Market Brief...
Houston
OFFICE
4Q2021 Property Pictured Above: Seven-Seventy Post Oak | 770 South Post Oak Lane | Houston, Texas 77056
HOUSTON OFFICE MARKET BRIEF 4Q 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. B. C. D. E. F. G. H. I. J. K. L. M. N. O. P. Q. R. S. T.
CBD West Loop Katy Freeway West The Woodlands Westchase Greenspoint/IAH FM 1960 Corridor Greenway Plaza Medical Center Southwest Katy Freeway East Northwest Sugar Land Clear Lake Midtown West Belt East Houston/Pasadena Far West Kingwood Suburban Outliers
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HOUSTON HLC SUBMARKET COVERAGE
OTHER SUBMARKETS 1 CBD | 51,240,359 SF 2 WEST LOOP | 36,122,006 SF 3 WESTCHASE | 18,150,521 SF 4 GREENWAY PLAZA | 11,341,433 SF 5 MEDICAL CENTER | 11,699,607 SF 6 MIDTOWN | 7,535,673 SF 7 SUBURBAN OUTLIERS | 11,740,971 SF
THE WOODLANDS 20,886,139 SF
TOMBALL
KINGWOOD 2,669,729 SF SPRING
FM 1960 CORRIDOR 14,280,414 SF
HUMBLE
GEORGE BUSH INTERCONTINENTAL AIRPORT
CYPRESS
GREENSPOINT/IAH 12,732,980 SF
LAKE HOUSTON
WEST BELT 6,020,693 SF NORTHWEST 8,669,702 SF
KATY FREEWAY WEST 27,096,738 SF
KATY
KATY FREEWAY EAST 10,268,926 SF
FAR WEST 4,305,565 SF
EAST HOUSTON/PASADENA 5,870,549 SF
HOUSTON 6
1
BAY TOWN
2 3
SOUTHWEST 9,561,892 SF
GALLERIA
SHIP CHANNEL
4 5
MEDICAL CENTER
PASADENA LA PORTE HOBBY AIRPORT
SUGAR LAND
SUGAR LAND 7,934,878 SF
ELLINGTON AIRPORT
RICHMOND
TRINITY BAY
MISSOURI CITY PEARLAND
CLEAR LAKE 7,005,358 SF
LEAGUE CITY
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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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ONE WESTCHASE CENTER
NEW LISTING
One Westchase Center is a 466,025 SF Class A office building located in Westchase
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NEW LISTING THE MAGNOLIA OFFICE PARK
Magnolia Office Park is a 13-building office condo development located in Magnolia
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HLC HOUSTON OFFICE OVERALL MARKET
HOUSTON OVERALL At the close of 4Q 2021, the Houston office market as a whole had a vacancy rate of 21.7% which was higher than the vacancy rate of 21.4% in 3Q 2021. Absorption remained positive with 640K SF of space absorbed, up from the 192K SF of positive absorption in 3Q 2021. Leasing activity decreased with 2.6M SF of deals completed, down from the 3.4M SF of deals completed in 3Q 2021. There is currently 3.6M SF of office space under construction and 2M SF of space delivered in 4Q 2021.
CONSTRUCTION - OVERALL HOUSTON
VACANCY - OVERALL HOUSTON 25.0%
6,000,000
21.7%
20.4%
17.7%
5,000,000
20.0%
4,000,000
16.5%
15.0% 3,000,000
10.0% 2,000,000
5.0%
1,000,000
1.3%
1.2%
0.0% 4Q 18
1Q 19
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
Direct
3Q 20
4Q 20
1Q 21
2Q 21
Sublet
3Q 21
4Q 21
0 4Q 18
1Q 19
2Q 19
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
Delivered Inventory
Total
1Q 21
2Q 21
3Q 21
4Q 21
Under Construction
OVERVIEW - OVERALL HOUSTON
ABSORPTION - OVERALL HOUSTON 7,000,000
4Q 20
22.0%
2,500,000
6,000,000 5,000,000
2,000,000 21.0% 1,500,000
4,000,000
1,000,000
20.0% 3,000,000
500,000 2,000,000
19.0%
0
1,000,000 0
(500,000) 18.0% (1,000,000)
(1,000,000) (2,000,000) 4Q 18
1Q 19
2Q 19
3Q 19
4Q 19
Total Net
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Leasing Activity
3Q 21
4Q 21
17 .0%
(1,500,000) 4Q 18
1Q 19
2Q 19
3Q 19
Absorption
4Q 19
1Q 20
2Q 20
3Q 20
Deliveries
4Q 20
1Q 21
2Q 21
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 2021 Office Report
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HLC HOUSTON OFFICE OVERALL MARKET
Market
Existing Inventory
Vacancy
#Bldgs.
Total RBA
Direct SF
Total SF
Vac. %
YTD Net Absorption
YTD Deliveries
Under Const. SF
Quoted Rates
CBD
91
51,240,359
11,748,787
12,717,571
24.8%
(104,923)
1,248,269
386,323
$37.53
West Loop
197
36,122,006
8,591,153
9,065,464
25.1%
(1,085,448)
70,000
77,189
$32.92
Katy Freeway West
164
27,096,738
6,142,038
6,703,335
24.7%
(386,463)
0
0
$25.70
The Woodlands
173
20,886,139
3,036,030
3,255,892
15.6%
(301,592)
26,000
615,062
$30.84
Westchase
104
18,150,521
4,721,402
5,050,655
27.8%
(432,218)
0
0
$27.39
Greenspoint/IAH
97
12,732,980
5,588,788
5,663,787
44.5%
(122,419)
0
0
$18.10
FM 1960 Corridor
163
14,280,414
2,513,360
2,773,495
19.4%
219,539
253,304
0
$20.28
Greenway Plaza
56
11,341,433
2,318,382
2,599,152
22.9%
(398,671)
0
0
$34.59
Medical Center
63
11,699,607
1,094,000
1,101,148
9.4%
(112,514)
153,775
1,447,052
$30.80
Southwest
89
9,561,892
1,902,593
1,919,147
20.1%
150,297
0
0
$17.97
Katy Freeway East
73
10,268,926
1,125,722
1,272,519
12.4%
829,941
800,000
186,000
$29.06
Northwest
95
8,669,702
1,826,338
1,839,769
21.2%
(151,879)
23,200
109,500
$19.61
Sugar Land
99
7,934,878
1,373,574
1,467,846
18.5%
(226,510)
0
0
$29.94
Clear Lake
98
7,005,358
525,511
544,095
7.8%
169,404
0
0
$22.34
Midtown
69
7,535,673
1,078,073
1,085,968
14.4%
275,205
471,400
40,000
$35.36
West Belt
69
6,020,693
1,349,345
1,464,870
24.3%
2,568
0
0
$24.69
East Houston/Pasadena
104
5,870,549
783,451
800,434
13.6%
111,451
56,778
395,977
$20.45
Far West
59
4,305,565
590,606
708,369
16.5%
18,337
40,106
20,758
$30.15
Kingwood
45
2,669,729
273,283
273,283
10.2%
295,674
270,000
0
$24.77
Suburban Outliers
195
11,740,971
1,585,099
1,601,799
13.6%
102,400
158,106
374,045
$27.01
2,103
285,134,133
58,167,535
61,908,598
21.7%
(1,147,821)
3,570,938
3,651,906
$29.46
Totals
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HOUSTON CENTRAL BUSINESS DISTRICT SUBMARKET INTELLIGENCE Absorption 171,019
vs. Prev. Qtr 185,517
(345,366)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
24.8%
23.3%
22.7%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
322,898 Delivered SF 1,248,269 Quoted Rates $39.53
VITAL STATS
vs. 12 Mths Ago
588,656
573,138
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$39.49
$42.43
1,400,000
26.0%
1,200,000 24.0%
1,000,000 800,000
22.0% 600,000 400,000 20.0% 200,000 0
18.0%
(200,000) 16.0%
(400,000) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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 4Q 2021, the CBD submarket had a vacancy rate of 24.8% which was higher than the 23.3% at the close of 3Q 2021. Absorption remained positive with 171K SF of space absorbed, slightly lower than the 185K SF of positive absorption in 3Q 2021. Leasing activity remained steady with 322K SF of deals completed. There is currently 386K SF of office space under construction with 1.2M SF delivered in 4Q 2021.
TOP LEASE TRANSACTIONS
• Beck Redden LP has signed a 47K SF renewal in 1221 McKinney Street.
NEW DEVELOPMENTS • 1550 on the Green | 1550 Lamar Street – a 386K SF class A office building
LARGE EXISTING VACANCIES
• 800 Bell | 800 Bell Street – 1,314,350 SF • 1001 Fannin Street – 784,598 SF • Texas Tower | 845 Texas Avenue – 683,088 SF • Wells Fargo Plaza | 1000 Louisiana Street – 662,374 SF • Fulbright Tower | 1301 McKinney Street – 579,915 SF • 4 Houston Center | 1221 Lamar Street – 561,432 SF • 1600 Smith Street – 501,300 SF • One City Centre | 1021 Main Street – 486,118 SF • Two Allen Center | 1200 Smith Street – 459,353 SF • 919 Milam | 919 Milam Street – 447,268 SF • Heritage Plaza | 1111 Bagby Street – 416,083 SF • TC Energy Center | 700 Louisiana Street – 415,152 SF • 1801 Smith Street – 407,894 SF
• JERA Energy Americas has signed a 29K SF lease in 1000 Main.
• 2 Houston Center | 909 Fannin Street – 407,400 SF
• Liskow & Lewis has signed a 27K SF renewal in 1001 Fannin.
• North Tower | 700 Milam Street – 381,163 SF
• Calvetti Ferguson has signed a 18K SF lease in TC Energy Center.
• Three Allen Center | 333 Clay Street – 366,779 SF
• Paradox Resources has signed a 14K SF renewal in One Allen Center.
• 1100 Louisiana | 1100 Louisiana Street – 327,185 SF
• Restoring Justice has signed a 3K SF lease in 100 Jackson Street.
DEALS IN THE MARKET
• Theater District | 720 Rusk Street – a 25K SF class B office building • The Tamborello Building | 1901 Milam Street – a 24K SF class B office building • 421 Fannin Street – a 20K SF class B office building 10
• One Allen Center | 500 Dallas Street – 385,800 SF
• JP Morgan Chase Tower | 600 Travis Street – 362,019 SF
WEST LOOP SUBMARKET INTELLIGENCE Absorption (631,274)
vs. Prev. Qtr (289,311)
(117,756)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
25.1%
23.3%
21.9%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
589,992
601,095
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
491,456 Delivered SF Quoted Rates $33.53
VITAL STATS
vs. 12 Mths Ago
vs. Prev. Qtr
vs. 12 Mths Ago
$33.30
$34.08
26.0%
400,000
200,000
24.0%
0 22.0% (200,000) 20.0% (400,000)
18.0%
(600,000)
16.0%
(800,000) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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 4Q 2021, the West Loop submarket had a vacancy rate of 25.1% which was higher than the 23.3% at the close of 3Q 2021. Absorption remained negative with 631K SF of space given back, up from the 289K SF of negative absorption in 3Q 2021. Leasing activity dropped off slightly with 491K SF of deals completed. There is currently 77K SF of office space under construction with 70K SF 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 – 872,239 SF • Williams Tower | 2800 Post Oak Boulevard – 416,435 SF • San Felipe Plaza | 5847 San Felipe Street – 374,831 SF • Sage Plaza | 5151 San Felipe Street – 277,432 SF • TwentyFour25 | 2425 West Loop South – 256,849 SF • Two Post Oak Central | 1980 Post Oak Boulevard – 256,261 SF • BHP Petroleum | 1500 Post Oak Boulevard – 250,522 SF
TOP LEASE TRANSACTIONS
• Galleria Tower I | 2700 Post Oak Boulevard – 241,586 SF
• Kane, Russell, Coleman & Logan has signed a 21K SF lease in Sage Plaza.
• Three Riverway | 3 Riverway – 241,036 SF
• Waste Corporation of America has signed a 20K SF sublease in Four Oaks Place.
• Five Post Oak Park | 4400 Post Oak Parkway – 225,007 SF
• 2000 West Loop South | 2000 West Loop S – 236,808 SF
• Idera has signed a 16K SF lease in 5599 San Felipe.
• Schlumberger Building | 5599 San Felipe Street – 222,762 SF
• Schwartz, Page & Harding, L.L.P has signed a 13K SF lease in Wells Fargo Bank Tower.
• Galleria Tower II | 5051 Westheimer Road – 205,236 SF
• Vantage Hospice has signed a 8K SF lease in 5718 Westheimer Road. • Calderwood Financial has signed a 3K SF lease in 510 Bering.
HLC Deal
• Thirty Forty Post Oak | 3040 Post Oak Boulevard – 204,896 SF • 5718 Westheimer | 5718 Westheimer Road – 187,042 SF • One Riverway | 1 Riverway – 184,660 SF
• RDJ Advisors, LLC has signed a 1K SF lease in 770 South Post Oak Lane.
HLC Deal
DEALS IN THE MARKET
• 9009 West Loop South – a 472K SF class B office building • 50 Briar Hollow Lane – a two (2) building office complex totaling 202K SF • 3535 Sage Road – an 80K SF class B office building • Bellaire Medical Professional Building | 6550 Mapleridge Street – a 65K SF class B medical office building • 5610-5613 Southwest Freeway – a 23K SF class B medical office building • 6105 Beverly Hill Street – a 20K SF class B medical office building
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KATY FREEWAY WEST SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(150,345)
(242,028)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
24.7%
24.9%
23.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
31,235
220,226 Delivered SF Quoted Rates $26.87
293,958
314,375
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$27.45
$28.00
VITAL STATS
30.0%
500,000
300,000 25.0% 100,000
(100,000)
20.0%
(300,000)
(500,000)
15.0% 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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 4Q 2021, the Katy Freeway West submarket had a vacancy rate of 24.7% which was slightly lower than the 24.9% at the close of 3Q 2021. Absorption shifted positive with 31K SF of space absorbed, up from the 150K SF of negative absorption in 3Q 2021. Leasing activity dropped with 220K SF of deals completed. There is currently no office space under construction and no space delivered in 4Q 2021.
TOP LEASE TRANSACTIONS
• Clough has signed a 23K SF lease in Energy Tower I. • Expert Pain has signed a 5K SF renewal in The Westchester.
HLC Deal
• Patrick Broadcasting has signed a 3K SF renewal in The Westchester.
HLC Deal
• Kemira Chemicals has signed a 3K SF lease in Energy Center II. • Girls on the Run has signed a 1K SF lease in Ashford Place IV.
DEALS IN THE MARKET
• One Park Ten | 16225 Park Ten Place – a 163K SF class B office building • 15721 Park Row – a 154K SF class A office building • Eleven Five Eleven Building | 11511 Katy Freeway – a 78K 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 – 630,610 SF • Two WestLake | 580 Westlake Park Boulevard – 455,142 SF • Three WestLake Park | 550 Westlake Park Boulevard – 406,484 SF • Eldridge Oaks Phase 1 | 1080 Eldridge Parkway – 363,086 SF • Energy Tower III | 11740 Katy Freeway – 350,813 SF • Three Eldridge | 737 N Eldridge Parkway – 308,186 SF • 1200 Enclave Parkway – 286,917 SF • 8 West Centre | 3505 W Sam Houston Parkway N – 273,810 SF • West Memorial Place II | 15377 Memorial Drive – 265,761 SF • 1330 Enclave Parkway – 262,331 SF • Ten West Corporate Center II | 17404 Katy Freeway – 252,931 SF • Energy Center II | 575 N Dairy Ashford – 227,943 SF • Republic Square | 13501 Katy Freeway – 225,617 SF • Two Eldridge | 757 N Eldridge Parkway – 191,146 SF • Enclave on the Lake | 1255 Enclave Parkway – 171,091 SF • Energy Center I | 585 N Dairy Ashford Road – 160,907 SF
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THE WOODLANDS SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
59,154
115,907
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
15.6%
15.9%
14.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
222,305
177,081
95,661
190,423 Delivered SF 26,000 Quoted Rates $33.47
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$33.34
$33.74
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) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 2021 Office Report
HLC OUTLOOK
The Woodlands submarket continues to be one of the most active Houston office submarkets, growing so much that it now competes with other premier submarkets such as the CBD, West Loop, Greenway Plaza, and the two Katy Freeway submarkets. The Woodlands 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 4Q 2021, The Woodlands submarket had a vacancy rate of 15.6% which was slightly lower than the 15.9% at the close of 3Q 2021. Absorption remained positive with 95K SF of space absorbed, up from the 59K SF of positive absorption in 3Q 2021. Leasing activity decreased with only 190K SF of deals completed. There is currently 615K SF of office space under construction with 26K SF delivered in 4Q 2021.
NEW DEVELOPMENTS
• CityPlace – a 440K SF class A two (2) building office complex • Vision Park Build-To-Suit | 134 Vision Park – a 57K SF class A medical office building • 18354 I-45 South – a 50K SF class A medical office building • Creekside Park Medical Plaza | 26424 Strake – a 32K SF class A medical office building
LARGE EXISTING VACANCIES
• Hewitt Lake Woodlands Building 3 | 9500 Lakeside Boulevard – 360K SF • The Woodlands Towers at The Waterway | 9950 Woodloch Forest Drive – 346,085 SF • 1735 Hughes Landing Boulevard – 290,814 SF
TOP LEASE TRANSACTIONS
• Lancium Technologies Corporation has signed a 26K SF lease in The Woodlands Towers at The Waterway. • NYDIG has signed a 26K SF lease in The Woodlands Towers at The Waterway. • Tachus has signed a 24K SF sublease in 3831 Technology Forest Boulevard. • Simplicity Financial Marketing has signed a 8K SF lease in 10200 Grogans Mill Road.
• South Tower | 10000 Energy Drive – 288,609 SF • 8800 Technology Forest Place – 247,053 SF • Hughes Landing | 1725 Hughes Landing Boulevard – 194,779 SF • 24955 Interstate 45 N – 148,104 SF • 9709 Lakeside Boulevard – 137,938 SF • 2001 Timberloch Place – 122,610 SF • CityPlace 1 | 1700 City Plaza Drive – 108,920 SF
• Banorte Securities International has signed a 3K SF lease in The Woodlands Towers at The Waterway. • Diamond Consulting has signed a 1K SF lease in the Grogans Ridge Office Condos.
HLC Deal
DEALS IN THE MARKET
• 1776 Woodstead Court – a 37K SF class B office building • The Gateway Building | 26865 I-45 – a 24K SF class B office building
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WESTCHASE SUBMARKET INTELLIGENCE Absorption (51,035)
vs. Prev. Qtr (90,976)
(90,793)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
27.8%
27.5%
25.4%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
375,213
306,190
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
90,877 Delivered SF Quoted Rates $27.51
VITAL STATS
vs. 12 Mths Ago
vs. Prev. Qtr
vs. 12 Mths Ago
$27.38
$28.28
28.0%
300,000 240,000 180,000
26.0% 120,000 60,000 0
24.0%
(60,000) (120,000) 22.0% (180,000) (240,000) 20.0%
(300,000) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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 4Q 2021, the Westchase submarket had a vacancy rate of 27.8% which was slightly higher than the 27.5% at the close of 3Q 2021. Absorption remained negative with 51K SF of space given back, less than the 91K SF of negative absorption in 3Q 2021. Leasing activity decreased with 90K SF of deals completed. There is currently no office space under construction and no space delivered in 4Q 2021.
TOP LEASE TRANSACTIONS
• Boxley Group has signed a 3K SF lease in One BriarLake Plaza. • Geosyntec Consultants has signed a 3K SF expansion in One Westchase Center.
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 – 187,452 SF • One BriarLake Plaza | 2000 W Sam Houston Parkway S – 187,163 SF • 2500 CityWest | 2500 CityWest Boulevard – 161,368 SF • One Westchase Center | 10777 Westheimer Road – 159,662 SF • Westchase Point | 1250 W Sam Houston Parkway – 147,403 SF • West8 Tower | 10205 Westheimer Road – 143,539 SF • Royal Oaks Centre | 11490 Westheimer Road – 134,943 SF • Towers at Westchase I | 10370 Richmond Avenue – 128,989 SF • Two BriarLake Plaza | 2050 W Sam Houston Parkway S – 127,315 SF • Millennium Tower II | 10353 Richmond Avenue – 125,840 SF • 3250 Briarpark Drive – 125,544 SF • 10333 Richmond | 10333 Richmond Avenue – 123,368 SF • Briarpark Green | 3151 Briarpark Drive – 116,140 SF
DEALS IN THE MARKET
• The Mosing Building | 10260 Westheimer Road – a 131K SF class B office building • 3990 Rogerdale Road – a 125K SF class B office building • 3535 Briarpark Drive – a 66K SF class B office building • 2610 W Sam Houston Parkway S – a 26K SF class B office building
14
14
GREENSPOINT/IAH SUBMARKET INTELLIGENCE Absorption (143,661)
vs. Prev. Qtr 76,699
(21,247)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
44.5%
43.4%
43.5%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
86,554
90,147
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$18.03
$18.67
144,877 Delivered SF Quoted Rates $18.06
VITAL STATS
vs. 12 Mths Ago 46.0%
200,000
100,000 45.0%
0 44.0% (100,000)
43.0% (200,000)
42.0%
(300,000) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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 at 44.5%. Rental rates have fallen significantly since 2015 and investors have been working persistently to rebrand the submarket. At the close of 4Q 2021, the Greenspoint submarket had a vacancy rate of 44.5% which was slightly higher than the 43.4% at the close of 3Q 2021. Absorption shifted negative with 144K SF of space given back, down from the 76K SF of positive absorption in 3Q 2021. Leasing activity increased with 144K SF of deals completed. There is currently no office space under construction and no space delivered in 4Q 2021.
TOP LEASE TRANSACTIONS
• Horizon Excavating, Inc has signed a 2K SF lease in Greenbriar Place.
HLC Deal
• EM Houston | 13401 I-45 North – a 143K SF class A office building • Heritage Park | 390 Benmar Drive – a 104K SF class B office building • Greens Crossing I | 810 Gears Road – a 79K SF class B office building • Greens Crossing II | 820 Gears Road – a 79K SF class B office building • 509 N Sam Houston Parkway E – a 79K SF class B office building • 397 N Sam Houston Parkway – a 68K 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
• Revo Testing Technologies has signed a 2K SF renewal in Greenbriar Place.
• CityNorth 6 | 12450 Greenspoint Drive – 343,495 SF
• Clay Consulting, LLC has signed a 2K SF expansion in Greenbriar Place.
• 363 North Belt | 363 N Sam Houston Parkway E – 220,603 SF
HLC Deal
HLC Deal
• CityNorth 1 | 233 Benmar Drive – 253,562 SF
• Innovative Minds has signed a 1K SF lease in Greenbriar Place.
• 222 Benmar | 222 Benmar Drive – 198,256 SF
• Specialized Power Logistics has signed a 1K SF lease in Bridgewood I.
•
HLC Deal
HLC Deal
DEALS IN THE MARKET
• 363 North Belt | 363 N Sam Houston Parkway E – a 386K SF class A office building
• Glenborough Tower | 100 Glenborough Drive – 172,454 SF 396 W Greens Road – 164,411 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
• CityNorth 1 | 233 Benmar Drive – a 258K SF class A office building
• 16666 Northchase Drive – 147,135 SF
• Northpoint Central | 2 Northpoint Drive – a 180K SF class A office building
• 333 Northbelt | 333 N Sam Houston Parkway E – 137,939 SF
• North Houston Tech Tower | 12707 North Freeway – a 157K SF class B office building • The Meadows at Interwood | 14950 Heathrow Forest Parkway - a 146K SF class B office building
15
• EM Houston | 13401 I-45 N – 143,410 SF • Northbelt Office Center V | 500 N Sam Houston Parkway W – 135,030 SF • Bridgewood II | 652 N Sam Houston Parkway E – 134,646 SF • 2350 North Belt Tower | 2350 N Sam Houston Parkway E – 130,114 SF
15
FM 1960INTELLIGENCE CORRIDOR SUBMARKET Absorption 107,484
vs. Prev. Qtr 92,221
(4,470)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
19.4%
19.5%
19.5%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
217,372
147,081
vs. Prev. Qtr
vs. 12 Mths Ago
48,000
20,000
178,272 Delivered SF 127,640 Quoted Rates $20.39
VITAL STATS
vs. 12 Mths Ago
vs. Prev. Qtr
vs. 12 Mths Ago
$20.18
$20.54
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) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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 4Q 2021, the FM 1960 Corridor submarket had a vacancy rate of 19.4% which was nearly identical to the vacancy rate of 19.5% at the close of 3Q 2021. Absorption remained positive with 107K SF of space absorbed, up from the 92K SF of positive absorption in 3Q 2021. Leasing activity decreased with 178K SF of deals completed. There is currently no office space under construction, but there was 127K SF of space that delivered in 4Q 2021.
TOP LEASE TRANSACTIONS • Bayou City Dermatology has signed a 5K SF renewal in 290 Medical Office Plaza. • SMG Industries has signed a 4K SF lease in Centre at Cypress Creek. • Redbud E&P has signed a 4K SF renewal in Cypresswood Crossing.
HLC Deal
• Drayco Properties has signed a 2K SF lease in Cypresswood Crossing.
HLC Deal
HLC Deal
• NESC has signed a 2K SF lease in Cypresswood Crossing. • Blushed Beauty, LLC has signed a 2K SF lease in Cypresswood Crossing.
HLC Deal
• Holcomb, Inc has signed a 1K SF lease in Cypresswood Crossing.
HLC Deal
• 6410 N Sam Houston Parkway – a 44K 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 • 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 • Red Oak Professional | 17222 Red Oak Drive – a 21K SF class B office building • Butte Creek Professional | 17154 Butte Creek Road – a 20K SF class B office building • 6810 West FM-1960 – a 20K SF class B office building • Copperfield Professional | 8711 Highway 6 N – a 20K 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 – Building 9 & 10 | 11450 Compaq Center W Drive – 208,841 SF • Creekridge II | 140 Cypress Station Drive – 112,525 SF
DEALS IN THE MARKET • 11445 Compaq Center – a 2M SF class A office building • Creekridge II | 140 Cypress Station Drive – a 163K SF class B office building • 8300 Cypress Creek Parkway – a 70K SF class B office building • Champions Forest Office Building | 13231 Champion Forest Drive – a 64K SF class B office building 16
16
GREENWAY PLAZA SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
VITAL STATS
vs. 12 Mths Ago 26.0%
(18,189)
(66,421)
(250,132)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
22.9%
22.8%
19.4%
20.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
18.0%
95,663
130,836
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$34.88
$35.72
69,742 Delivered SF Quoted Rates $34.93
300,000 250,000
24.0%
200,000 22.0%
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) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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 complex and other recent developments in the area have helped breathe life back into this submarket.
DEALS IN THE MARKET
• 3334 Richmond Avenue – a 26K SF class B office building
LARGE EXISTING VACANCIES
• Nine Greenway Plaza | 9 Greenway Plaza – 316,316 SF • Phoenix Tower at Greenway Plaza | 3200 Southwest Freeway – 244,008 SF • Four Greenway Plaza | 4 Greenway Plaza – 242,628 SF
At the close of 4Q 2021, the Greenway Plaza submarket had a vacancy rate of 22.9% which was almost identical to the vacancy rate of 22.8% at the close of 3Q 2021. Absorption remained negative with 18K SF of space given back, up from the 66K SF of negative absorption in 3Q 2021. Leasing activity decreased with 69K SF of deals completed. There is currently no office space under construction and no space delivered in 4Q 2021.
• Three Greenway Plaza | 3 Greenway Plaza – 202,782 SF
TOP LEASE TRANSACTIONS
• Eleven Greenway Plaza | 11 Greenway Plaza – 101,896 SF
• Itex Property Management has signed a 5K SF expansion in 9 Greenway Plaza.
• Twelve Greenway Plaza | 12 Greenway Plaza – 191,783 SF • 20 Greenway Plaza – 110,746 SF • One Greenway Plaza | 1 Greenway Plaza – 110,724 SF • Weslayan Tower | 24 Greenway Plaza – 105,044 SF • Eight Greenway Plaza | 8 Greenway Plaza – 104,587 SF • 3800 Buffalo Speedway – 96,250 SF • Five Greenway Plaza | 5 Greenway Plaza – 85,356 SF • 3555 Timmons Lane | 3555 Timmons Lane – 84,652 SF • Two Greenway Plaza | 2 Greenway Plaza – 69,056 SF • 3737 Buffalo Speedway Avenue – 68,251 SF • 3355 W Alabama | 3355 W Alabama Street – 67,230 SF
17
17
MEDICAL CENTER SUBMARKET INTELLIGENCE Absorption 65,499 Vacancy
vs. Prev. Qtr (208)
(6,577)
vs. Prev. Qtr
vs. 12 Mths Ago
9.4%
8.8%
7.2%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
55,284
66,886
45,685 Delivered SF 153,775 Quoted Rates $30.60
VITAL STATS
vs. 12 Mths Ago
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$30.83
$27.52
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) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 2021 Office Report
HLC OUTLOOK
The Medical Center 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 4Q 2021, the Medical Center submarket had a vacancy rate of 9.4% which was slightly higher than the 8.8% at the close of 3Q 2021. Absorption shifted positive with 65K SF of space absorbed, up from the 208 SF of negative absorption in 3Q 2021. Leasing activity slightly decreased with 45K SF of deals completed. There is currently 1.4M SF of office space under construction with 153K SF delivered in 4Q 2021.
TOP LEASE TRANSACTIONS
• Medical Center Endoscopy has signed a 10K SF lease in Scurlock Tower.
18
NEW DEVELOPMENTS
• Horizon Tower | 6929 Main Street – a 521K SF class A medical office building • O’Quinn Medical Tower | 6624 Fannin Street – a 427K SF class A medical office building • 3131 Holcombe Boulevard – a 270K SF class A medical office building • 7500 Fannin - a 116K SF class A medical office building • Old Spanish Trail – a 112K SF class A office building
LARGE EXISTING VACANCIES
• 6624 Fannin Tower | 6624 Fannin Street – 133,442 SF • TMC Innovation | 2450 Holcombe Road – 119,260 SF • Museo Plaza Office Building | 5115 Fannin Street – 98,720 SF • Museum Medical Tower | 1213 Hermann Drive – 88,127 SF • University Medical Plaza I | 7501 Fannin Street – 74,908 SF • 1919 Pressler Street – 68,607 SF • 7900 Fannin | 7900 Fannin Street – 58,085 SF
18
SOUTHWEST SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
35,377
(64,145)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
20.1%
21.2%
21.6%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
108,008
82,495 Delivered SF Quoted Rates $17.51
119,371
130,239
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$17.21
$17.57
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) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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 4Q 2021, the Southwest submarket had a vacancy rate of 20.1% which was slightly lower than the 21.2% at the close of 3Q 2021. Absorption remained positive with 108K SF of space absorbed, up from the 35K SF of positive absorption in 3Q 2021. Leasing activity decreased with 82K SF of deals completed. There is currently no office space under construction and no space delivered in 4Q 2021.
LARGE EXISTING VACANCIES
• Houston Technology Center | 5959 Corporate Drive – 333,332 SF • Southwest Corporate Center | 9700-9702 Bissonnet Street – 217,837 SF • 11111 S Wilcrest Drive – 190,398 SF • One Arena Place | 7322 Southwest Freeway – 142,902 SF • 7011 Southwest Freeway – 112,590 SF • Two Arena Place | 7324 Southwest Freeway – 112,397 SF • Southwest Medical Plaza I | 7777 Southwest Freeway – 82,002 SF • Centre One | 9800 Centre Parkway – 80,885 SF • Westwood Green | 9494 Southwest Freeway – 73,072 SF
TOP LEASE TRANSACTIONS
• ReconMR has signed a 9K SF lease in Arena Place.
DEALS IN THE MARKET
• American First Tower | 9999 Bellaire Boulevard – a 212K SF class A office building • West Belt Office Center I | 8101 W Sam Houston Parkway S – a 135K SF class B office building • 7011 Southwest Freeway – a 112K SF class B office building • Southwest Medical Plaza | 8200 Wednesbury Lane – an 84K SF class B office building • 8700 Commerce Park – a 79K 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 • 9200 W Sam Houston Parkway S – a 23K SF class B office building
19
19
KATY FREEWAY EAST SUBMARKET INTELLIGENCE Absorption 570,130
vs. Prev. Qtr
vs. 12 Mths Ago
158,027
(16,285)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
12.4%
14.3%
13.8%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
197,735
62,729
194,333
VITAL STATS 15.0% 800,000 700,000
14.0%
600,000 500,000
13.0%
400,000 300,000
12.0%
200,000 100,000
11.0%
Delivered SF 440,000 Quoted Rates $29.08
vs. Prev. Qtr
vs. 12 Mths Ago
360,000
-
vs. Prev. Qtr
vs. 12 Mths Ago
$30.10
$35.40
0 (100,000)
10.0%
(200,000) 9.0%
(300,000) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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 mixed-use development, CityCentre. At the close of 4Q 2021, the Katy Freeway East submarket had a vacancy rate of 12.4% which was lower than the 14.3% at the close of 3Q 2021. Absorption increased significantly with 570K SF of space absorbed, up from the 158K SF of positive absorption in 3Q 2021. Leasing activity decreased slightly with 194K SF of deals completed. There is currently 186K SF of office space under construction with 440K SF of space delivered in 4Q 2021.
TOP LEASE TRANSACTIONS
DEALS IN THE MARKET
• Old Katy Road Building | 9180 Old Katy Road – a 30K SF class B office building • The Orthopedic Sports Clinic | 9090 Gaylord Street – a 26K SF class A office building
NEW DEVELOPMENTS
• 9753 Katy Freeway - a 186K SF class A office building
LARGE EXISTING VACANCIES • 10777 Clay Road – 222,210 SF
• Memorial Hermann Tower | 929 Gessner Road – 118,966 SF • Village Tower II | 9655 Katy Freeway – 96,570 SF • 920 Memorial City Way – 83,331 SF
• Cotton Holdings has signed a 24K SF lease in Three Memorial City Plaza.
• One Memorial City Plaza | 800 Gessner Road – 66,278 SF
• ESRI has signed a 11K SF lease in One Memorial City Plaza.
• Three Memorial City Plaza | 840 Gessner Road – 55,772 SF
• Village Therapy Works has signed a 3K SF renewal in 1240 Blalock.
• 950 Corbindale Road – 52,935 SF
HLC Deal
20
• CityCentre One | 800 Town & Country Boulevard – 60,790 SF
20
NORTHWEST SUBMARKET INTELLIGENCE Absorption 50,828
vs. Prev. Qtr (30,294)
14,829
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
21.2%
21.6%
19.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
148,195
95,247
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
125,438 Delivered SF 23,200 Quoted Rates $20.27
VITAL STATS
vs. 12 Mths Ago
vs. Prev. Qtr
vs. 12 Mths Ago
$20.59
$21.65
24.0%
140,000 120,000 100,000
22.0%
80,000 60,000 40,000 20,000
20.0%
0 (20,000) (40,000) 18.0%
(60,000) (80,000) (100,000)
16.0%
(120,000) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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 Interstate 610 and Highway 290 or in the vicinity of Highway 290 and Hollister Road. At the close of 4Q 2021, the Northwest submarket had a vacancy rate of 21.2% which was slightly lower than the 21.6% at the close of 3Q 2021. Absorption shifted positive with 50K SF of space absorbed, up from the 30K SF of negative absorption in 3Q 2021. Leasing activity decreased with 125K SF of deals completed. There is currently 109K SF of office space under construction with 23K SF of space delivered in 4Q 2021.
TOP LEASE TRANSACTIONS
• Armstrong & Lee LLP has signed a 10K SF lease in Brookhollow Central I. • Cory Brothers has signed a 3K SF lease in Brookhollow Central I.
DEALS IN THE MARKET
• North Loop Center | 1235 North Loop W – a 221K SF class B office building
NEW DEVELOPMENTS
• 1737 North Loop West – a 109K SF class A medical office building
LARGE EXISTING VACANCIES
• Brookhollow Central III | 2950 N Loop Freeway W – 142,706 SF • Brookhollow Central II | 2900 N Loop Freeway W – 130,101 SF • North Loop Center | 1235 North Loop W – 96,587 SF • Northwest Crossing | 13333 Northwest Freeway – 90,527 SF • Granite Tower at 290 | 13430 Northwest Freeway – 77,827 SF • 7000 Hollister Street – 71,372 SF • Northwest One Building | 13100 Northwest Freeway – 68,917 SF • Northwest Crossing II | 7676 Hillmont Street – 68,612 SF • Park Central Plaza One | 1111 N Loop Freeway W – 64,687 SF • 13111 Northwest Freeway – 60,780 SF • Wells Fargo Building | 13201 Northwest Freeway – 56,859 SF • 5252 Hollister Road – 56,316 SF • Northwest Crossing III | 13105 Northwest Freeway – 55,880 SF • Brookhollow Central I | 2800 N Loop Freeway W – 54,867 SF • One Northwind Plaza | 7600 W Tidwell Road – 53,926 SF
• One Northwind Plaza | 7600 W 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 73K SF class B two (2) building office complex • 5200 Hollister Road – a 32K SF class B office building • 10500 Northwest Freeway - a 30K SF class B office building • Maxwell Construction Building | 4321 Directors Row – a 28K SF class B office building 21
21
SUGAR LAND SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(32,151)
(16,166)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
18.5%
18.8%
15.6%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
77,631
56,263
vs. Prev. Qtr
vs. 12 Mths Ago
-
56,000
27,691
VITAL STATS 120,000 100,000
18.0%
80,000 60,000 40,000
16.0%
20,000 0 (20,000)
14.0%
(40,000) (60,000)
130,689 Delivered SF Quoted Rates $30.51
vs. Prev. Qtr
vs. 12 Mths Ago
$30.25
$29.76
(80,000)
12.0%
(100,000) (120,000) (140,000)
10.0%
(160,000) (180,000) 8.0%
(200,000) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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 4Q 2021, the Sugar Land submarket had a vacancy rate of 18.5% which was slightly lower than the 18.8% at the close of 3Q 2021. Absorption shifted positive with 27K SF of space absorbed, up from the 32K SF of negative absorption in 3Q 2021. Leasing activity increased with 130K SF of deals completed. There is currently no office space under construction and no office space was delivered in 4Q 2021.
LARGE EXISTING VACANCIES
• Sugar Creek on the Lake | 14141 Southwest Freeway – 232,487 SF • Sugar Creek Tower I | 13135 Dairy Ashford Road – 118,922 SF • Sugar Creek Tower II | 13131 Dairy Ashford Road – 93,873 SF • ABB Network Management | 1601 Industrial Boulevard – 92,497 SF • The Minute Maid Building | 2150 Town Square Place – 72,906 SF • Imperial Plaza | 3 Sugar Creek Center Boulevard – 71,588 SF • Sugar Creek Place I | 14100 Southwest Freeway – 70,171 SF • Comerica Office Tower | 1 Sugar Creek Center Boulevard – 57,567 SF • Texas Instruments | 13905 University Boulevard – 55,195 SF • Sugar Creek Place II | 14140 Southwest Freeway – 48,430 SF
TOP LEASE TRANSACTIONS
• Amplify Plus Therapy & Coaching has signed a 1K SF lease in the Oyster Creek Office Condos.
HLC Deal
• Silverback Promotions has signed a 1K SF lease in the Ashford Ridge Office Condos.
HLC Deal
DEALS IN THE MARKET
• 1410 Gillingham Lane – a 150K SF class B office building
22
22
CLEAR LAKE SUBMARKET INTELLIGENCE Absorption 32,063
vs. Prev. Qtr 56,890
8,370
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
7.8%
8.2%
10.2%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
96,068
47,727
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
46,697 Delivered SF Quoted Rates $22.61
VITAL STATS
vs. 12 Mths Ago
vs. Prev. Qtr
vs. 12 Mths Ago
$21.93
$21.75
90,000
12.0%
70,000 11.0%
50,000 30,000
10.0% 10,000 (10,000) 9.0% (30,000) (50,000)
8.0%
(70,000) 7.0%
(90,000) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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.
LARGE EXISTING VACANCIES
• 13100 Space Center Boulevard – 68,265 SF • Two Corporate Plaza | 2625 Bay Area Boulevard – 66,174 SF • Boeing | 3700 Bay Area Boulevard – 51,014 SF • One Corporate Plaza | 2525 Bay Area Boulevard – 48,581 SF • Saturn One | 18050 Saturn Lane – 35,958 SF
At the close of 4Q 2021, the Clear Lake submarket had a vacancy rate of 7.8% which was slightly lower than the 8.2% at the close of 3Q 2021. Absorption remained positive with 32K SF of space absorbed, but down from the 56K SF of positive absorption in 3Q 2021. Leasing activity was cut in half with 46K SF of deals completed. There is currently no office space under construction and no office space was delivered in 4Q 2021.
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 66K SF class B medical office building • 2045 Professional Building | 2045 Space Park Drive – a 25K SF class B medical office building • 16902 El Camino Real – a 25K SF class B medical office building • 17300 Saturn Lane – a 24K SF class B office building
23
23
MIDTOWN SUBMARKET INTELLIGENCE Absorption 53,967 Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
160,764
(45,663)
vs. Prev. Qtr
vs. 12 Mths Ago
14.4%
15.1%
12.6%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
106,189
135,500
vs. Prev. Qtr
vs. 12 Mths Ago
170,000
-
vs. Prev. Qtr
vs. 12 Mths Ago
$34.99
$38.37
80,315 Delivered SF Quoted Rates $34.66
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% 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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 4Q 2021, the Midtown submarket had a vacancy rate of 14.4% which was lower than the 15.1% at the close of 3Q 2021. Absorption remained positive, but it decreased with 53K SF of space absorbed, down from the 160K SF of positive absorption in 3Q 2021. Leasing activity decreased with 80K SF of deals completed. There is currently 40K SF of office space under construction, but no space was delivered in 4Q 2021.
NEW DEVELOPMENTS
• Houston Endowment HQ | 3615 Willia Street – a 40K SF class B office building
LARGE EXISTING VACANCIES
• America Tower | 2929 Allen Parkway – 207,287 SF • The Ion | 4201 Main Street – 189,222 SF • Wortham Tower | 2727 Allen Parkway – 130,126 SF • HCC Building | 3100 Main Street – 91,820 SF • Central Square | 2100 Travis Street – 81,715 SF • 2777 Allen Parkway – 74,324 SF • St. Joseph Professional Building | 2000 Crawford Street – 71,719 SF
TOP LEASE TRANSACTIONS
• Tivoli Midstream LLC has signed a 4K SF lease in The Bellevue. • One Map Mineral Services has signed a 2K SF lease in 5300 Memorial.
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
24
24
WEST BELT SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
VITAL STATS
vs. 12 Mths Ago 28.0%
79,495
(59,397)
14,391
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
26.0%
24.3%
25.7%
24.4%
24.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
42,452
51,050
vs. Prev. Qtr
vs. 12 Mths Ago
31,468 Delivered SF Quoted Rates $24.94
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$24.88
$26.76
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) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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 is home to 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. At the close of 4Q 2021, the West Belt submarket had a vacancy rate of 24.3% which was lower than the 25.7% at the close of 3Q 2021. Absorption shifted back positive with 79K SF of space absorbed, up from the 59K SF of negative absorption in 3Q 2021. Leasing activity decreased with 31K SF of deals completed. There is currently no office space under construction and no space delivered in 4Q 2021.
TOP LEASE TRANSACTIONS
• Texas Capital Bank has signed a 4K SF renewal in Westway II.
DEALS IN THE MARKET
• 4650 Westway Park Boulevard – a 160K 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 • 6221 W Sam Houston Parkway N – a 25K SF class B office building • 16060 Dillard Drive – a 24K SF class B office building
LARGE EXISTING VACANCIES
• Westway II | 4424 W Sam Houston Parkway N – 206,554 SF • Westway Plaza | 11330 Clay Road – 170,603 SF • Beltway Lakes Phase III | 5775 N Sam Houston Parkway W – 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 N Sam Houston Parkway W – 64K SF • Beltway Lakes Phase II | 5875 N Sam Houston Parkway W – 56,770 SF • Sam Houston Crossing II | 10344 Sam Houston Park Drive – 52,017 SF • Beltway 8 Corporate Centre Building I | 5300 W Sam Houston Parkway N – 50K SF
25
25
EAST HOUSTON/PASADENA SUBMARKET INTELLIGENCE Absorption 16,126
vs. Prev. Qtr 32,102
10,822
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
13.6%
13.9%
14.7%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
40,920
36,894
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
97,244 Delivered SF Quoted Rates $20.64
VITAL STATS
vs. 12 Mths Ago
vs. Prev. Qtr
vs. 12 Mths Ago
$22.40
$22.13
16.0%
120,000 100,000 80,000 60,000
14.0%
40,000 20,000 0 12.0%
(20,000) (40,000) (60,000) (80,000)
10.0%
(100,000) (120,000) (140,000) 8.0%
(160,000) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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 4Q 2021, the East Houston/Pasadena submarket had a vacancy rate of 13.6% which was slightly lower than the 13.9% at the close of 3Q 2021. Absorption remained positive with 16K SF of space absorbed, but down from the 32K SF of positive absorption in 3Q 2021. Leasing activity increased with 97K SF of deals completed. There is currently 395K SF of office space under construction, but no space was delivered in 4Q 2021.
TOP LEASE TRANSACTIONS
• Impact Networking has signed a 15K SF lease in 100 Jensen Drive.
NEW DEVELOPMENTS
• 100 Jensen Drive – a 300K SF mixed-use development • 2351 Oleander Drive – a 32K SF class B office building • 5025 Preston Avenue – a 25K SF class B office building
LARGE EXISTING VACANCIES • 7524 Sherman Street – 75,280 SF • 12301 Kurland Drive – 59,860 SF • Vibe Hobby | 8866 Gulf Freeway – 34,077 SF • 1001 Shaw Avenue – 30,938 SF • Gulf Freeway Plaza | 9333 Bryant Street – 29,750 SF • Medical Professional Building I | 908 E Southmore Boulevard – 26,144 SF • EaDo | 2339 Commerce Street – 25,549 SF • 2720 Leeland Street – 25,500 SF
DEALS IN THE MARKET
• 3737-3743 Red Bluff Road – a 85K SF class B office building • 1001 Shaw Avenue – a 80K SF class B office building • 7524 Sherman Street – a 75K SF class B office building • 2807 Little York Road – a 35K SF class B office building
• Featherwood | 12727 Featherwood Drive – 25,312 SF • BPM Airport | 8031 Airport Boulevard – 25,293 SF • Atrium 10 Tower | 11811 East Freeway – 24,099 SF • The 1200 Building | 1200 Highway 146 S – 22,915 SF • Vibe Hobby | 8876 Gulf Freeway – 22,800 SF • Bayshore Medical Building | 3333 Bayshore Boulevard – 20,688 SF • Land Park | 11821 E I-10 Freeway – 20,177 SF • Phase III | 4460 Highway 225 – 17,617 SF
26
26
WEST SUBMARKETFARINTELLIGENCE Absorption (15,945)
vs. Prev. Qtr 36,421
9,276
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
16.5%
16.1%
16.1%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
10,451
37,133
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$30.91
$30.86
52,983 Delivered SF Quoted Rates $30.95
VITAL STATS
vs. 12 Mths Ago 20.0%
200,000
150,000
18.0%
100,000 16.0% 50,000 14.0% 0
12.0%
(50,000)
(100,000)
10.0% 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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.
NEW DEVELOPMENTS
• 25220 Kingsland Boulevard – a 20K SF class B office building
LARGE EXISTING VACANCIES
• Mason Creek Office Center II | 21700 Merchants Way – 127,955 SF • Katy Ranch Phase II | 24285 Katy Freeway – 111,087 SF • The Offices at Greenhouse | 19219 Katy Freeway – 77,610 SF • Katy MOB II | 707 S Fry Road – 65,938 SF
At the close of 4Q 2021, the Far West submarket had a vacancy rate of 16.5% which was slightly higher than the 16.1% at the close of 3Q 2021. Absorption shifted negative with 16K SF of space given back, down from the 36K SF of positive absorption in 3Q 2021. Leasing activity increased with 52K SF of deals completed. There is currently 20K SF of office space under construction, but no space was delivered in 4Q 2021.
• Det Norske Veritas | 1400 Ravello Road – 51,963 SF
TOP LEASE TRANSACTIONS
• Building 2 | 2002 W Grand Parkway N – 27,683 SF
• Connect Realty has signed a 1K SF expansion in the Falcon Ridge Office Condos.
HLC Deal
DEALS IN THE MARKET
• New Park Drilling Fluids | 21920 Merchants Way – 51,256 SF • Greenhouse at Park Row | 2051 S Greenhouse Road – 50,788 SF • Katy Ranch Phase I | 24275 Katy Freeway – 42,763 SF • Horizon Medical Plaza 2 | 19002 Park Row – 35K SF • Medical Plaza II | 23960 Katy Freeway – 24,134 SF • Katy MOB III | 19770 Kingsland Boulevard – 22,848 SF • Katy Medical Plaza I | 23510 Kingsland Boulevard – 21,338 SF
• Academy Sports HQ | 1540 North Mason Road – a 218K SF class B office building • Westgate Atrium | 1550 Fox Lake Drive – a 113K SF class B office building • BLDG#2 | 25807 Westheimer Parkway – a 39K SF class B office building • PetroSkills | 25403 Katy Mills Parkway – a 32K SF class B office building • 21734 Provincial Boulevard – a 21K SF class B office building
27
27
KINGWOOD SUBMARKET INTELLIGENCE Absorption 19,856
vs. Prev. Qtr
VITAL STATS
vs. 12 Mths Ago
6,553
14,733
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
10.2%
11.0%
12.5%
12.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
31,540
32,682
vs. Prev. Qtr
vs. 12 Mths Ago
17,324 Delivered SF Quoted Rates $24.79
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$25.29
$24.73
300,000
16.0%
250,000
200,000
150,000 10.0% 100,000 8.0% 50,000 6.0%
0
4.0%
(50,000) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Deliveries
2Q 21
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 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 4Q 2021, the Kingwood submarket had a vacancy rate of 10.2% which was lower than the 11.0% at the close of 3Q 2021. Absorption remained positive with 19K SF of space absorbed, up from the 6K SF of positive absorption in 3Q 2021. Leasing activity decreased with 17K SF of deals completed. There is currently no office space under construction and no office space was delivered in 4Q 2021.
DEALS IN THE MARKET • Chase Bank Building | 19747 North Highway 59 – a 46K SF class B office building
LARGE EXISTING VACANCIES • Northeast Medical Tower II | 18980 N Memorial Drive– 65,269 SF
• Kingwood West Tower | 22999 Highway 59 N – 31,906 SF
• Four Kingwood Place | 900 Rockmead Drive – 30,087 SF
• Two Kingwood Place | 700 Rockmead Drive – 22,399 SF • Three Kingwood Place | 800 Rockmead Drive – 20,480 SF
• BRB Medical Office Building | 22751 Professional Drive – 17,689 SF
• Humble Medical Office Building | 1485 FM 1960 E – 17,053 SF
• | 22710-22720 Professional Drive – 14,468 SF • Kingwood Medical Plaza I | 22698 Professional Drive – 12,940 SF
• Citizens Bank Building | 8811 FM 1960 Bypass Road – 10,305 SF
• Chase Bank Building | 19747 N US 59 Highway – 7,956 SF
• Woodforest National Bank Plaza-Building 3 | 1710 W Lake Houston Parkway – 7,790 SF
• McKay Medical Plaza | 18648 McKay Drive – 5,791 SF
28
28
SUBURBAN OUTLIERS SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
11,884
(31,291)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
13.6%
14.3%
13.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
70,797
51,118
vs. Prev. Qtr
vs. 12 Mths Ago
-
111,133
vs. Prev. Qtr
vs. 12 Mths Ago
$26.96
$27.23
72,230
68,278 Delivered SF Quoted Rates $27.31
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) 4Q 18
1Q 19
2Q 19
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
2Q 21
Deliveries
3Q 21
4Q 21
Vacancy
Source: CoStar 4Q 2021 Office Report
HLC OUTLOOK
HLC’s Suburban Outliers office submarket consists of the remaining submarkets outside of the major Houston submarkets. 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 4Q 2021, the Suburban Outliers submarket had a vacancy rate of 13.6% which was slightly lower than the 14.3% at the close of 3Q 2021. Absorption remained positive with 72K SF of space absorbed, up from the 11K SF of positive absorption in 3Q 2021. Leasing activity decreased slightly with 68K SF of deals completed. There is currently 374K SF of office space under construction, but no space was delivered in 4Q 2021.
DEALS IN THE MARKET
• Westland Bunker | 550 Club Drive – a 240K SF class B office building • Magnolia Landmark Building | 18230 FM 1488 Road – a 65K SF class B office building • 301 South 1st Street – a 59K SF class B office building • The Offices at Greatwood | 6514-6548 Greatwood Parkway – a 43K SF class B medical office • 2401 Termini Street – a 38K SF class B medical office building • Bank of America | 4000 Garth Road – a 33K SF class B medical office building • Sealy Business Continuity Center | 3063 Outlet Center Drive – a 32K SF class B office building • 10586 Highway 75 North – a 30K SF class B medical office building • 24130 State Highway 249 – a 29K SF class B office building
• Northpoint Crossing Office Building | 24445 State Highway 249 – a 21K SF class B office building
NEW DEVELOPMENTS
• 24200 Via Mazzini Way – a 80K SF class A office building • Highway 35 & Steele Road – a 64K SF class B office building • 17122 Telge Road – a 59K SF class B office medical building • Towne Lake Office Condos | 10242 Greenhouse Road – a 50K SF project of class B office condos • Waller Business Center | 31390 FM 2920 – a 35K SF class B medical 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 medical office building
LARGE EXISTING VACANCIES • 4005 Technology Drive – 257,399 SF
• Primary Medical Tower II | 2800 Garth Road – 102,084 SF • Westland Bunker | 550 Club Drive – 56,379 SF • Emancipation Center | 3131 Emancipation Avenue – 45,206 SF • Bldg G - Marcel Boulevard | 1135 Grand Central Boulevard – 45K SF • 1517 Thompson Road | 1517 Thompson Road – 42,551 SF • Professional Building 6 | 2765-2785 Gulf Freeway S – 41,625 SF • 4001 Technology Drive – 40,681 SF
• 12280 Broadway Street – a 25K SF class A medical office building • Hughes Court Professional Building | 3828 Hughes Court – a 23K SF class B medical office • Baker Road Professional Building | 1010 Baker Road – a 22K SF class B medical office building • 455 School Street – a 22K SF class B medical office building
29
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