II | 24285 Katy Freeway – 128,401 SF • Mason Creek Office Center II | 21700 Merchants Way – 127,955 SF
• The Offices at Greenhouse | 19219 Katy Freeway – 77,610 SF
• Katy MOB II | 707 South Fry Road – 65,938 SF • Det Norske Veritas | 1400 Ravello Road – 51,963 SF • New Park Drilling Fluids | 21920 Merchants Way – 51,256 SF
• Greenhouse at Park Row | 2051 South Greenhouse Road – 46,140 SF
• Katy Ranch Phase I | 24275 Katy Freeway – 43,871 SF • Bldg 2 | 2002 West Grand Parkway North– 33,992 SF • Horizon Medical Plaza 2 | 19002 Park Row – 32K SF • Katy Medical Plaza I | 23510 Kingsland Boulevard – 25,021 SF
• Kingsland Medical Plaza | 777 South Fry Road – 22,950 SF
• Katy MOB III | 19770 Kingsland Boulevard – 22,848 SF • Medical Plaza II | 23960 Katy Freeway – 18,696 SF
DEALS IN THE MARKET • PetroSkills | 25403 Katy Mills Parkway – a 32K SF class B office building
NEW DEVELOPMENTS • 2088 North Mason Road – a 25K SF class B office building
27
27
KINGWOOD SUBMARKET INTELLIGENCE Absorption
VITAL STATS
vs. Prev. Qtr
vs. 12 Mths Ago
272,992
(15,892)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
200,000400,000
11.8%
11.4%
11.7%
12.0% 12.0%
150,000 300,000
vs. 12 Mths Ago
10.0%
100,000
(11,927)
Leasing Act. 19,867 Delivered SF Quoted Rates $25.24
vs. Prev. Qtr 23,351 vs. Prev. Qtr
15,663 vs. 12 Mths Ago
270,000
-
vs. Prev. Qtr
vs. 12 Mths Ago
$25.19
$24.99
18.0% 16.0%
300,000600,000
16.0%
250,000500,000 14.0%
10.0% 50,000
8.0% 6.0% 4.0%
8.0%
0
200,000 100,000 0
(50,000)
(100,000)
6.0%
(100,000)
2.0%
(200,000)
4.0%
0.0% 1Q 16
(150,000) 2Q 18
3Q 18
4Q 18
1Q 19
2Q 3Q 4Q 16 Absorption 16 16
2Q 19
1Q 17
Absorption
3Q 19
2Q 17
4Q 19
1Q 20
3Q 4Q 17 17 Deliveries
Deliveries
2Q 20
1Q 18
3Q 20
2Q 18
4Q 20
1Q 21
2Q 21
3Q 4Q 18 Vacancy 18
(300,000) 1Q 19
Vacancy
Source: CoStar 2Q 2021 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 2Q 2021, the Kingwood submarket had a vacancy rate of 11.8% which was slightly higher than 1Q 2021. Absorption turned negative with 12K SF of space given back, significantly less than the 273K SF of positive absorption in 1Q 2021. Leasing activity consisted of 20K SF of deals completed. Currently, no office space is under construction in this submarket.
DEALS IN THE MARKET • 900 Rockmead Drive | Four Kingwood Place – a 60K SF class B office building
• 800 Rockmead Drive | Three Kingwood Place – a 53K SF class B office building
• 700 Rockmead Drive | Two Kingwood Place – a 50K SF class B office building
• 600 Rockmead Drive | One Kingwood Place – a 34K SF
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
• Four Kingwood Place | 900 Rockmead Drive – 27,760 SF
• Three Kingwood Place | 800 Rockmead Drive – 21,926 SF
• Two Kingwood Place | 700 Rockmead Drive – 20,646 SF • Humble Medical Office Building | 1485 FM 1960 Bypass East – 18,856 SF
• Deerbrook Plaza | 9802 FM 1960 Bypass Road West– 18,241 SF
• Kings Harbor | Building 6 | 4501 Magnolia Cove Drive – 16,010 SF
• 22710-22720 Professional Drive – 14,468 SF • Kingwood Medical Plaza I | 22698 Professional Drive – 12,940 SF
• BRB Medical Office Building | 22751 Professional Drive – 12,206 SF
• Citizens Bank Building | 8811 FM 1960 Bypass Road – 9,026 SF
class B office building
28
28
SUBURBAN OUTLIERS SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
46,995
109,199
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.6%
13.8%
12.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
56,395
79,848
vs. Prev. Qtr
vs. 12 Mths Ago
(24,180)
103,130 Delivered SF 70,456 Quoted Rates $27.41
39,650
83,800
vs. Prev. Qtr
vs. 12 Mths Ago
$28.05
$26.52
VITAL STATS 12.0%16.0%
200,000 250,000
200,000 150,000 11.0%
14.0%
150,000
100,000
10.0%
100,000
12.0%
50,000
50,000
9.0%
0
0
10.0%
(50,000)
8.0%
(50,000) 7.0%
8.0% 2Q 3Q 1Q 18 2Q 18
16
16
4Q 3Q18
16
1Q 4Q19
16
Absorption Absorption
2Q 19 1Q
17
3Q 19 2Q
17
4Q 19 3Q
17
1Q 20 4Q
17
2Q 201Q
Deliveries Deliveries
18
3Q 202Q
18
4Q 20 3Q
18
(100,000) 1Q 2Q (100,000) 21 4Q 21 1Q
18
Vacancy Vacancy
19
Source: CoStar 2Q 2021 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 2Q 2021, the Suburban Outliers submarket had a vacancy rate of 14.6% which was slightly higher than 1Q 2021. Absorption turned negative with 24K SF of space given back, compared to the 47K SF of space absorbed in 1Q 2021. Leasing activity increased with 103K of deals completed. Currently, 222K SF is under construction in this submarket.
TOP LEASE TRANSACTIONS • Jacinto Medical Corporation has signed a 26K SF lease in 2800 Garth Road.
DEALS IN THE MARKET • Primary Medical Tower II | 2800 Garth Road – a 129K Class B office building • Magnolia Landmark Building | 18230 FM 1488 Road – a 65K SF class B office building • Umar Syed Medical Tower | 2802 Garth Road – a 62K SF class B office building
• Baylor St. Luke’s Emergency Center | 4019 Interstate 45 North – a 20K SF class B office building
NEW DEVELOPMENTS • Medical Center of Tomball | 155 School Street – a 64K SF class A office building • Towne Lake Office Condos | 10242 Greenhouse Road – 50K SF of class B office condos • 11200 Broadway Street – a 48K SF class A office building • 400 West Davis Street – a 33K SF class B office building • Conroe Medical Plaza | 603 South Conroe Medical Drive – a 27K class B office building
LARGE EXISTING VACANCIES • 4005 Technology Drive – 257,399 SF • Westland Bunker | 550 Club Drive – 54,071 SF • Cypress Medical Office Building | 27700 Highway 290 – 49,057 SF • Emancipation Center | 3131 Emancipation Avenue – 45,206 SF • Building G | Marcel Boulevard | Interstate 45 & Crescent Campus Boulevard – 45K SF • 1517 Thompson Road – 42,551 SF
• 301 South First Street – a 59K SF class B office building
• Professional Building 6 | 2765-2785 Gulf Freeway South – 41,625 SF
• The Offices at Greatwood | 6514-6548 Greatwood Parkway – a 43K SF class B office building
• 4001 Technology Drive – 40,681 SF
• 2401 Termini Street – a 37K SF class B office building • Bank of America | 4000 Garth Road – a 33K SF class B office building • Sealy Business Continuity Center | 3063 Outlet Center Drive – a 32K SF class B office building • NOV | 10586 Highway 75 North – a 30K SF class B office building • 12280 Broadway Street – a 25K SF class A office building • Hughes Court Professional Building | 3828 Hughes Court – a 23K SF class B office building
• Oakbend Professional Building | 1601 Main Street – 40,502 SF • League Line Medical Office Building | 4015 Interstate 45 North – 34,952 SF • Sealy Business Continuity Center | 3063 Outlet Center Drive – 31,629 SF • 750 Fish Creek Thoroughfare – 31,117 SF • 2401 Termini Street – 30,262 SF • National Oilwell Varco | 10586 Highway 75 North– 30K SF • 22001 Southwest Freeway – 29,359 SF
• Baker Road Professional Building | 1010 Baker Road – a 22K SF class B office building
• 7830 West Grand Parkway South – 27,612 SF
• 455 School Street – a 22K SF class B office building
• Magnolia Landmark Building | 18230 FM 1488 Road – 26,372 SF
• Northpoint Crossing Office Building | 24445 State Highway 249 – a 21K SF class B office building
• Conroe 500 Medical Office Building | 500 Medical Center Boulevard – 26,291 SF
• 3100 Gulf Freeway – a 21K SF class B office building
• 10970 Shadow Creek Parkway – 25,900 SF
29
• 1920 Country Place Parkway – 27,284 SF
29
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