Market Brief...
Houston
OFFICE
3Q2021 Property Pictured Above: 2350 North Belt Tower
HOUSTON OFFICE MARKET BRIEF 3Q 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
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2
HOUSTON HLC SUBMARKET COVERAGE
OTHER SUBMARKETS 1 CBD | 49,667,038 SF 2 WEST LOOP | 35,369,506 SF 3 WESTCHASE | 18,139,623 SF 4 GREENWAY PLAZA | 11,189,311 SF 5 MEDICAL CENTER | 10,685,469 SF 6 MIDTOWN | 7,498,233 SF 7 SUBURBAN OUTLIERS | 11,693,790 SF
THE WOODLANDS 20,706,179 SF
TOMBALL
KINGWOOD 2,666,118 SF SPRING
FM 1960 CORRIDOR 12,274,602 SF
HUMBLE
GEORGE BUSH INTERCONTINENTAL AIRPORT
CYPRESS
GREENSPOINT/IAH 12,746,992 SF
LAKE HOUSTON
WEST BELT 6,010,945 SF NORTHWEST 8,678,843 SF
KATY FREEWAY WEST 26,987,529
KATY
KATY FREEWAY EAST 10,269,144 SF
FAR WEST 4,305,430 SF
EAST HOUSTON/PASADENA 5,795,354 SF
HOUSTON 6
1
BAY TOWN
2 3
SOUTHWEST 9,653,696 SF
GALLERIA
SHIP CHANNEL
4 5
MEDICAL CENTER
PASADENA LA PORTE HOBBY AIRPORT
SUGAR LAND
SUGAR LAND 7,932,576 SF
ELLINGTON AIRPORT
RICHMOND
TRINITY BAY
MISSOURI CITY PEARLAND
CLEAR LAKE 6,974,563 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 (HLC) 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
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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.
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770 SOUTH POST OAK LANE
NEW LISTING
770 South Post Oak Lane: 95,515 SF class B office building in Houston
6
NEW LISTING
2350 NORTH BELT TOWER
2350 North Belt Tower: 165,094 SF class A office building in Houston
7
HLC HOUSTON OFFICE OVERALL MARKET
HOUSTON OVERALL At the close of 3Q 2021, the Houston office market had a vacancy rate of 21.6% which was identical to 2Q 2021. Absorption returned positive with 780K SF of space absorbed, up from the 826K SF of negative absorption in 2Q 2021. Leasing activity increased with 2.98M SF of deals completed. There is currently 5M SF of office space under construction and 1M SF of space delivered in 3Q 2021.
CONSTRUCTION - OVERALL HOUSTON
VACANCY - OVERALL HOUSTON 25.0%
6,000,000
21.6%
18.3%
20.3%
5,000,000
20.0%
4,000,000
16.8%
15.0% 3,000,000
10.0% 2,000,000
5.0% 1.5%
1,000,000
1.3% 0.0%
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
4Q 19
1Q 20
Direct
2Q 20
3Q 20
4Q 20
1Q 21
Sublet
2Q 21
3Q 21
0 3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
Delivered Inventory
Total
4Q 20
1Q 21
2Q 21
3Q 21
Under Construction
OVERVIEW - OVERALL HOUSTON
ABSORPTION - OVERALL HOUSTON 7,000,000
3Q 20
22.0% 1,500,000
6,000,000 5,000,000
21.0%
1,000,000
4,000,000
500,000
20.0% 3,000,000 2,000,000
0 19.0%
1,000,000 0
(500,000) 18.0% (1,000,000)
(1,000,000) (2,000,000) 3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
Total Net
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Leasing Activity
2Q 21
3Q 21
17 .0%
(1,500,000) 3Q 18
4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
Deliveries
3Q 20
4Q 20
1Q 21
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 2021 Office Report
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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
49,667,038
10,696,999
11,531,996
23.2%
(373,262)
0
1,600,973
$38.39
West Loop
197
35,369,506
8,051,507
8,488,471
24.0%
(450,452)
70,000
77,189
$33.02
Katy Freeway West
164
26,987,529
5,858,546
6,465,192
24.0%
(265,867)
0
0
$26.45
The Woodlands
171
20,706,179
2,954,995
3,194,596
15.4%
(246,645)
0
686,000
$32.06
Westchase
104
18,139,623
4,710,406
4,924,835
27.1%
(268,191)
0
0
$27.38
Greenspoint/IAH
97
12,746,992
5,539,216
5,597,860
43.9%
25,234
0
0
$18.09
FM 1960 Corridor
158
12,274,602
2,410,052
2,681,531
21.8%
65,492
145,744
107,560
$20.21
Greenway Plaza
56
11,189,311
2,302,786
2,580,963
23.1%
(397,797)
0
0
$34.81
Medical Center
61
10,685,469
975,382
993,133
9.3%
(141,651)
0
1,597,780
$31.04
Southwest
89
9,653,696
2,049,350
2,054,376
21.3%
82,217
0
0
$17.35
Katy Freeway East
73
10,269,144
1,259,128
1,397,607
13.6%
730,136
800,000
186,000
$29.29
Northwest
93
8,678,843
1,853,966
1,867,397
21.5%
(187,867)
0
132,700
$20.16
Sugar Land
101
7,932,576
1,305,239
1,403,853
17.7%
(296,389)
40,000
0
$30.20
Clear Lake
97
6,974,563
858,619
881,146
12.6%
81,628
0
0
$22.00
Midtown
68
7,498,233
1,159,183
1,190,123
15.9%
245,808
471,400
40,000
$34.91
West Belt
69
6,010,945
1,391,370
1,564,673
26.0%
(84,099)
0
0
$24.70
East Houston/Pasadena
103
5,795,354
811,760
828,743
14.3%
96,370
56,778
410,177
$22.32
Far West
59
4,305,430
598,576
718,727
16.7%
59,084
40,106
25,000
$29.63
Kingwood
45
2,666,118
293,139
293,139
11.0%
275,818
270,000
0
$25.15
Suburban Outliers
194
11,693,790
1,647,884
1,669,787
14.3%
43,143
158,106
233,045
$26.78
2,088
279,244,941
56,728,103
60,328,148
21.6%
(1,007,290)
2,052,134
5,096,424
$29.59
Totals
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HOUSTON CENTRAL BUSINESS DISTRICT SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(287,873)
(205,793)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
23.2%
23.6%
22.2%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
317,860
598,120
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
180,211
318,888 Delivered SF Quoted Rates $39.49
vs. Prev. Qtr
vs. 12 Mths Ago
$39.97
$41.43
VITAL STATS 900,000
700,000 23.0% 500,000
300,000
100,000
21.0%
(100,000)
(300,000)
(500,000)
19.0% 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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 rental rates in the city with a current YTD average of $38 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 3Q 2021, the CBD submarket had a vacancy rate of 23.2% which was slightly lower than the 23.6% at the close of 2Q 2021. Absorption moved positive with 180K SF of space absorbed, up from the 287K SF of negative absorption in 2Q 2021. Leasing activity remained steady with 319K SF of deals completed. There is currently more than 1.6M SF of office space under construction with no space delivered in 3Q 2021.
TOP LEASE TRANSACTIONS
• Common Desk has signed a 24K SF lease in Post Houston. • Parkman Whaling has signed a 12K SF renewal in Chase Tower. • Smith Graham & Company has signed a 10K SF renewal in Chase Tower.
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 • 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 – 812,365 SF • Wells Fargo Plaza | 1000 Louisiana Street – 660,451 SF • 4 Houston Center | 1221 Lamar Street – 625,577 SF • Fulbright Tower | 1301 McKinney Street – 574,151 SF • Two Allen Center | 1200 Smith Street – 523,387 SF • 1600 Smith Street – 501,300 SF • One City Centre | 1021 Main Street – 481,148 SF • 919 Milam | 919 Milam Street – 444,482 SF • One Allen Center | 500 Dallas Street – 434,445 SF • 2 Houston Center | 909 Fannin Street – 408,051 SF • 1801 Smith Street – 407,894 SF • TC Energy Center | 700 Louisiana Street – 380,234 SF
DEALS IN THE MARKET
• North Tower | 700 Milam Street – 343,903 SF
• Esperson | 808 Travis Street – a 600K SF class B office building
• Three Allen Center | 333 Clay Street – 342,438 SF
• Theatre District | 720 Rusk Street – a 25K SF class B office building
• JPMorgan Chase Tower | 600 Travis Street – 339,455 SF
• 1000 Main | 1000 Main Street – 341,007 SF
• The Tamborello Building | 1901 Milam Street – a 24K SF class B office building
• 1301 Fannin Office Tower | 1301 Fannin Street – 327,018 SF
• 421 Fannin Street – a 20K SF class B office building
• South Tower | 711 Louisiana Street – 292,806 SF
• 1415 Louisiana | 1415 Louisiana Street – 304,859 SF • GreenStreet Tower | 1201 Polk Street – 286,674 SF • 1100 Louisiana | 1100 Louisiana Street – 283,225 SF
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WEST LOOP SUBMARKET INTELLIGENCE Absorption (314,213)
vs. Prev. Qtr
VITAL STATS
vs. 12 Mths Ago 25.0%
(149,012)
(431,264)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
24.0%
23.1%
22.2%
22.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
21.0%
583,706 Delivered SF Quoted Rates $33.30
580,478
392,372
vs. Prev. Qtr
vs. 12 Mths Ago
-
52,825
vs. Prev. Qtr
vs. 12 Mths Ago
$32.90
$33.45
24.0%
250,000
23.0%
0
20.0% (250,000)
19.0% 18.0% 17 .0%
(500,000) 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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 rental rates here are among the highest in the city. At the close of 3Q 2021, the West Loop submarket had a vacancy rate of 24.0% which was higher than the 23.1% at the close of 2Q 2021. Absorption remained negative with 314K SF of space given back, up from the 149K SF of negative absorption in 2Q 2021. Leasing activity remained steady with 584K SF of deals completed. There is currently 77K SF of office space under construction with 70K SF of space delivered in 3Q 2021.
NEW DEVELOPMENTS
• 4411 San Felipe Street – a 77K SF class A office building
LARGE EXISTING VACANCIES
• Marathon Oil Tower | 5555 San Felipe Street – 878,625 SF • Williams Tower | 2800 Post Oak Boulevard – 420,467 SF • San Felipe Plaza | 5847 San Felipe Street – 392,008 SF • Sage Plaza | 5151 San Felipe Street – 293,535 SF • BHP Petroleum | 1500 Post Oak Boulevard – 273,235 SF • Two Post Oak Central | 1980 Post Oak Boulevard – 256,261 SF • TwentyFour25 | 2425 West Loop South – 255,744 SF
TOP LEASE TRANSACTIONS
• Five Post Oak Park | 4400 Post Oak Parkway – 247,314 SF
• UT Physicians has signed a 96K SF lease in Bellaire Station.
• Galleria Tower I | 2700 Post Oak Boulevard – 241,586 SF
• Top Spot has signed a 15K SF renewal in 515 Post Oak Boulevard.
• 2000 West Loop South – 236,808 SF
• Velocys has signed a 7K SF renewal in 2603 Augusta Drive.
• Galleria Tower II | 5051 Westheimer Road – 213,343 SF
• The Consulate General of Spain has signed a 5K SF lease in 1800 Bering Drive.
• Thirty Forty Post Oak | 3040 Post Oak Boulevard – 209,294 SF
• Three Riverway | 3 Riverway – 219,194 SF
• One Riverway | 1 Riverway – 201,700 SF
DEALS IN THE MARKET
• 9009 West Loop South – a 472K SF class B office building • 50 Briar Hollow Lane – two (2) class B office buildings totaling 202K SF • 1717 St James Place – a 110K SF class B office building
• 5718 Westheimer | 5718 Westheimer Road – 199,513 SF • Three Post Oak Central | 1990 Post Oak Boulevard – 181,098 SF • Wells Fargo Bank Tower | 1300 Post Oak Boulevard – 174,583 SF
• Bellaire Medical Professional Building | 6550 Mapleridge Street – a 65K SF class B office building
• Schlumberger Building | 5599 San Felipe Street – 170,252 SF
• 5610-5613 Southwest Freeway – a 23K SF class B office building
• Two Riverway | 2 Riverway – 161,415 SF
• 6105 Beverly Hill Street – a 20K SF class B office building
• Bellaire Station | 6500 West Loop South – 167,813 SF • Galleria Park I | 5251 Westheimer Road – 151,991 SF • Four Oaks Place | 1330 Post Oak Boulevard – 139,303 SF
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KATY FREEWAY WEST SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(32,766)
(351,520)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
24.0%
23.8%
22.5%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
(43,378)
250,304 Delivered SF Quoted Rates $27.45
250,016
150,911
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$27.24
$28.27
VITAL STATS
30.0%
500,000
300,000 25.0% 100,000
(100,000)
20.0%
(300,000)
(500,000)
15.0% 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
Deliveries
1Q 21
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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 3Q 2021, the Katy Freeway West submarket had a vacancy rate of 24.0% which was slightly higher than the 23.8% at the close of 2Q 2021. Absorption remained negative with 43K SF of space given back, up from the 33K SF of negative absorption in 2Q 2021. Leasing activity remained steady with 250K SF of deals completed. There is currently no office space under construction and no space delivered in 3Q 2021.
DEALS IN THE MARKET
• Three WestLake Park | 550 Westlake Park Boulevard – a 420K SF class A office building • One Park Ten | 16225 Park Ten Place – a 163K SF class B 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 • 16000 Memorial Drive – a 28K SF class B office building
LARGE EXISTING VACANCIES
• Four WestLake Park | 200 Westlake Park Boulevard– 605,053 SF • Two WestLake | 580 Westlake Park Boulevard– 455,142 SF • Three WestLake Park | 550 Westlake Park Boulevard– 406,484 SF • Eldridge Oaks Phase I | 1080 Eldridge Parkway – 363,086 SF
TOP LEASE TRANSACTIONS
• Energy Tower III | 11740 Katy Freeway – 350,813 SF
• Excel Midstream Solutions, Inc has signed a 17K SF renewal in 1250 Wood Branch Park Drive.
• Three Eldridge | 737 North Eldridge Parkway – 308,186 SF
• Lloyd Warwick has signed a 9K SF renewal and expansion in The Westchester.
• 1200 Enclave Parkway – 286,917 SF
HLC Deal
• Enclave on the Lake | 1255 Enclave Parkway – 289,632 SF
• Northwestern Mutual has signed a 9K SF lease in 1250 Wood Branch Park Drive.
• 8 West Centre | 3505 West Sam Houston Parkway North – 273,810 SF
• Securranty has signed a 7K SF renewal in Timberway II.
• West Memorial Place II | 15377 Memorial Drive – 265,761 SF
• Memorial Hermann has signed a 4K SF lease in Royal Oaks Place.
• Ten West Corporate Center II | 17404 Katy Freeway – 252,931 SF
• Longhorn Labs has signed a 4K SF lease in 16420 Park Ten Place Drive.
• Republic Square | 13501 Katy Freeway – 245,893 SF
• Dr. Francis Dunlap, DDS has signed a 2K SF renewal in The Westchester.
• Two Eldridge | 757 North Eldridge Parkway – 201,348 SF
HLC Deal
• Energy Center II | 575 North Dairy Ashford – 219,490 SF • 1330 Enclave Parkway – 165,739 SF • West Memorial Place I | 15375 Memorial Drive – 163,244 SF • Energy Center I | 585 North Dairy Ashford Road – 160,907 SF • Energy Tower IV | 11750 Katy Freeway – 160,201 SF
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12
THE WOODLANDS SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
81,189
(161,610)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
15.4%
15.7%
14.8%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
190,968
85,619
59,154
211,797 Delivered SF Quoted Rates $33.34
vs. Prev. Qtr
vs. 12 Mths Ago
-
137,938
vs. Prev. Qtr
vs. 12 Mths Ago
$33.49
$33.87
VITAL STATS 17 .0%
750,000
16.0% 550,000
15.0% 14.0%
350,000
13.0% 150,000 12.0% (50,000)
11.0% 10.0%
(250,000)
9.0% (450,000)
8.0% 7.0%
(650,000) 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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 rental rates and maintaining a vacancy rate well below the city average. At the close of 3Q 2021, The Woodlands submarket had a vacancy rate of 15.4% which was slightly lower than the 15.7% at the close of 2Q 2021. Absorption remained positive with 59K SF of space absorbed, but down from the 81K SF of absorption in 2Q 2021. Leasing activity increased slightly with 212K SF of deals completed. There is currently 686K SF office space under construction and no space delivered in 3Q 2021.
TOP LEASE TRANSACTIONS
• Entergy has signed a 53K SF lease in Lake Front North.
DEALS IN THE MARKET
• One Northgate | 28420 Hardy Toll Road – a 59K SF class A office building • 1776 Woodstead Court – a 37K SF class B 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
NEW DEVELOPMENTS
LARGE EXISTING VACANCIES
• The Woodlands Towers at The Waterway | 9950 Woodloch Forest Drive – 402,337 SF • Hewitt Lake Woodlands Building 3 | 9500 Lakeside Boulevard – 360,000 SF • 1735 Hughes Landing Boulevard – 290,814 SF • South Tower | 10000 Energy Drive – 288,609 SF • Hughes Landing | 1725 Hughes Landing Boulevard – 167,250 SF • 24955 North I-45 Freeway – 148,104 SF • Building 9 | 9709 Lakeside Boulevard – 137,938 SF • 8800 Technology Forest Place – 128,790 SF • 2001 Timberloch Place – 126,502 SF • CityPlace I | 1700 City Plaza Drive – 108,920 SF • Parkwood II | 10055 Grogans Mill Road – 95,170 SF • Kiewet Energy Company | 3831 Technology Forest Boulevard – 95,078 SF • One Hughes Landing | 1800 Hughes Landing Boulevard – 93,502 SF • 9201 Pinecroft Drive – 82,034 SF • Chase Bank Building | 25025 North I-45 Freeway – 80,088 SF • Two Hughes Landing | 1790 Hughes Landing Boulevard – 68,277 SF • North Building | 460 Wildwood Forest Drive – 63,823 SF • Waterway Plaza Two | 10001 Woodloch Forest Drive – 57,106 SF
• HPE Buildings 3 & 4 | City Place Drive – two (2) 284K SF class A office buildings
• Three Hughes Landing | 1780 Hughes Landing Boulevard – 51,409 SF
• Vision Park Build-to-Suit | 134 Vision Park – a 57K SF class A office building
• 4 Waterway Square Place | 4 Waterway Avenue – 50,961 SF
• LifeTime Co-Work | Six Pine Drive – a 35K SF class B office building
13
• 3 Waterway Square Place | 3 Waterway Avenue – 50,187 SF
13
WESTCHASE SUBMARKET INTELLIGENCE Absorption (90,976)
vs. Prev. Qtr (198,512)
(149,600)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
27.1%
26.6%
25.2%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
45,899
243,584
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
339,655
VITAL STATS
vs. 12 Mths Ago 28.0%
300,000 240,000 180,000
26.0% 120,000 60,000 24.0%
0 (60,000) (120,000)
Delivered SF Quoted Rates $27.38
vs. Prev. Qtr
vs. 12 Mths Ago
$26.84
$27.73
22.0% (180,000) (240,000) 20.0%
(300,000) 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 2021 Office Report
HLC OUTLOOK
• 10590 Westoffice Drive – a 26K SF class B office building
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.
• 2610 West Sam Houston Parkway South – a 26K SF class B office building
At the close of 3Q 2021, the Westchase submarket had a vacancy rate of 27.1% which was slightly higher than the 26.6% at the close of 2Q 2021. Absorption remained negative with 91K SF of space given back, down from the 199K SF of negative absorption in 2Q 2021. Leasing increased with 340K SF of deals completed. There is currently no office space under construction and no space delivered in 3Q 2021.
LARGE EXISTING VACANCIES • 10200 Bellaire Boulevard – 568,458 SF • Pinnacle Westchase | 3010 Briarpark Drive – 356,648 SF • CityWestPlace Building 3 | 2105 CityWest Boulevard – 200,782 SF • Towers at Westchase II | 10350 Richmond Avenue – 199,279 SF • One BriarLake Plaza | 2000 West Sam Houston Parkway South – 190,532 SF • Westchase Point | 1250 West Sam Houston Parkway – 147,403 SF • 2500 CityWest | 2500 CityWest Boulevard – 146,648 SF • West8 Tower | 10205 Westheimer Road – 143,507 SF
TOP LEASE TRANSACTIONS • Aspen Technology has signed a 56K SF renewal in 2500 CityWest.
• Royal Oaks Centre | 11490 Westheimer Road – 135,457 SF • One Westchase Center | 10777 Westheimer Road – 132,818 SF
• Shaw Systems has signed a 16K SF lease in Westchase Oaks.
• Towers at Westchase I | 10370 Richmond Avenue – 128,989 SF
• BEC Engineers and Consultants has signed a 13K SF renewal in Westchase III.
• Briarpark Green | 3151 Briarpark Drive – 126,545 SF • 10333 Richmond | 10333 Richmond Avenue – 125,643 SF
• Riversand has signed a 11K SF renewal in 2929 Briarpark Drive.
• 3250 Briarpark Drive – 125,544 SF
DEALS IN THE MARKET • Columbia Centre | 11011 Richmond Avenue – a 167K SF class A office building • 2929 Briarpark Drive – a 140K SF class B office building • The Mosing Building | 10260 Westheimer Road – a 130K SF class B office building • 10000 Richmond Avenue – a 127K SF class B office building • 3990 Rogerdale Road – a 123K SF class B office building • 10255 Richmond Avenue – a 103K SF class B office building • 3535 Briarpark Drive – a 66K SF class B office building 14
• Two BriarLake Plaza | 2050 W Sam Houston Parkway South – 113,409 SF • CityWestPlace Building 4 | 2103 CityWest Boulevard – 109,330 SF • Columbia Centre | 11011 Richmond Avenue – 107,415 SF • Westchase Park I | 3700 West Sam Houston Parkway South – 105,724 SF • Oak Park Office Center II | 6380 Rogerdale Road – 100,510 SF • Richmond Park Westchase I | 10800 Richmond Avenue – 99,088 SF • Millennium Tower II | 10353 Richmond Avenue – 94,505 SF • 10000 Richmond Avenue – 91,789 SF 14
GREENSPOINT/IAH SUBMARKET INTELLIGENCE Absorption 76,699
vs. Prev. Qtr 13,900
(41,276)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
43.9%
44.5%
43.9%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
74,794
98,952
vs. Prev. Qtr
vs. 12 Mths Ago
72,512 Delivered SF Quoted Rates $18.03
VITAL STATS
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$18.15
$19.02
46.0%
200,000
100,000 44.0%
0
42.0% (100,000)
40.0%
(200,000) 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 2021 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. Rental rates have fallen significantly and investors have been working persistently to rebrand the submarket. At the close of 3Q 2021, the Greenspoint submarket had a vacancy rate of 43.9% which was slightly lower than the 44.5% at the close of 2Q 2021. Absorption remained positive with 77K SF of space absorbed, up from the 14K SF of positive absorption in 2Q 2021. Leasing activity remained steady with 73K SF of deals completed. There is currently no office space under construction and no space delivered in 3Q 2021.
• 509 North Sam Houston Parkway East – a 79K SF class B office building • 397 North Sam Houston Parkway – a 68K SF class B 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
TOP LEASE TRANSACTIONS
• CityNorth 6 | 12450 Greenspoint Drive – 343,495 SF
• Prime Energy Services has signed a 16K SF lease in 450 Gears Road.
• CityNorth 1 | 233 Benmar Drive – 253,562 SF
• Sunbelt Merchant Group Consulting has signed a 4K SF lease in 400 North Belt.
• 222 Benmar | 222 Benmar Drive – 198,256 SF
• Coastline Rail Engineering, Inc has signed a 2K SF lease in Greenbriar Place.
• 396 West Greens Road – 164,411 SF
HLC Deal
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 • North Houston Tech Tower | 12707 North Freeway – a 157K SF class B 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
• 363 North Sam Houston Parkway East – 222,500 SF • Glenborough Tower | 100 Glenborough Drive – 172,454 SF • World Houston Plaza | 15710 John F. Kennedy Boulevard – 158,352 SF • 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 • EM Houston | 13401 I-45 North – 143,410 SF • 333 Northbelt | 333 North Sam Houston Parkway East – 133,069 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
• Greens Crossing I | 810 Gears Road – a 79K SF class B office building 15
15
FM 1960INTELLIGENCE CORRIDOR SUBMARKET Absorption 92,221
vs. Prev. Qtr (66,534)
25,019
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
21.8%
22.3%
21.9%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
173,915
236,785
vs. Prev. Qtr
vs. 12 Mths Ago
-
102,187
210,589 Delivered SF 48,000 Quoted Rates $20.22
VITAL STATS
vs. 12 Mths Ago
vs. Prev. Qtr
vs. 12 Mths Ago
$20.74
$20.78
24.0%
200,000
22.0%
100,000
20.0%
0
18.0%
(100,000)
16.0%
(200,000)
14.0%
(300,000)
12.0%
(400,000) 3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
4Q 19
Absorption
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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 over 12M SF of class A and B office space. At the close of 3Q 2021, the FM 1960 Corridor submarket had a vacancy rate of 21.8% which was lower than the 22.3% at the close of 2Q 2021. Absorption returned positive with 92K SF of space absorbed, up from the 67K SF of negative absorption in 2Q 2021. Leasing activity increased with 211K SF of deals completed. There is currently 108K SF of office space under construction and 48K SF of space delivered in 3Q 2021.
• 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
NEW DEVELOPMENTS • North Cypress Physician Office Building III – a 110K 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
TOP LEASE TRANSACTIONS • SGR Energy has signed a 6K SF renewal in Cornerstone Tower.
• University Park – Building 9 & 10 | 11450 Compaq Center West Drive – 208,841 SF • Creekridge II | 140 Cypress Station Drive – 112,525 SF
• Kuhn & Associates has signed a 4K SF renewal in One Northchase Park.
• Chasewood Crossing III | 19350 State Highway 249 – 97,877 SF
• Hendricks Engineers has signed a 1K SF renewal in Cypresswood Crossing.
• 7310 Eldridge Parkway – 81,800 SF
HLC Deal
• 616 FM 1960 Road West – 79,237 SF • 21212 Northwest Freeway – 76,354 SF
DEALS IN THE MARKET • 11445 Compaq Center West Drive – a 588K SF class A office building
• Chasewood Crossing I | 19500 State Highway 249 – 69,862 SF • Two Chasewood | 20405 State Highway 249 – 56,249 SF
• 8300 Cypress Creek Parkway – a 70K SF class B office building
• Cy-Fair Medical Office Building | 13114 FM 1960 West – 51,846 SF
• Champions Forest Office Building | 13231 Champion Forest Drive – a 64K SF class B office building
• Northwest Medical Plaza I | 800 Peakwood Drive – 51,633 SF
• 18750 Interstate 45 – a 44K SF class A office building
• Cypress Station Medical Building | 1140 Cypress Station Drive – 49,533 SF
• 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 • 17323 Red Oak Drive – a 27K SF class B office building 16
• 21216 Northwest Freeway – 50,058 SF
• 3648 Cypress Creek Parkway – 45,043 SF • 18750 I-45 – 44,019 SF • Willowchase Atrium | 8203 Willow Place Drive South – 43,592 SF • Texas School of Business | 711 Airtex Drive – 42,890 SF • Two Kuykendahl Place | 15531 Kuykendahl Road – 39K SF 16
GREENWAY PLAZA SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
VITAL STATS
vs. 12 Mths Ago
300,000
26.0%
(66,421)
(277,419)
(133,366)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
22.0%
23.1%
22.5%
17.4%
20.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
18.0%
38,371
154,635
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$34.94
$35.36
90,097 Delivered SF Quoted Rates $34.88
250,000 24.0%
200,000 150,000 100,000 50,000 0 (50,000)
16.0%
(100,000)
14.0%
(150,000) (200,000)
12.0%
(250,000)
10.0%
(300,000) 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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 3Q 2021, the Greenway Plaza submarket had a vacancy rate of 23.1% which was higher than the 22.5% at the close of 2Q 2021. Absorption remained negative with 66K SF of space given back, down from the 277K SF of negative absorption in 2Q 2021. Leasing activity increased with 90K SF of deals completed. There is currently no office space under construction and no space delivered in 3Q 2021.
TOP LEASE TRANSACTIONS
• Avelo Airlines has signed a 18K SF sublease in Twelve Greenway Plaza.
DEALS IN THE MARKET
• 3334 Richmond Avenue – a 26K SF class B office building
17
LARGE EXISTING VACANCIES
• Nine Greenway Plaza | 9 Greenway Plaza – 316,316 SF • Four Greenway Plaza | 4 Greenway Plaza – 242,628 SF • Phoenix Tower at Greenway Plaza | 3200 Southwest Freeway – 236,745 SF • Three Greenway Plaza | 3 Greenway Plaza – 202,782 SF • Twelve Greenway Plaza | 12 Greenway Plaza – 191,783 SF • Weslayan Tower | 24 Greenway Plaza – 119,190 SF • Eight Greenway Plaza | 8 Greenway Plaza – 113,663 SF • 20 Greenway Plaza – 110,746 SF • Eleven Greenway Plaza | 11 Greenway Plaza – 101,896 SF • 3800 Buffalo Speedway – 96,250 SF • 3737 Buffalo Speedway – 86,710 SF • Five Greenway Plaza | 5 Greenway Plaza – 85,356 SF • 3355 West Alabama | 3355 West Alabama Street – 83,813 SF • 3555 Timmons Lane – 81,199 SF • Two Greenway Plaza | 2 Greenway Plaza – 69,056 SF • Nitya Tower | 2211 Norfolk Sreet – 65,786 SF
17
MEDICAL CENTER SUBMARKET INTELLIGENCE Absorption 47,708 Vacancy
vs. Prev. Qtr (89,152)
11,033
vs. Prev. Qtr
vs. 12 Mths Ago
9.3%
9.7%
8.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
88,259
68,845
55,284 Delivered SF Quoted Rates $30.83
VITAL STATS
vs. 12 Mths Ago
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$30.73
$27.36
10.0%
200,000
9.5%
160,000
9.0%
120,000
8.5%
80,000
8.0%
40,000
7.5%
0
7.0%
(40,000)
6.5%
(80,000)
6.0%
(120,000)
5.5%
(160,000)
5.0%
(200,000) 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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 10.7M 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 3Q 2021, the Medical Center submarket had a vacancy rate of 9.3% which was slightly lower than the 9.7% at the close of 2Q 2021. Absorption returned positive with 48K SF of space absorbed, up from the 89K SF of negative absorption in 2Q 2021. Leasing activity fell with 55K SF of deals completed. There is currently 1.6M SF of office space under construction and no space delivered in 3Q 2021.
NEW DEVELOPMENTS
LARGE EXISTING VACANCIES
• 6624 Fannin Tower | 6624 Fannin Street – 153,054 SF • TMC Innovation | 2450 Holcombe Road – 119,260 SF • University Medical Plaza I | 7501 Fannin Street – 96,103 SF • 1919 Pressler Street – 68,607 SF • Museum Medical Tower | 1213 Hermann Drive – 68,271 SF • 7900 Fannin | 7900 Fannin Street – 59,348 SF • 8000 Greenbriar Drive – 52,180 SF • 7807 Main Street – 47,000 SF • Greenpark One | 7515 South Main Street – 43,777 SF • 7505 Fannin Street – 41,108 SF • One Fannin | 7400 Fannin Street – 36,302 SF • Memorial Hermann Medical Plaza | 6400 Fannin Street – 35,214 SF • Greenpark II Professional | 7505 Main Street – 32,010 SF
• Horizon Tower | 6929 Main Street – a 512K SF class A office building
• Prosperity Bank Plaza | 5020 Montrose Boulevard – 26,950 SF
• O’Quinn Medical Tower | 7200 Cambridge Street – a 427K SF class A office building
• Atrium 2656 | 2656 South Loop Freeway West – 23,672 SF
• 1200 Binz | 1200 Binz Street – 24,419 SF
• 3131 Holcombe Boulevard – a 270K SF class A office building
• 3003 South Loop West | 3003 South Loop Freeway West – 22,918 SF
• Museo Plaza Office Building | 5115 Fannin Street – a 160K SF class A office building
• 2636 South Loop Freeway West – 21,358 SF
• 7500 Fannin Street – a 126K SF class A office building • Old Spanish Trail – a 112K SF class A office building
18
18
SOUTHWEST SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(2,041)
(103,735)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
21.3%
21.6%
20.8%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
35,377
73,044 Delivered SF Quoted Rates $17.21
95,711
183,294
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$17.19
$17.55
VITAL STATS 26.0%
140,000 120,000 100,000
24.0%
80,000 60,000 22.0%
40,000 20,000 0
20.0%
(20,000) (40,000) (60,000)
18.0%
(80,000) (100,000) 16.0%
(120,000) 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
Deliveries
1Q 21
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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. At the close of 3Q 2021, the Southwest submarket had a vacancy rate of 21.3% which was slightly lower than the 21.6% at the close of 2Q 2021. Absorption returned positive with 35K SF of space absorbed, up from the 2K SF of negative absorption in 2Q 2021. Leasing activity decreased slightly with 73K SF of deals completed. There is currently no office space under construction and no space delivered in 3Q 2021.
DEALS IN THE MARKET
• American First Tower | 9999 Bellaire Boulevard – a 212K SF class A office building
LARGE EXISTING VACANCIES
• Houston Technology Center | 5959 Corporate Drive – 333,332 SF • Southwest Corporate Center | 9700-9702 Bissonnet Street – 217,837 SF • Arena Place II | 7324 Southwest Freeway – 210,600 SF • 11111 South Wilcrest Drive – 190,398 SF • Arena Place I | 7322 Southwest Freeway – 137,457 SF • 7011 Southwest Freeway – 112,590 SF • Southwest Medical Plaza I | 7777 Southwest Freeway – 82,301 SF • Centre One | 9800 Centre Parkway – 80,885 SF • Westwood Green | 9494 Southwest Freeway – 73,412 SF • Southwest Medical Plaza II | 7737 Southwest Freeway – 69,664 SF • 6464 Savoy Drive – 53,052 SF
• 11111 South Wilcrest Drive – a 190K SF class B office building
• The Center | 8303 Southwest Freeway – 47,437 SF
• West Belt Office Center I | 8101 West Sam Houston Parkway South – a 135K SF class B office building
• 9896 Bissonnet Street | 9896 Bissonnet Street – 45,276 SF • 6001 Savoy Drive – 45,201 SF
• 8700 Commerce Park – a 79K SF class B office building
• The Center | 8323 Southwest Freeway – 44,298 SF
• 6100 Corporate Drive – a 73K SF class B office building
• Southwest Center | 6671 Southwest Freeway – 40,265 SF
• Harwin International Plaza | 7171 Harwin Drive – a 73K SF class B office building
• Sterling Plaza | 10101 Southwest Freeway – 36,877 SF
• 7850 Parkwood Circle Drive – a 34K SF class B office building
• One West Belt | 9555 West Sam Houston Parkway South – 33,636 SF
• 9200 West Sam Houston Parkway South – a 23K SF class B office building
• The Atrium Tower | 9894 Bissonnet Street – 36,404 SF
• Southwest Medical Plaza | 8200 Wednesbury Lane – 33,358 SF • West Belt Office Center I | 8101 West Sam Houston Parkway South – 32,743 SF • NRG Office Complex | 2616 South Loop Freeway West – 11,595 SF
19
19
KATY FREEWAY EAST SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
123,114
(74,630)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
13.6%
12.6%
13.6%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
289,673
136,834
vs. Prev. Qtr
vs. 12 Mths Ago
598,027
190,594 Delivered SF 800,000 Quoted Rates $30.10
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$30.97
$34.86
VITAL STATS 850,000 800,000 750,000 700,000 650,000 600,000
15.0%
14.0%
550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000
13.0%
12.0%
11.0%
150,000 100,000 50,000 0 (50,000) (100,000)
10.0%
9.0% 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
Deliveries
1Q 21
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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 Sam Houston Tollway near the Energy Corridor and Houston’s western suburbs. It is home to MetroNational’s Memorial City and Midway’s CityCentre mixeduse developments. At the close of 3Q 2021, the Katy Freeway East submarket had a vacancy rate of 13.6% which was 1.0% higher than 2Q 2021. Absorption increased significantly with 598K SF of space absorbed, up from the 123K SF of absorption in 2Q 2021. Leasing activity decreased with 191K SF of deals completed. There is currently 186K SF of office space under construction and 800K SF of space delivered in 3Q 2021.
LARGE EXISTING VACANCIES • 10777 Clay Road – 222,210 SF
• Memorial Hermann Tower | 929 Gessner Road – 118,966 SF • Three Memorial City Plaza | 840 Gessner Road – 114,474 SF • Village Tower II | 9655 Katy Freeway – 96,570 SF • Two Memorial City Plaza | 820 Gessner Road – 70,956 SF • One Memorial City Plaza | 800 Gessner Road – 67,464 SF • CityCentre One | 800 Town & Country Boulevard – 64,772 SF • 950 Corbindale Road – 52,935 SF • 9900 Westpark Drive – 44,649 SF • Medical Plaza III | 915 Gessner Road – 44,470 SF • 8584-8588 Katy Freeway – 41,743 SF
TOP LEASE TRANSACTIONS
• Black & Veatch Corporation has signed a 16K SF lease in 920 Memorial City Way. • BRS has signed a 3K SF lease in Two Memorial City Plaza.
HLC Deal
• The Law Offices of Peter Dadinis has signed a 2K SF renewal in 1240 Blalock.
• 920 Memorial City Way – 39,898 SF • CityCentre Three | 842 West Sam Houston Parkway North – 34,436 SF • Town & Country Central I | 10497 Town & Country Way – 31,312 SF • Nexen Building | 945 Bunker Hill Road – 29,569 SF • 952 Echo Lane – 29,368 SF
DEALS IN THE MARKET
• Old Katy Road Building | 9180 Old Katy Road – a 30K SF class B office building
• Hedwig Place | 8731 Katy Freeway – 26,427 SF • CityCentre Four | 840 West Sam Houston Parkway North – 22,112 SF
NEW DEVELOPMENTS • 9753 Katy Freeway – a 186K SF class A office building
20
20
NORTHWEST SUBMARKET INTELLIGENCE Absorption (35,494)
vs. Prev. Qtr
VITAL STATS
vs. 12 Mths Ago
(89,455)
87,970
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
21.5%
21.1%
19.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
160,376
178,986
vs. Prev. Qtr
vs. 12 Mths Ago
-
114,349
24.0%
140,000 120,000 100,000
22.0%
80,000 60,000 40,000 20,000
20.0%
0
135,356 Delivered SF Quoted Rates $20.59
vs. Prev. Qtr
vs. 12 Mths Ago
$20.96
$21.78
(20,000) (40,000) 18.0%
(60,000) (80,000) (100,000)
16.0%
(120,000) 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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. A majority of the 8.6M SF of class A and B office space is located at Interstate 610 and Highway 290 or in the vicinity of Highway 290 and Hollister Road. At the close of 3Q 2021, the Northwest submarket had a vacancy rate of 21.5% which was higher than the 21.1% at the close of 2Q 2021. Absorption remained negative with 35K SF of space given back, but down from the 89K SF of negative absorption in 2Q 2021. Leasing activity decreased with 135K SF of deals completed. There is currently 133K SF of office space under construction and no space delivered in 3Q 2021.
LARGE EXISTING VACANCIES
• Brookhollow Central III | 2950 North Loop Freeway West – 142,706 SF • Brookhollow Central II | 2900 North Loop Freeway West – 124,358 SF • North Loop Center | 1235 North Loop West – 96,587 SF • Northwest Crossing | 13333 Northwest Freeway – 90,527 SF • Granite Tower at 290 | 13430 Northwest Freeway – 77,080 SF • Northwest One Building | 13100 Northwest Freeway – 76,472 SF • Brookhollow Central I | 2800 North Loop Freeway West – 69,201 SF • Park Central Plaza I | 1111 North Loop Freeway West – 64,687 SF • Northwest Crossing II | 7676 Hillmont Street – 62,242 SF • 13111 Northwest Freeway – 60,780 SF • 5252 Hollister Road – 56,316 SF
TOP LEASE TRANSACTIONS
• Rangel Renewables, LLC has signed a 2K SF lease in The Preserve at North Loop.
DEALS IN THE MARKET
• North Loop Center | 1235 North Loop West – a 220K SF class B office building • One Northwind Plaza | 7600 West Tidwell Road – a 141K SF class B office building • Northwest Plaza | 550 Northwest Central Drive – a 75K SF class B office building • 10050 Northwest Freeway – a 43K SF class B office building • 5200 Hollister Road – a 31K SF class B office building
• Northwest Crossing III | 13105 Northwest Freeway – 55,880 SF • One Northwind Plaza | 7600 West Tidwell Road – 53,926 SF • Washington Place North & South | 7155 Old Katy Road – 49,563 SF • Wells Fargo Building | 13201 Northwest Freeway – 45,024 SF • Hollister & Hillmont Building | 5300 Hollister Road – 44,787 SF • Town & Country Central I | 10497 Town & Country Way – 31,312 SF • Nexen Building | 945 Bunker Hill Road – 29,569 SF • 952 Echo Lane – 29,368 SF • Hedwig Place | 8731 Katy Freeway – 26,427 SF
NEW DEVELOPMENTS
• 1737 North Loop West – a 109K SF class B office building • 1224 North Post Oak – a 23K SF class B office building
21
21
SUGAR LAND SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(56,051)
76,289
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
17.7%
17.2%
15.0%
(39,355)
Leasing Act. 73,721 Delivered SF Quoted Rates $30.25
vs. Prev. Qtr
vs. 12 Mths Ago
91,261
79,396
vs. Prev. Qtr
vs. 12 Mths Ago
-
60,937
vs. Prev. Qtr
vs. 12 Mths Ago
$30.62
$28.80
VITAL STATS 110,000
18.0%
90,000 70,000 50,000
16.0%
30,000 10,000
14.0%
(10,000) (30,000) (50,000)
12.0%
(70,000) (90,000)
10.0%
(110,000) (130,000) (150,000)
8.0% 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 2021 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 3Q 2021, the Sugar Land submarket had a vacancy rate of 17.7% which was slightly higher than the 17.2% at the close of 2Q 2021. Absorption remained negative with 39K SF of space given back, but down from the 56K SF of negative absorption in 2Q 2021. Leasing activity decreased with 73K SF of deals completed. There is currently no office space under construction and 40K SF of space delivered in 3Q 2021.
TOP LEASE TRANSACTIONS
• Oliver Street Dermatology Management has signed a 6K SF renewal in Sugar Land Medical Plaza. • DM Clinical Research has signed a 3K SF lease in Imperial Medical Center.
HLC Deal
• Strategic CFO has signed a 1K SF lease in Ashford Ridge Office Condominiums.
LARGE EXISTING VACANCIES
• Sugar Creek on the Lake | 14141 Southwest Freeway – 255,588 SF • Sugar Creek Tower I | 13135 Dairy Ashford Road – 103,632 SF • Sugar Creek Tower II | 13131 Dairy Ashford Road – 97,969 SF • Three Sugar Creek Center Boulevard | 3 Sugar Creek Center Boulevard – 77,597 SF • The Minute Maid Building | 2150 Town Square Place – 72,906 SF • Sugar Creek Place I | 14100 Southwest Freeway – 72,342 SF • ABB Network Management | 1601 Industrial Boulevard – 69,250 SF • Comerica Office Tower | 1 Sugar Creek Center Boulevard – 57,567 SF • Texas Instruments | 13905 University Boulevard – 55,195 SF • Two Sugar Creek Center | 77 Sugar Creek Center Boulevard – 48,893 SF • The Glenn Lakes Professional Building | 3634 Glenn Lakes Lane – 46,568 SF • 13016 University Boulevard – 40K SF • The Texas Drive Building | 2245 Texas Drive – 34,297 SF • 7619 Branford Place | 7619 Branford Place – 32,472 SF • Imperial Medical Center | 1111-1211 Highway 6 – 28,013 SF
DEALS IN THE MARKET
• 1410 Gillingham Lane – a 150K SF class B office building
• 18722 University Boulevard – 27K SF • 12808 West Airport Boulevard – 26,438 SF • The Plaza Building | 2277 Plaza Drive – 24,553 SF • The Atrium Building | 10701 Corporate Drive – 22,373 SF
22
22
CLEAR LAKE SUBMARKET INTELLIGENCE Absorption 56,890
vs. Prev. Qtr 86,872
27,201
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
12.6%
13.4%
14.8%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
47,097
85,151
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
90,795 Delivered SF Quoted Rates $21.96
VITAL STATS
vs. 12 Mths Ago
vs. Prev. Qtr
vs. 12 Mths Ago
$21.91
$21.52
90,000
16.0%
70,000 50,000 30,000 10,000 14.0% (10,000) (30,000) (50,000) (70,000) 12.0%
(90,000) 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
Deliveries
1Q 21
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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 3Q 2021, the Clear Lake submarket had a vacancy rate of 12.6% which was lower than the 13.4% at the close of 2Q 2021. Absorption remained positive with 57K SF of space absorbed, but down from the 87K SF of positive absorption in 2Q 2021. Leasing activity nearly doubled with 91K SF of deals completed. There is currently no office space under construction and no space delivered in 3Q 2021.
LARGE EXISTING VACANCIES
• Clear Lake Central | 600 Gemini Street – 317,370 SF • 13100 Space Center Boulevard – 61,840 SF • Boeing | 3700 Bay Area Boulevard – 49,405 SF • One Corporate Plaza | 2525 Bay Area Boulevard – 48,581 SF • Two Corporate Plaza | 2625 Bay Area Boulevard – 47,521 SF • Atrium Crest | 18333 Egret Bay Boulevard – 38,073 SF • 1322 Space Park Drive | 1322 Space Park Drive – 37,528 SF • 16055 Space Center Boulevard – 29,503 SF • Hercules I | 1300 Hercules Avenue – 29,452 SF • Bay Plaza | 711 West Bay Area Boulevard – 27,453 SF • Galaxy II | 455 East Medical Center Boulevard – 20,751 SF • Camino Center I | 17629 El Camino Real – 20,612 SF
TOP LEASE TRANSACTIONS
• The Sanctuary Foster Care Services has signed a 2K SF lease in 1350 Nasa Road.
• Space Park Office Building | 2200 Space Park Drive – 19,227 SF • Camino Center II | 17625 El Camino Real – 18,920 SF • Marina Plaza | 2450 South Shore Boulevard – 17,478 SF
DEALS IN THE MARKET
• Clear Lake Central | 600 Gemini Street – a 363K SF class B office building
• Clear Lake Medical Office Building | 250 Blossom Street – 15,135 SF
• Gemini Plaza | 1150 Gemini Street – a 158K SF class B office building • Clear Lake Tech Center | 17146 Feathercraft Lane – a 98K 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 • 2045 Professional Building | 2045 Space Park Drive – a 25K SF class B office building • 17300 Saturn Lane – a 24K SF class B office building
23
23
MIDTOWN SUBMARKET INTELLIGENCE Absorption 160,764 Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
34,984
37,330
vs. Prev. Qtr
vs. 12 Mths Ago
15.9%
16.1%
12.6%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
93,301
20,144
vs. Prev. Qtr
vs. 12 Mths Ago
266,000
103,758
vs. Prev. Qtr
vs. 12 Mths Ago
$34.29
$32.13
88,618 Delivered SF 170,000 Quoted Rates $35.01
VITAL STATS 260,000 16.0%
220,000 180,000
14.0%
140,000 100,000 60,000
12.0%
20,000 (20,000) 10.0%
(60,000) (100,000) (140,000)
8.0% 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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 3Q 2021, the Midtown submarket had a vacancy rate of 15.9% which was lower than the 16.1% at the close of 2Q 2021. Absorption increased significantly with 161K SF of space absorbed, up from the 35K SF of positive absorption in 2Q 2021. Leasing activity remained steady with 89K SF of deals completed. There is currently 40K SF of office space under construction and 170K SF of space delivered in 3Q 2021.
LARGE EXISTING VACANCIES
• America Tower | 2929 Allen Parkway – 207,287 SF • The Ion | 4201 Main Street – 189,222 SF • Wortham Tower | 2727 Allen Parkway – 148,089 SF • Central Square | 2100 Travis Street – 107,619 SF • HCC Building | 3100 Main Street – 91,820 SF • 2777 Allen Parkway – 74,324 SF • St. Joseph Professional Building | 2000 Crawford Street – 67,840 SF • 5300 Memorial Drive – 46,960 SF • 55 Waugh Drive – 43,265 SF • 550 Westcott Street – 33,591 SF • River Oaks Bank Building | 2001 Kirby Drive – 30,557 SF
TOP LEASE TRANSACTIONS
• Pickering Energy Partners has signed a 20K SF lease in 100 Waugh Drive.
DEALS IN THE MARKET
• 2303 Smith Street – a 23K SF class B office building • 3605 Katy Freeway – a 23K SF class B office building • 230 Westcott Street – a 22K SF class B office building
NEW DEVELOPMENTS
• 2800-2810 San Jacinto Street – 27,484 SF • Buffalo Heights | 3663 Washington Avenue – 23,642 SF • Montrose Collective | 888 Westheimer Road – 21,678 SF • 2302 Fannin Street – 20,919 SF • Midtown Plaza | 5225 Katy Freeway – 20,192 SF • Campanile South | 4306 Yoakum Boulevard – 17,282 SF • 4200 Montrose Boulevard – 14,681 SF • 5151 Katy Freeway – 14,016 SF • Palm Court Building | 3303 Louisiana Street – 14K SF
• Houston Endowment HQ | 3615 Willia Street – a 40K SF class B office building
24
24
WEST BELT SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
VITAL STATS
vs. 12 Mths Ago 28.0%
(23,841)
6,598
(8,032)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
26.0%
26.0%
25.6%
25.6%
24.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
82,311
37,471
vs. Prev. Qtr
vs. 12 Mths Ago
41,644 Delivered SF Quoted Rates $24.88
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$25.44
$25.61
200,000 150,000 100,000 50,000 0
22.0%
(50,000) (100,000)
20.0%
(150,000) (200,000)
18.0%
(250,000) 16.0%
(300,000) 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 2021 Office Report
HLC OUTLOOK
The West Belt submarket spans a quarter-mile along the Sam Houston Tollway between Clay Road and Highway 249. This submarket houses nearly 6M 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. At the close of 3Q 2021, the West Belt submarket had a vacancy rate of 26.0% which was higher than the 25.6% at the close of 2Q 2021. Absorption turned negative with 24K SF of space given back, down from the 7K SF of positive absorption in 2Q 2021. Leasing activity decreased with 42K SF of deals completed. There is currently no office space under construction and no space delivered in 3Q 2021.
DEALS IN THE MARKET
• 4650 Westway Park Boulevard – a 161K SF class B office building • 4601 Westway Park Boulevard – a 85K 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
LARGE EXISTING VACANCIES
• Westway Plaza | 11330 Clay Road – 210,519 SF • Westway II | 4424 West Sam Houston Parkway North – 206,554 SF • Beltway Lakes Phase III | 5775 North Sam Houston Parkway West – 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 • 10943 North Sam Houston Parkway West – 64K SF • Sam Houston Crossing II | 10344 Sam Houston Park Drive – 62,329 SF • Beltway Lakes Phase II | 5875 North Sam Houston Parkway West – 56,770 SF • 10603 West Sam Houston Parkway North – 56,650 SF • Beltway 8 Corporate Centre Building 1 | 5300 West Sam Houston Parkway North – 50K SF • Concourse at Westway | 4700 West Sam Houston Parkway North – 42,137 SF • 9949 West Sam Houston Parkway North – 36,099 SF • Heron Lakes | 10740 North Gessner Drive – 35,571 SF
• 10943 North Sam Houston Parkway West – a 64K SF class B office building
• York Centre | 10235 West Little York Road – 34,933 SF
• 8400 North Sam Houston Parkway West – a 40K SF class B office building
• 10930 West Sam Houston Parkway North – 31,368 SF
• 6221 West Sam Houston Parkway North – a 25K SF class B office building
• Tanner Office Building | 11302 Tanner Road – 33K SF • 7840 North Sam Houston Parkway West – 29,581 SF
• 16060 Dillard Drive – a 24K SF class B office building
25
25
EAST HOUSTON/PASADENA SUBMARKET INTELLIGENCE Absorption 32,102
vs. Prev. Qtr 21,391
(57,166)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.3%
14.9%
15.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
31,593
38,648
vs. Prev. Qtr
vs. 12 Mths Ago
32,396
30,500
40,920 Delivered SF Quoted Rates $22.40
VITAL STATS
vs. 12 Mths Ago
vs. Prev. Qtr
vs. 12 Mths Ago
$22.72
$21.95
16.0% 120,000 100,000 14.0%
80,000 60,000 40,000
12.0%
20,000 0 10.0%
(20,000) (40,000)
8.0%
(60,000) 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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.
LARGE EXISTING VACANCIES • 12301 Kurland Drive – 59,860 SF • 1001 Shaw Avenue – 30,938 SF • Gulf Freeway Plaza | 9333 Bryant Street – 29,750 SF
At the close of 3Q 2021, the East Houston/Pasadena submarket had a vacancy rate of 14.3% which was lower than the 14.9% at the close of 2Q 2021. Absorption remained positive with 32K SF of space absorbed, up from the 21K SF of positive absorption in 2Q 2021. Leasing activity increased with 41K SF of deals completed. There is currently 410K SF of office space under construction and 57K SF of space delivered in 3Q 2021.
• Vibe Hobby | 8866 Gulf Freeway – 29,035 SF
TOP LEASE TRANSACTIONS
• Featherwood | 12727 Featherwood Drive – 25,312 SF
• 2339 Commerce Street – 25,549 SF • 2720 Leeland Street – 25,500 SF • Medical Professional Building 1 | 908 East Southmore Boulevard – 25,448 SF • Bank of America East Freeway | 12605 East Freeway – 25,426 SF
• Teal has signed a 13K SF lease in 100 Jensen Drive.
• BPM Airport | 8031 Airport Boulevard – 25,293 SF
• Texas Braces has signed a 5K SF in 5616 Lawndale Street.
• Atrium 10 Tower | 11811 East Freeway – 24,099 SF • The 1200 Building | 1200 Highway 146 South – 22,915 SF
DEALS IN THE MARKET
• 5615 Lawndale Street – a 95K SF class B office building
• Bayshore Medical Building | 3333 Bayshore Boulevard – 20,688 SF
• Bank of America East Freeway | 12605 East Freeway – a 86K SF class B office building
• Land Park | 11821 East I-10 Freeway – 20,177 SF
• 3737-3743 Red Bluff Road – a 85K SF class B office building
• 11550 Fuqua Street – 18,265 SF
• 1001 Shaw Avenue – a 80K SF class B office building
• 12600 North Featherwood Drive – 17,240 SF
• 2807 Little York Road – a 35K SF class B office building
• 2327 Commerce Street – 17,033 SF
• Vibe Hobby | 8876 Gulf Freeway – 20,110 SF
• Gulf Freeway Building | 9920 Gulf Freeway – 16,928 SF
NEW DEVELOPMENTS
• 100 Jensen Drive – a 353K SF mixed-use office building
• Fuqua Professional Center | 12505-12563 Gulf Freeway – 16,877 SF
• 2351 Oleander Drive – a 32K SF class B office building • 5025 Preston Avenue – a 25K SF class B office building
26
26
WEST SUBMARKETFARINTELLIGENCE Absorption 36,421
vs. Prev. Qtr 41,560
52,718
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
16.7%
17.5%
16.9%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
63,853
145,651
vs. Prev. Qtr
vs. 12 Mths Ago
40,106
152,645
vs. Prev. Qtr
vs. 12 Mths Ago
$31.14
$29.02
10,451 Delivered SF Quoted Rates $30.91
VITAL STATS
vs. 12 Mths Ago 20.0%
17 5,000
18.0%
125,000
16.0%
75,000
14.0%
25,000
12.0%
(25,000)
10.0%
(75,000) 3Q 18
4Q 18
1Q 19
Absorption
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
Deliveries
1Q 21
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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 3Q 2021, the Far West submarket had a vacancy rate of 16.7% which was lower than the 17.5% at the close of 2Q 2021. Absorption remained positive with 36K SF of space absorbed, but down from the 42K SF of positive absorption in 2Q 2021. Leasing activity decreased with 10K SF of deals completed. There is currently 25K SF of office space under construction and 40K SF of space delivered in 3Q 2021.
TOP LEASE TRANSACTIONS
• Connect Realty has signed a 2K SF lease in the Falcon Ridge Office Condominiums.
HLC Deal
LARGE EXISTING VACANCIES
• Mason Creek Office Center II | 21700 Merchants Way – 127,955 SF • Katy Ranch Phase II | 24285 Katy Freeway – 104,014 SF • The Offices at Greenhouse | 19219 Katy Freeway – 77,610 SF • Katy Medical Office Building 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 – 50,788 SF • Katy Ranch Phase I | 24275 Katy Freeway – 42,763 SF • Horizon Medical Plaza II | 19002 Park Row – 32K SF • 2002 West Grand Parkway North – 27,683 SF • Katy Medical Office Building III | 19770 Kingsland Boulevard – 22,848 SF • Katy Medical Plaza I | 23510 Kingsland Boulevard – 21,410 SF • Medical Plaza II | 23960 Katy Freeway – 18,696 SF
DEALS IN THE MARKET
• Westgate Atrium | 1550 Fox Lake Drive – a 113K SF class B office building • 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 6,553
vs. Prev. Qtr
VITAL STATS
vs. 12 Mths Ago 16.0%
4,174
256
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
11.0%
11.2%
13.1%
12.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
10.0%
19,867
9,151
vs. Prev. Qtr
vs. 12 Mths Ago
31,540 Delivered SF
140,000
90,000
40,000
(10,000) 8.0%
(60,000)
6.0%
Quoted Rates $25.29
-
(110,000)
39,106
vs. Prev. Qtr
vs. 12 Mths Ago
$25.24
$24.66
4.0%
(160,000) 3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
Absorption
4Q 19
1Q 20
2Q 20
Deliveries
3Q 20
4Q 20
1Q 21
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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 3Q 2021, the Kingwood submarket had a vacancy rate of 11.0% which was slightly lower than the 11.2% at the close of 2Q 2021. Absorption remained positive with 7K SF of space absorbed, up from the 4K SF of positive absorption in 2Q 2021. Leasing activity increased with 32K SF of deals completed. There is currently no office space under construction and 270K SF of space delivered in 3Q 2021.
DEALS IN THE MARKET • Chase Bank Building | 19747 Highway 59 – a 47K SF class B office building
LARGE EXISTING VACANCIES • Northeast Medical Tower II | 18980 North Memorial Drive – 65,269 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 – 17,053 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 – 10,905 SF
• Chase Bank Building | 19747 Highway 59 – 7,956 SF
28
28
SUBURBAN OUTLIERS SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
8,820
(5,348)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.3%
14.4%
12.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
103,870
94,514
vs. Prev. Qtr
vs. 12 Mths Ago
118,456
31,672
11,884
69,285 Delivered SF Quoted Rates $27.12
vs. Prev. Qtr
vs. 12 Mths Ago
$27.66
$26.76
VITAL STATS 16.0%
200,000
150,000 14.0% 100,000
12.0%
50,000
0 10.0% (50,000)
8.0%
(100,000) 3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
4Q 19
1Q 20
Absorption
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
Vacancy
Source: CoStar 3Q 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 over 11.6M SF of class A and B office buildings. At the close of 3Q 2021, the Suburban Outliers submarket had a vacancy rate of 14.3% which was slightly lower than the 14.4% at the close of 2Q 2021. Absorption remained positive with 12K SF of space absorbed, up from the 9K SF of positive absorption in 2Q 2021. Leasing activity decreased slightly with 69K SF of deals completed. There is currently 233K SF of office space under construction and 158K SF of space delivered in 3Q 2021.
NEW DEVELOPMENTS • Medical Center of Tomball | 155 School Street – a 64K SF class A office building • 17122 Telge Road – a 59K SF class B office building • Towne Lake Office Condos | 10242 Greenhouse Road – a 50K SF project of class B office condos • 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 DEALS IN THE MARKET
• 4005 Technology Drive – 257,399 SF
• Westland Bunker | 550 Club Drive – a 240K SF class B office building
• Primary Medical Tower II | 2800 Garth Road – 102,084 SF
• Magnolia Landmark Building | 18230 FM 1488 Road – a 65K SF class B office building
• Westland Bunker | 550 Club Drive – 56,379 SF
• Umar Syed Medical Tower | 2802 Garth Road – a 62K SF class B office building
• Emancipation Center | 3131 Emancipation Avenue – 45,206 SF
• 301 South First Street – a 59K SF class B office building • The Offices at Greatwood | 6514-6548 Greatwood Parkway – a 43K SF class B office building
• Cypress Medical Office Building | 27700 Highway 290 – 47,642 SF • 1135 Grand Central Boulevard – 45K SF • 1517 Thompson Road – 42,551 SF • 2765-2785 Gulf Freeway South – 41,625 SF
• 2401 Termini Street – a 37K SF class B office building
• 4001 Technology Drive – 40,681 SF
• Bank of America | 4000 Garth Road – a 33K SF class B office building
• Oakbend Professional Building | 1601 Main Street – 37,915 SF
• Sealy Business Continuity Center | 3063 Outlet Center Drive – a 32K SF class B office building
• Sealy Business Continuity Center | 3063 Outlet Center Drive – 31,629 SF
• NOV | 10586 Highway 75 North – a 30K SF class B office building
• 750 Fish Creek – 31,117 SF
• 12280 Broadway Street – a 25K SF class A office building
• National Oilwell Varco | 10586 Highway 75 North – 30K SF
• Hughes Court Professional Building | 3828 Hughes Court – a 23K SF class B office building
• 22001 Southwest Freeway | 22001 Southwest Freeway – 29,359 SF
• Baker Road Professional Building | 1010 Baker Road – a 22K SF class B office building
• Magnolia Landmark Building | 18230 FM 1488 Road – 25,936 SF
• 455 School Street – a 22K SF class B office building
• 4015 I-45 North – 34,952 SF
• 7830 West Grand Parkway South – 27,612 SF • 10970 Shadow Creek Parkway – 25,900 SF
• Northpoint Crossing Office Building | 24445 State Highway 249 – a 21K SF class B office building
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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