OFFICE Q2 2022 MARKET REPORT HOUSTON
P ro p er t y : The Wes tcheste r
w w w.h o l t l u n s fo rd .co m
TABLE OF CONTENTS
03
Houston Office Submarket Coverage
04
Houston Office Market Experts
07
Houston Office Facts & Figures
08
Submarket Intelligence
HOUSTON 11451 Katy Freeway, Suite 300 Houston, Texas 77079 T 713.850.8500 | F 713.850.8550
www.holtlunsford.com
03 Q2 2022 HOUSTON OFFICE MARKET REPORT
HOUSTON OFFICE
Submarket Coverage
MONTGOMERY
OTHER SUBMARKETS 1 CBD | 50,643,980 SF 2 WEST LOOP | 31,223,938 SF 5 WESTCHASE | 17,967,767 SF 8 INNER LOOP | 23,701,200 SF 9 MEDICAL CENTER | 11,202,473 SF 11 KATY FREEWAY EAST | 10,103,943 SF
CLEVELAND
CONROE
THE WOODLANDS 21,397,332 SF
MAGNOLIA
THE WOODLANDS
NEW CANEY
TOMBALL SPRING
DAYTON
FM 1960 CORRIDOR 12,058,957 SF
GEORGE BUSH INTERCONTINENTAL AIRPORT
HUMBLE
CYPRESS
SUBURBAN OUTLIERS 25,149,486 SF
GREENSPOINT 14,047,019 SF
NORTHWEST 15,147,814 SF
11
KATY FREEWAY WEST 27,358,080 SF
KATY
MONT BELVIEU
HOUSTON
2 GALLERIA
5
SOUTHWEST 9,518,819 SF
BAY TOWN
1 SHIP CHANNEL
8 9
MEDICAL CENTER
PASADENA LA PORTE
HOBBY AIRPORT
SUGAR LAND
RICHMOND
ELLINGTON AIRPORT
SUGAR LAND 7,932,564 SF MISSOURI CITY PEARLAND
CLEAR LAKE 6,864,719 SF
LEAGUE CITY
04 Q2 2022 HOUSTON OFFICE MARKET REPORT
HOUSTON OFFICE
HLC
Market Experts
BRANDON AVEDIKIAN
BRAD SEGRETO
Managing Principal bavedikian@holtlunsford.com 713.602.3754
Market Associate bsegreto@holtlunsford.com 713.602.3758
SKYLER SEIDMAN
KYLE PESEK
Market Analyst sseidman@holtlunsford.com 713.602.3767
Market Analyst kpesek@holtlunsford.com 713.602.3764
Outlook
At the close of Q2 2022, the Houston office market as a whole had a vacancy rate of 21.7% which was almost identical to the vacancy rate of 21.6% in Q1 2022. Absorption shifted back negative with 210K SF of space vacated, down from the 1.02M SF of positive absorption in Q1 2022. Leasing activity decreased with 2.97M SF of deals completed, down from the 3.63M SF of deals completed in Q1 2022. There was 4.81M SF of office space under construction, and 122K SF of space was delivered in Q2 2022.
New Listing
THE PRIMELINE PRO OFFICE BUILDING The Primeline Pro Office Building is a 31,691 SF Class A office building located in Pearland
New Listing
6908 BRISBANE COURT 6908 Brisbane Court is a 22,621 SF Class A office building located in Sugar Land
07 Q2 2022 HOUSTON OFFICE MARKET REPORT
Facts & Figures
HOUSTON OFFICE OVERALL HOUSTON
OVERALL VACANCY
22.0%
2,250,000
25.0% 21.7%
1,500,000
20.0%
18.4%
20.3%
17.4%
750,000
20.0%
15.0%
18.0%
10.0%
0 16.0%
(750,000)
5.0% 1.4%
1.0% 14.0%
0.0%
(1,500,000) Q2 19
Q3 19
Q4 19
Q1 20
Q2 20
Q3 20
Q4 20
ABSORPTION
Q1 21
Q2 21
Q3 21
Q4 21
DELIVERIES
Q1 22
Q2 22
Q2 19
Q3 19
Q4 19
Q1 20
Q2 20
Q3 20
Q4 20
DIRECT
VACANCY
OVERALL ABSORPTION
Q1 21
Q2 21
Q3 21
Q4 21
SUBLET
Q1 22
Q2 22
TOTAL
OVERALL CONSTRUCTION 6,000,000
6,000,000
5,000,000
5,000,000
4,000,000
4,000,000
3,000,000
3,000,000
2,000,000 1,000,000
2,000,000
0
1,000,000
(1,000,000)
0
(2,000,000) Q2 19
Q3 19
Q4 19
Q1 20
Q2 20
Q3 20
Q4 20
TOTAL NET
Q1 21
Q2 21
Q3 21
Q4 21
Q1 22
Q2 22
LEASING ACTIVITY
Q3 19
Q4 19
Q1 20
Q2 20
Q3 20
Q4 20
DELIVERED
EXISTING INVENTORY SUBMARKET
Q2 19
Q1 21
Q2 21
Q3 21
Q4 21
Q1 22
Q2 22
UNDER CONSTRUCTION
VACANCY DIRECT SF TOTAL SF
VAC. %
YTD NET YTD UNDER YTD LEASING ABSORPTION DELIVERIES CONSTRUCTION SF ACTIVITY
# BLDGS.
TOTAL RBA
CBD
91
50,643,980
11,929,644
12,893,857
25.5%
(304,520)
0
386,323
1,080,323
West Loop
162
31,223,938
7,662,257
8,000,862
25.6%
283,928
0
95,055
898,622
Katy Freeway West
166
27,358,080
5,643,615
6,235,624
22.8%
310,285
0
0
855,401
The Woodlands
179
21,397,332
3,079,771
3,596,833
16.8%
452,849
505,574
85,400
380,253
Westchase
105
17,967,767
4,949,744
5,342,610
29.7%
(335,582)
0
20,000
439,749
Greenspoint
121
14,047,019
6,150,977
6,220,054
44.3%
17,372
0
0
239,257
FM 1960 Corridor
137
12,058,957
1,918,379
1,938,573
16.1%
(89,874)
0
0
256,514
Inner Loop
158
23,701,200
3,985,198
4,399,942
18.6%
46,561
0
40,000
499,295
Medical Center
63
11,202,473
1,073,620
1,092,405
9.8%
78,963
116,500
1,960,459
518,189
Southwest
89
9,518,819
1,964,828
2,024,458
21.3%
(105,311)
0
70,647
108,581
Katy Freeway East
73
10,103,943
871,224
973,264
9.6%
196,657
0
188,553
330,837
Northwest
166
15,147,814
3,094,225
3,281,240
21.7%
32,281
0
98,674
338,999
Sugar Land
99
7,932,564
1,371,962
1,486,456
18.7%
(62,820)
0
0
139,615
Clear Lake
95
6,864,719
890,922
908,290
13.2%
(1,145)
0
783,871
125,785
Suburban Outliers
414
25,149,486
3,156,760
3,308,749
13.2%
291,929
237,312
599,015
389,015
2,118
284,318,091
57,743,126
61,703,217
21.7%
811,573
859,386
4,327,997
6,600,435
TOTALS
08 Q2 2022 HOUSTON OFFICE MARKET REPORT
SUBMARKET INTELLIGENCE
HOUSTON CBD 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 $40 per SF for class A and B property types. The submarket is home to a large concentration of energy, professional and business services, and government tenants. Recent residential and retail developments, and the existing infrastructure of the underground tunnel system, have helped Houston’s CBD become a true live-work-play environment. At the close of Q2 2022, the CBD submarket had a vacancy rate of 25.5% which was slightly higher than the 25.2% at the close of Q1 2022. Absorption remained negative with 109K SF of space vacated, which was better than the 196K SF of negative absorption in Q1 2022. Leasing activity increased with 602K SF of deals completed. 1550 on the Green is the only office building under construction in the CBD which will bring an additional 386K SF of class A office space into the market.
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(108,964)
(195,556)
(225,631)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
25.5%
25.2%
22.9%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
602,166
478,157
357,316
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
$41.08
$40.05
$40.59
TOP LEASE TRANSACTIONS • Cheniere Energy, Inc has signed a 151K SF lease in Texas Tower. • GEXA Energy has signed a 62K SF lease in 601 Travis. • Genesis Energy has signed a 49K SF lease in 811 Louisiana. • Trafigura has signed a 31K SF lease in Texas Tower. • O’Melveny & Myers has signed a 26K SF lease in TC Energy Center. • Munsch Hardt Kopf & Harr, P.C. has signed a 20K SF lease in 700 Milam. • Chicago Title has signed a 10K SF lease in Texas Tower.
DEALS IN THE MARKET • Citizens Bank Building | 402 Main Street – a 45K SF class B office building • McCrory Building | 1004-1008 Prairie Street – a 29K SF class B office building • 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
NEW DEVELOPMENTS • 1550 on the Green | 1550 Lamar Street – a 386K SF class A office building
VITAL STATS 30.0%
1,350,000
24.0%
1,000,000
18.0%
650,000
12.0%
300,000
6.0%
(50,000)
0.0%
(400,000) Q2 19
Q3 19
Q4 19
Q1 20
ABSORPTION
Q2 20
Q3 20
Q4 20
Q1 21
Q2 21
DELIVERIES
Q3 21
Q4 21
Q1 22
Q2 22
VACANCY
LARGE EXISTING VACANCIES • 800 Bell | 800 Bell Street – 1,314,350 SF • 1001 Fannin Street – 784,598 SF • Wells Fargo Plaza | 1000 Louisiana Street – 631,669 SF • 4 Houston Center | 1221 Lamar Street – 581,995 SF • Fulbright Tower | 1301 McKinney Street – 577,652 SF • 919 Milam | 919 Milam Street – 542,078 SF • 1600 Smith Street – 501,300 SF • One City Centre | 1021 Main Street – 481,159 SF • Texas Tower | 845 Texas Avenue – 458,249 SF • North Tower | 700 Milam Street – 444,478 SF • 2 Houston Center | 909 Fannin Street – 431,495 SF • Heritage Plaza | 1111 Bagby Street – 416,083 SF • Two Allen Center | 1200 Smith Street – 408,788 SF • Three Allen Center | 333 Clay Street – 405,486 SF • JP Morgan Chase Tower | 600 Travis Street – 405,093 SF • TC Energy Center | 700 Louisiana Street – 401,511 SF • One Allen Center | 500 Dallas Street – 351,103 SF
09 Q2 2022 HOUSTON OFFICE MARKET REPORT
SUBMARKET INTELLIGENCE
WEST LOOP HLC OUTLOOK
VITAL STATS
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
83,804
200,124
(109,875)
30.0%
400,000
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
25.0%
200,000
25.6%
25.9%
24.2%
20.0%
0
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
15.0%
(200,000)
503,745
394,877
729,047
10.0%
(400,000)
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
5.0%
(600,000)
-
-
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
$33.66
$33.71
$33.59
TOP LEASE TRANSACTIONS • Kane Russell Coleman Logan P.C. has signed a 20K SF lease in Sage Plaza. • Next Level Med has signed a 13K SF lease in 5718 Westheimer. • Applied Behavior Learning Center has signed a 12K SF lease in 4544 Post Oak Place. • Chuck Poteet Properties has signed a 3K SF renewal in 770 South Post Oak Lane.
HLC DEAL
• Healthier Wilmore, DDS has signed a 3K SF renewal in 7500 San Felipe. • Power W3 has signed a 2K SF lease lease in 1775 Saint James Place. • Delmar Solutions, LLC has signed a 2K SF lease in 4801 Woodway.
DEALS IN THE MARKET • One Riverway | 1 Riverway – a 508K SF class A office building • Three Riverway | 3 Riverway – a 407K SF class A office building • Two Riverway | 2 Riverway – a 369K SF class A office building • 2100 West Loop South – a 163K SF class A office building • S&B Engineering Building | 3535 Sage Road – an 80K SF class B office building
0.0%
(800,000) Q2 19
Q3 19
Q4 19
Q1 20
ABSORPTION
Q2 20
Q3 20
Q4 20
Q1 21
Q2 21
Q3 21
DELIVERIES
Q4 21
Q1 22
Q2 22
VACANCY
NEW DEVELOPMENTS • 4411 San Felipe Street – a 95K SF class A office building
LARGE EXISTING VACANCIES • Marathon Oil Tower | 5555 San Felipe Street – 881,751 SF • Williams Tower | 2800 Post Oak Boulevard – 694,396 SF • The Lakes on Post Oak | 3000 Post Oak Boulevard – 449,821 SF • San Felipe Plaza | 5847 San Felipe Street – 388,847 SF • Sage Plaza | 5151 San Felipe Street – 260,203 SF • TwentyFour25 | 2425 West Loop South – 255,744 SF • Galleria Tower I | 2700 Post Oak Boulevard – 248,748 SF • Thirty Forty Post Oak | 3040 Post Oak Boulevard – 232,027 SF • 2000 West Loop South – 230,778 SF • Two Post Oak Central | 1980 Post Oak Boulevard – 227,098 SF • Five Post Oak Park | 4400 Post Oak Parkway – 223,310 SF • Schlumberger Building | 5599 San Felipe Street – 223,216 SF • Three Riverway | 3 Riverway – 219,194 SF • BHP Petroleum | 1500 Post Oak Boulevard – 204,885 SF
CoStar’s Galleria, Uptown, Post Oak Park, San Felipe/ Voss, Richmond/Fountain View, and Riverway submarkets make up HLC’s West Loop submarket. This submarket contains approximately 31M 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 Q2 2022, the West Loop submarket had a vacancy rate of 25.6% which was slightly lower than the 25.9% at the close of Q1 2022. Absorption remained positive with 84K SF of space absorbed, down from the 200K SF of positive absorption in Q1 2022. Leasing activity increased with 504K SF of deals completed. The only new development in West Loop is at 4411 San Felipe Street which will feature a new 95K SF mixed use building comprised of office and retail space.
10 Q2 2022 HOUSTON OFFICE MARKET REPORT
SUBMARKET INTELLIGENCE
KATY FREEWAY WEST 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 flight-toquality helping these large corporations to continue attracting a talented workforce. At the close of Q2 2022, the Katy Freeway West submarket had a vacancy rate of 22.8% which was slightly lower than the 23.2% at the close of Q1 2022. Absorption remained positive with 124K SF of space absorbed, down from the 186K SF of positive absorption in Q1 2022. Leasing activity decreased with 292K SF of deals completed. There is currently no office space under construction and no space was delivered in Q2 2022.
VITAL STATS
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
123,983
186,302
(94,837)
14.0%
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
12.0%
22.8%
23.2%
23.6%
10.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
8.0%
292,026
563,375
300,669
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
$26.42
$26.73
$27.16
TOP LEASE TRANSACTIONS
500,000 400,000 300,000 200,000
6.0% 100,000
4.0%
0
2.0% 0.0%
(100,000) Q2 19
Q3 19
Q4 19
Q1 20
ABSORPTION
Q2 20
Q3 20
Q4 20
Q1 21
Q2 21
DELIVERIES
Q3 21
Q4 21
Q1 22
Q2 22
VACANCY
LARGE EXISTING VACANCIES
• CTCI Americas, Inc has signed a 26K SF lease in 15721 Park Row.
• Four WestLake Park | 200 Westlake Park Boulevard – 630,610 SF
• Smith Sechman Reid has signed a 20K SF lease in Ashford 7.
• Two WestLake | 580 Westlake Park Boulevard – 425,206 SF
• Winston & Strawn has signed a 13K SF lease in Energy Center II.
• Three WestLake Park | 550 Westlake Park Boulevard – 419,671 SF
• Houston Research Institute has signed a 10K SF lease in Ashford 6.
• Westgate II | 17320 Katy Freeway – 372,664 SF
• First Solar, Inc has signed a 9K SF lease in Kirkwood Tower.
• Eldridge Oaks | 1080 Eldridge Parkway – 355,579 SF
• PetroTal has signed a 7K SF lease in 16200 Park Row.
• Energy Tower III | 11740 Katy Freeway – 350,813 SF
• Full Spectrum Healthcare has signed a 2K SF lease in 10750 Hammerly Boulevard.
• Three Eldridge | 737 North Eldridge Parkway – 308,186 SF
HLC DEAL
DEALS IN THE MARKET • Eldridge Green | 1293 Eldridge Parkway – a 248K SF class A office building • The Offices at Park 10 | 16285 Park Ten Place Drive – a 157K SF class A office building • Park Ten Phase II | 16290 Katy Freeway – a 157K SF class A office building • 16001 Park Ten Place Drive – a 138K SF class B office building • The Westchester | 11451 Katy Freeway – a 117K SF class A office building • Dairy Ashford Plaza | 2000 South Dairy Ashford Road – a 110K SF class B office building • Dairy Ashford Plaza | 2020 Dairy Ashford Road – a 108K SF class B office building • Eleven Five Eleven Building | 11511 Katy Freeway – a 78K SF class B office building
• 8 West Centre | 3505 West Sam Houston Parkway North – 293,182 SF • Enclave Business Park | 1200 Enclave Parkway – 286,917 SF • West Memorial Place II | 15377 Memorial Drive – 263,502 SF • Ten West Corporate Center II | 17404 Katy Freeway – 252,931 SF • 1330 Enclave Parkway – 243,369 SF • Two Eldridge | 757 North Eldridge Parkway – 205,929 SF • Republic Square | 13501 Katy Freeway – 189,699 SF • Energy Center II | 575 North Dairy Ashford – 188,672 SF • Enclave on the Lake | 1255 Enclave Parkway – 171,091 SF
11 Q2 2022 HOUSTON OFFICE MARKET REPORT
SUBMARKET INTELLIGENCE
THE WOODLANDS HLC OUTLOOK
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(8,075)
460,924
57,701
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
16.8%
16.5%
16.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
158,053
222,200
216,568
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
65,574
440,000
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
$32.76
$32.90
$33.49
TOP LEASE TRANSACTIONS • Evonik Corporation has signed a 9K SF lease in 1700 City Plaza Drive.
DEALS IN THE MARKET • 1776 Woodstead Court – a 37K SF class B office building • 25814 Budde Road – a 26K SF class B office building • Springbrook Plaza | 21021 Springbrook Plaza Drive – a 26K SF class B office building • The Gateway Building | 26865 I-45 – a 24K SF class B office building
NEW DEVELOPMENTS • Physicians Center at Vision Park | 18354 I-45 South – a 50K SF class A medical office building • Life Time Co-Work | Six Pines Drive – a 35K SF class B office building
VITAL STATS 18.0%
600,000 400,000
12.0%
200,000 0
6.0%
(200,000) (400,000)
0.0%
(600,000) Q2 19
Q3 19
Q4 19
Q1 20
ABSORPTION
Q2 20
Q3 20
Q4 20
Q1 21
Q2 21
DELIVERIES
Q3 21
Q4 21
Q1 22
Q2 22
VACANCY
LARGE EXISTING VACANCIES • The Woodlands Towers at The Waterway | 9950 Woodloch Forest Drive – 303,452 SF • Hughes Landing | 1735 Hughes Landing Boulevard – 290,814 SF • South Tower | 10000 Energy Drive – 288,609 SF • 8800 Technology Forest Place – 247,053 SF • Hughes Landing | 1725 Hughes Landing Boulevard – 226,820 SF • 24955 I-45 North – 148,104 SF • 9709 Lakeside Boulevard – 137,938 SF • 2001 Timberloch Place – 122,610 SF • Parkwood II | 10055 Grogans Mill Road – 101,056 SF • Alight Solutions | 8770 New Trails Drive – 90K SF • One Hughes Landing | 1800 Hughes Landing Drive – 88,042 SF • CityPlace 1 | 1700 City Plaza Drive – 86,657 SF
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 Q2 2022, The Woodlands submarket had a vacancy rate of 16.8% which was slightly higher than the 16.5% at the close of Q1 2022. Absorption shifted negative with 8K SF of space vacated, down from the 461K SF of positive absorption in Q1 2022. Leasing activity decreased with 158K SF of deals completed. There is currently 85K SF of office space under construction with 66K SF delivered in Q2 2022.
12 Q2 2022 HOUSTON OFFICE MARKET REPORT
SUBMARKET INTELLIGENCE
WESTCHASE 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 Q2 2022, the Westchase submarket had a vacancy rate of 29.7% which was higher than the 28.6% at the close of Q1 2022. Absorption remained negative with 207K SF of space vacated, worse than the 129K SF of negative absorption in Q1 2022. Leasing activity increased with 252K SF of deals completed. No new space was delivered in Q2 2022, but there is currently 20K SF of office space under construction.
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(207,043)
(128,539)
(247,781)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
29.7%
28.6%
27.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
251,830
187,919
69,527
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
$27.38
$27.49
$26.84
TOP LEASE TRANSACTIONS • Wholesale Electric Supply has signed a 20K SF lease in 1500 CityWest. • Jordan & Skala has signed a 12K SF renewal in Millennium Tower. • HOAR Construction has signed a 11K SF lease in Towers at Westchase I. • EDG, Inc has signed a 8K SF expansion in One Westchase Center.
HLC DEAL
• BGE, Inc has signed a 8K SF expansion in One Westchase Center.
HLC DEAL
• Nguyen & Chen has signed a 8K SF lease in Towers in Westchase II. • Walsh Gallegos Trevino Kyle & Robinson, P.C. has signed a 8K SF lease in Towers at Westchase I. • Turner & Townsend has signed a 6K SF renewal in One Westchase Center.
HLC DEAL
• Christian Provider Services has signed a 2K SF lease in One Westchase Center.
HLC DEAL
• Suarez Candler Law has signed a 1K SF renewal in One Westchase Center.
HLC DEAL
• Quadro Architecture, LLC has signed a 1K SF lease in One Westchase Center.
HLC DEAL
• Sovee Enterprises, Inc has signed a 613 SF lease in One Westchase Center.
HLC DEAL
DEALS IN THE MARKET • 9801 Westheimer Road – a 211K SF class A office building • Oak Park Office Center | 5850 Rogerdale Road – a 173K SF class B office building • One Oak Park | 6002 Rogerdale Road – a 153K SF class A office building • The Mosing Building | 10260 Westheimer Road – a 131K SF class B office building • 3990 Rogerdale Road – a 128K SF class B office building • 2610 West Sam Houston Parkway South – a 26K SF class B office building
VITAL STATS 32.0%
300,000 200,000
24.0% 100,000 16.0%
0 (100,000)
8.0% (200,000) 0.0%
(300,000) Q2 19
Q3 19
Q4 19
Q1 20
ABSORPTION
Q2 20
Q3 20
Q4 20
Q1 21
Q2 21
Q3 21
DELIVERIES
Q4 21
Q1 22
Q2 22
VACANCY
NEW DEVELOPMENTS • 3860 Westmart Drive – a 20K SF class B office building
LARGE EXISTING VACANCIES • 10200 Bellaire Boulevard – 568,458 SF • Pinnacle Westchase | 3010 Briarpark Drive – 356,648 SF • Towers at Westchase II | 10350 Richmond Avenue – 189,328 SF • One BriarLake Plaza | 2000 West Sam Houston Parkway South – 183,246 SF • CityWestPlace Building 4 | 2103 CityWest Boulevard – 168,812 SF • 2500 CityWest | 2500 CityWest Boulevard – 153,763 SF • Westchase Point | 1250 West Sam Houston Parkway – 147,403 SF • West8 Tower | 10205 Westheimer Road – 145,390 SF • Two BriarLake Plaza | 2050 West Sam Houston Parkway South – 143,337 SF • One Westchase Center | 10777 Westheimer Road – 138,385 SF • Royal Oaks Centre | 11490 Westheimer Road – 134,943 SF • 10333 Richmond Avenue – 133,054 SF • Westchase Park II | 3600 West Sam Houston Parkway South – 125,660 SF • Reserve at Westchase | 3250 Briarpark Drive – 125,544 SF • Briarpark Green | 3151 Briarpark Drive – 122,881 SF • Westchase Park I | 3700 West Sam Houston Parkway South – 119,206 SF • Towers at Westchase I | 10370 Richmond Avenue – 108,703 SF
13 Q2 2022 HOUSTON OFFICE MARKET REPORT
SUBMARKET INTELLIGENCE
GREENSPOINT HLC OUTLOOK
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(69,774)
87,146
2,760
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
44.3%
43.8%
44.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
107,257
132,000
153,236
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
$17.95
$18.00
$18.23
TOP LEASE TRANSACTIONS •
Parcira has signed a 18K SF lease in 3808 World Houston Parkway.
•
Harris County Sheriff’s Emergency Response has signed a 10K SF lease in the Offices at Interwood.
VITAL STATS 46.0% 250,000 45.0% 100,000 44.0%
(50,000)
43.0%
42.0%
(200,000) Q2 19
Q3 19
Q4 19
Q1 20
ABSORPTION
Q2 20
Q3 20
Q4 20
Q1 21
Q2 21
DELIVERIES
Q3 21
Q4 21
Q1 22
Q2 22
VACANCY
•
North Harris Parkway Center | 16416 Northchase Drive – a 64K SF class B office building
•
MainStreet America | 18750 Interstate 45 – a 44K SF class A office building
•
Century Plaza | 711 Airtex Drive – a 43K SF class B office building
•
Red Oak Cardiovascular | 17400 Red Oak Drive – a 33K SF class B medical office building
•
Flatiron Construction has signed a 8K SF lease in Bridgewood I.
•
Harper Brothers Construction has signed a 5K SF expansion in Bridgewood I.
•
3808 World Houston Parkway – a 22K SF class A office building
•
Benchmark Houston Builders has signed a 5K SF renewal in Greenbriar Place.
•
Red Oak Professional | 17222 Red Oak Drive – a 21K SF class B medical office building
•
Cypress Pipeline Services has signed a 4K SF renewal in Greenbriar Place.
•
SecureComm Technologies has signed a 3K SF renewal in Greenbriar Place.
• •
HLC DEAL
HLC DEAL
HLC DEAL
HLC DEAL
HLC DEAL
HLC DEAL
HLC DEAL
LARGE EXISTING VACANCIES •
CityNorth 5 | 17001 Northchase Drive – 458,331 SF
Complete Care Clinic has signed a 3K SF lease in Bridgewood I.
•
CityNorth 6 | 12450 Greenspoint Drive – 343,495 SF
Prep at Home, LLC has signed a 1K SF renewal in Greenbriar Place.
•
CityNorth 1 | 233 Benmar Drive – 253,562 SF
•
222 Benmar | 222 Benmar Drive – 198,256 SF
•
363 North Belt | 363 North Sam Houston Parkway East – 196,927 SF
•
Glenborough Tower | 100 Glenborough Drive – 172,454 SF
•
396 West Greens Road – 164,411 SF
•
Greens Crossing II | 820 Gears Road – 157,790 SF
•
North Houston Tech Tower | 12707 North Freeway – 157,276 SF
DEALS IN THE MARKET •
CityNorth 1 | 233 Benmar Drive – a 254K SF class A office building
•
Northpoint Central | 2 Northpoint Drive – a 180K SF class A office building
•
2350 North Belt Tower | 2350 North Sam Houston Parkway East – a 166K SF class A office building
•
South Spring Office Park | 140 Cypress Station Drive – a 163K SF class B office building
•
World Houston Plaza | 15710 John F Kennedy Boulevard – 154,747 SF
•
16666 Northchase Drive – 147,135 SF
•
North Houston Tech Tower | 12707 North Freeway – a 157K SF class B office building
•
13401 North Freeway | 13401 North Interstate 45 – 143,410 SF
•
13401 North Freeway | 13401 I-45 North – a 143K SF class A office building
•
Bridgewood II | 652 North Sam Houston Parkway East – 142,431 SF
•
Imperial 20 | 16800 Imperial Valley Drive – a 112K SF class B office building
•
333 Northbelt | 333 North Sam Houston Parkway East – 140,476 SF
•
Heritage Park | 390 Benmar Drive – a 104K SF class B office building
•
Northbelt Office Center V | 500 North Sam Houston Parkway West – 135,030 SF
•
Intercontinental Park III | 16701 Greenspoint Park Drive – a 90K SF class B office building
•
CityNorth 2 | 16825 Northchase Drive – 134,305 SF
•
Greens Crossing I | 810 Gears Road – a 79K SF class B office building
•
2350 North Belt Tower | 2350 North Sam Houston Parkway East – 128,931 SF
•
Greens Crossing II | 820 Gears Road – a 79K SF class B office building
•
397 North Sam Houston Parkway East – a 68K SF class B office building
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 Q2 2022, the Greenspoint submarket had a vacancy rate of 44.3% which was slightly higher than the 43.8% at the close of Q1 2022. Absorption shifted back negative with 70K SF of space vacated, down from the 87K SF of positive absorption in Q1 2022. Leasing activity dropped with 107K SF of deals completed. There is currently no office space under construction and no space was delivered in Q2 2022.
14 Q2 2022 HOUSTON OFFICE MARKET REPORT
SUBMARKET INTELLIGENCE
FM 1960 CORRIDOR HLC OUTLOOK HLC’s FM 1960 Corridor office submarket includes CoStar’s FM 1960/Champions and FM 1960/Highway 249 submarkets. The submarket follows FM 1960 from Clay Road in West Houston up to Ella Boulevard in North Houston. This submarket is home to more than 12M SF of class A and B office space. At the close of Q2 2022, the FM 1960 Corridor submarket had a vacancy rate of 16.1% which was higher than the 15.4% at the close of Q1 2022. Absorption remained negative with 79K SF of space vacated, which was worse than the 11K SF of negative absorption in Q1 2022. Leasing activity dropped with 95K SF of deals completed. There is currently no office space under construction and no space was delivered in Q2 2022.
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(79,306)
(10,568)
(54,290)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
16.1%
15.4%
15.4%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
95,114
161,400
141,453
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
$21.31
$22.30
$21.40
TOP LEASE TRANSACTIONS
VITAL STATS 18.0%
150,000 100,000 50,000
16.0%
0 (50,000) (100,000)
14.0%
(150,000) (200,000) 12.0%
(250,000) Q2 19
Q3 19
Q4 19
Q1 20
ABSORPTION
Q2 20
Q3 20
Q4 20
Q1 21
Q2 21
Q3 21
DELIVERIES
Q4 21
Q1 22
Q2 22
VACANCY
• 11911 FM 529 – 80,864 SF
• ION Associates has signed a 4K SF lease in Two Chasewood.
• North Cypress POB II | 21212 Northwest Freeway – 73,033 SF
• Ingenes Institute has signed a 3K SF lease in Cypresswood Crossing.
• Centre Cypress Creek (C-3) | 20455 State Highway 249 – 71,628 SF
• Vulcraft-TX has signed a 3K SF renewal in Cypresswood Crossing.
• Willowchase Office Building | 8223 Willow Place Drive South – 62,538 SF
• LondonE Spa has signed a 1K SF lease in the Willow Centre Office Condos.
• Cy-Fair Medical Office Building | 13114 FM 1960 West – 59,130 SF
• E.R. McDaniel, CPA has signed a 659 SF lease in Cypresswood Crossing.
• Two Chasewood | 20405 State Highway 249 – 56,999 SF
HLC DEAL
HLC DEAL
HLC DEAL
HLC DEAL
DEALS IN THE MARKET • Steeplechase Corner Professional | 11301 Fallbrook Drive – a 61K SF class B medical office building • Copperfield Professional Building | 7171 Highway 6 North – a 53K SF class B office building • Building One | 8403 Louetta Road – a 26K SF class B medical office building • Cairnway Plaza | 16125 Cairnway Drive – a 25K SF class B medical office building • Butte Creek Professional | 17154 Butte Creek Road – a 21K SF class B office building • 6810 West FM 1960 – a 20K SF class B office building
LARGE EXISTING VACANCIES • 11403 Compaq Center West Drive – 246,341 SF • University Park – Building 9 & 10 | 11450 Compaq Center West Drive – 208,841 SF • Chasewood Crossing Three | 19350 State Highway 249 – 97,877 SF
• Chasewood Crossing I | 19500 State Highway 249 – 56,561 SF
15 Q2 2022 HOUSTON OFFICE MARKET REPORT
SUBMARKET INTELLIGENCE
INNER LOOP HLC OUTLOOK
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
107,543
(60,982)
(241,840)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
18.6%
19.0%
17.6%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
187,750
311,545
227,191
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
266,000
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
$33.09
$33.44
$33.29
DEALS IN THE MARKET
VITAL STATS 20.0%
300,000
18.0% 200,000
16.0% 14.0%
100,000
12.0% 10.0%
0
8.0% (100,000)
6.0% 4.0%
(200,000)
2.0% 0.0%
(300,000) Q2 19
Q3 19
Q4 19
Q1 20
ABSORPTION
Q2 20
Q3 20
Q4 20
Q1 21
Q2 21
DELIVERIES
Q3 21
Q4 21
Q1 22
Q2 22
VACANCY
LARGE EXISTING VACANCIES
• 9009 West Loop South – a 473K SF class B office building
• Twelve Greenway Plaza | 12 Greenway Plaza – 402,284 SF
• 3555 Timmons Lane – a 226K SF class A office building
• Nine Greenway Plaza | 9 Greenway Plaza – 311,411 SF
• 3000 Weslayan Street – an 82K SF class B office building
• Four Greenway Plaza | 4 Greenway Plaza – 242,628 SF
• Kirby Mansion | 2000 Smith Street – a 62K SF mansion turned class B office building
• America Tower | 2929 Allen Parkway – 235,953 SF
• 2303 Smith | 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 • Houston Endowment HQ | 3615 Willia Street – a 40K SF class B office building
• Phoenix Tower at Greenway Plaza | 3200 Southwest Freeway – 228,355 SF • Three Greenway Plaza | 3 Greenway Plaza – 177,805 SF • Bellaire Station | 6500 West Loop South – 167,813 SF • Wortham Tower | 2727 Allen Parkway – 121,769 SF • One Greenway Plaza | 1 Greenway Plaza – 120,665 SF • Weslayan Tower | 24 Greenway Plaza – 114,975 SF • Eight Greenway Plaza | 8 Greenway Plaza – 107,520 SF • Twenty Greenway Plaza | 20 Greenway Plaza – 102,333 SF
The Inner Loop office submarket neighbors some of Houston’s highest-income areas and features smaller submarkets such as Midtown, Bellaire, and Greenway Plaza. Given its convenient location between the West Loop, Medical Center, and CBD submarkets, the Inner Loop continues to be one of the most desirable submarkets in Houston. Recent improvements to the master-planned Greenway Plaza complex and other developments in the area have helped breathe life back into this submarket. At the close of Q2 2022, the Inner Loop submarket had a vacancy rate of 18.6% which was slightly lower than the 19.0% at the close of Q1 2022. Absorption shifted back positive with 108K SF of space absorbed, up from the 61K SF of negative absorption in Q1 2022. Leasing activity decreased with 188K SF of deals completed. No new space was delivered in Q2 2022, but there is currently 40K SF of office space under construction along Willia Street for Houston Endowment’s new headquarters.
16 Q2 2022 HOUSTON OFFICE MARKET REPORT
SUBMARKET INTELLIGENCE
MEDICAL CENTER 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. A large majority of the 11.2M 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 Q2 2022, the Medical Center submarket had a vacancy rate of 9.8% which was almost identical to the 9.7% at the close of Q1 2022. Absorption shifted negative with 8K SF of space vacated, down from the 87K SF of positive absorption in Q1 2022. Leasing activity decreased with 34K SF of deals completed. No space was delivered in Q2 2022, but there is currently 2.4M SF of office space under construction.
VITAL STATS
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(7,936)
86,899
(89,152)
12.0%
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
10.0%
9.8%
9.7%
8.8%
8.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
6.0%
34,543
483,646
108,626
4.0%
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
-
116,500
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
$32.23
$31.18
$30.73
TOP LEASE TRANSACTION • Dr. Scott Sherron has signed a 3K SF lease in 6624 Fannin Tower.
DEALS IN THE MARKET • US Pain & Spine Institute | 5445 La Branch Street – a 35K SF class B medical office building
NEW DEVELOPMENTS • TMC Industry Building | 1891 Old Spanish Trail – a 700K SF class A medical office building • Horizon Tower | 6929 Main Street – a 522K SF class A medical office building • Levit Green Phase I | 3131 Holcombe Boulevard – a 294K SF class A medical office building • TMC3 Collaborative Building | Old Spanish Trail – a 250K SF class A office building • 1615 South Loop West – a 156K SF class A medical office building • 1802 Binz Street – a 39K SF class A medical office building
200,000 150,000 100,000 50,000 0 (50,000) (100,000)
2.0%
(150,000)
0.0%
(200,000)
Q2 19
Q3 19
Q4 19
Q1 20
ABSORPTION
Q2 20
Q3 20
Q4 20
Q1 21
Q2 21
DELIVERIES
Q3 21
Q4 21
Q1 22
Q2 22
VACANCY
LARGE EXISTING VACANCIES • One Fannin | 7400 Fannin Street – 152,247 SF • 6624 Fannin Tower | 6624 Fannin Street – 133,807 SF • TMC Innovation | 2450 Holcombe Road – 119,260 SF • Museo Plaza Office Building | 5115 Fannin Street – 98,720 SF • Houston Medical Plaza Professional Building | 6655 Travis Street – 96,722 SF • Museum Medical Tower | 1213 Hermann Drive – 71,830 SF • 1919 Pressler Street – 68,607 SF • University Medical Plaza I | 7501 Fannin Street – 68,408 SF
17 Q2 2022 HOUSTON OFFICE MARKET REPORT
SUBMARKET INTELLIGENCE
SOUTHWEST HLC OUTLOOK VITAL STATS
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(73,611)
(31,700)
19,610
22.5%
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
22.0%
21.3%
20.5%
21.7%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
68,779
39,802
119,145
20.0%
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
19.5%
-
-
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
$18.48
$18.05
$17.19
DEALS IN THE MARKET • Southwest Corporate Center | 97009702 Bissonnet Street – a 526K SF class B office building
150,000 100,000
21.5% 50,000
21.0% 20.5%
0 (50,000) (100,000)
19.0% 18.5%
(150,000)
Q2 19
Q3 19
Q4 19
Q1 20
ABSORPTION
Q2 20
Q3 20
Q4 20
Q1 21
Q2 21
Q3 21
DELIVERIES
Q4 21
Q1 22
Q2 22
VACANCY
NEW DEVELOPMENTS • 13930 Bellaire Boulevard – a 71K SF class B medical office building
• American First Tower | 9999 Bellaire Boulevard – a 212K SF class A office building
LARGE EXISTING VACANCIES
• 7011 Southwest Freeway – a 113K SF class B office building
• Houston Technology Center | 5959 Corporate Drive – 353,856 SF
• Southwest Medical Plaza | 8200 Wednesbury Lane – an 84K SF class B medical office building
• Southwest Corporate Center | 97009702 Bissonnet Street – 217,837 SF
• 8700 Commerce Park – a 79K SF class B office building • 6100 Corporate Drive – a 73K SF class B office building
• One Arena Place | 7322 Southwest Freeway – 150,229 SF • Two Arena Place | 7324 Southwest Freeway – 150,086 SF • 7011 Southwest Freeway – 112,590 SF
• Harwin International Plaza | 7171 Harwin Drive – a 73K SF class B office building
• Southwest Medical Plaza I | 7777 Southwest Freeway – 83,460 SF
• 7850 Parkwood Circle Drive – a 34K SF class B medical office building
• Centre One | 9800 Centre Parkway – 79,005 SF
• 9200 West Sam Houston Parkway South – a 23K SF class B office building
• Westwood Green | 9494 Southwest Freeway – 73,072 SF
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 and deliveries here have been significantly less than in other submarkets recently. At the close of Q2 2022, the Southwest submarket had a vacancy rate of 21.3% which was higher than the 20.5% at the close of Q1 2022. Absorption remained negative with 74K SF of space vacated, worse than the 32K SF of negative absorption in Q1 2022. Leasing activity increased with 69K SF of deals completed. No new office space was delivered in Q2 2022, but there is currently 71K SF of office space under construction.
18 Q2 2022 HOUSTON OFFICE MARKET REPORT
SUBMARKET INTELLIGENCE
KATY FREEWAY EAST 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 Midway’s CityCentre and MetroNational’s Memorial City mixed-use developments. At the close of Q2 2022, the Katy Freeway East submarket had a vacancy rate of 9.6% which was slightly lower than the 10.2% at the close of Q1 2022. Absorption remained positive with 62K SF of space absorbed, down from the 135K SF of positive absorption in Q1 2022. Leasing activity increased with 190K SF of deals completed, and MetroNational has broken ground on a new 189K SF class A office building.
VITAL STATS
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
61,528
135,129
115,844
14.0%
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
12.0%
9.6%
10.2%
11.4%
10.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
8.0%
190,275
140,562
289,401
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
$28.77
$29.14
$30.96
TOP LEASE TRANSACTIONS • Assett Living has signed a 24K SF lease in 945 Bunker Hill. • BW Energy USA Management has signed a 23K SF lease in 945 Bunker Hill. • RyStad Energy has signed a 23K SF lease in 920 Memorial City Way. • Verdun Oil Company has signed a 23K SF lease in 945 Bunker Hill. • Artemis DNA has signed a 18K SF lease in 10777 Clay Road. • Profrac has signed a 7K SF lease in 945 Bunker Hill. • CNOOC Petroleum has signed a 6K SF lease in the Murphy Building. • IFMA has signed a 6K SF lease in One Memorial City Plaza.
DEALS IN THE MARKET • Shadow Wood | 10615 Shadow Wood Drive – a 42K SF class B office building
500,000 400,000 300,000 200,000
6.0% 100,000
4.0%
0
2.0% 0.0%
(100,000) Q2 19
Q3 19
Q4 19
Q1 20
ABSORPTION
Q2 20
Q3 20
Q4 20
Q1 21
Q2 21
Q3 21
DELIVERIES
Q4 21
Q1 22
Q2 22
VACANCY
NEW DEVELOPMENTS • 9753 Katy Freeway – a 189K SF class A office building
LARGE EXISTING VACANCIES • 10777 Clay Road – 203,847 SF • Memorial Hermann Tower | 929 Gessner Road – 87,398 SF • Village Tower II | 9651 Katy Freeway – 85,669 SF • Two Memorial City Plaza | 820 Gessner Road – 58,046 SF • 920 Memorial City Way – 51,649 SF • 9900 Westpark Drive – 43,616 SF
19 Q2 2022 HOUSTON OFFICE MARKET REPORT
SUBMARKET INTELLIGENCE
NORTHWEST HLC OUTLOOK
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(90,310)
122,591
(53,093)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
21.7%
21.1%
21.9%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
154,949
184,050
341,193
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
$23.70
$23.15
$23.08
TOP LEASE TRANSACTIONS • ARCO Design & Build has signed a 17K SF lease in North Loop Center.
DEALS IN THE MARKET
VITAL STATS 24.0%
150,000
16.0%
0
8.0%
(150,000)
0.0%
(300,000)
Q2 19
Q3 19
Q4 19
Q1 20
ABSORPTION
Q2 20
Q3 20
Q4 20
Q1 21
Q2 21
DELIVERIES
Q3 21
Q4 21
Q1 22
Q2 22
VACANCY
LARGE EXISTING VACANCIES • Westway II | 4424 West Sam Houston Parkway North – 203,153 SF • Westway III | 4425 Westway Park Boulevard – 182,004 SF
• One Northwind Plaza | 7600 West Tidwell Road – a 281K SF class B office building
• Beltway Lakes Phase III | 5775 North Sam Houston Parkway West – 163,528 SF
• Sam Houston Crossing One | 10343 Sam Houston Park Drive – a 159K SF class A office building
• Westway One | 11210 Equity Drive – 143,960 SF
• 1919 North Loop West Building | 1919 North Loop West – a 143K SF class B medical office building
• Brookhollow Central III | 2950 North Loop Freeway West – 132,675 SF • Brookhollow Central II | 2900 North Loop Freeway West – 125,254 SF
• Citadel Plaza | 2600 Citadel Plaza Drive – a 121K SF class B office building
• Building 4 | 4920 Westway Park Boulevard – 108,855 SF
• 4601 Westway Park Boulevard – an 85K SF class B office building
• Building 2 | 11000 Corporate Centre Drive – 101,796 SF
• Northwest Plaza | 5500 Northwest Central Drive – a 75K SF class B office building
• Sam Houston Crossing One | 10343 Sam Houston Park Drive – 91,449 SF
• Building II | 4805 Westway Park Boulevard – a 73K SF class B office building
• Northwest Crossing | 13333 Northwest Freeway – 90,527 SF
• Legacy Park Business Park | 10943 North Sam Houston Parkway West – a 64K SF class B office building • 10050 Northwest Freeway – a 43K SF class B office building • 1100 West 23rd Street – a 30K SF class B office building • 10500 Northwest Freeway – a 30K SF class B office building • 16060 Dillard Drive – a 24K SF class B office building
NEW DEVELOPMENTS • 6900 Hollister Street – a 99K SF class B office building
• 13111 Northwest Freeway – 91,221 SF
• 4601 Westway Park Boulevard – 84,562 SF
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, Northwest Far, and West Belt 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 15M 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 Q2 2022, the Northwest submarket had a vacancy rate of 21.7% which was slightly higher than the 21.1% at the close of Q1 2022. Absorption shifted negative with 90K SF of space vacated, down from the 123K SF of positive absorption in Q1 2022. Leasing activity decreased with 155K SF of deals completed. No new office space was delivered in Q2 2022, but there is currently 156K SF of office space under construction.
20 Q2 2022 HOUSTON OFFICE MARKET REPORT
SUBMARKET INTELLIGENCE
SUGAR LAND 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 CocaCola, 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 Q2 2022, the Sugar Land submarket had a vacancy rate of 18.7% which was slightly higher than the 18.3% at the close of Q1 2022. Absorption remained negative with 36K SF of space vacated, worse than the 26K SF of negative absorption in Q1 2022. Leasing activity increased with 82K SF of deals completed. There is currently no office space under construction and no office space was delivered in Q2 2022.
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(36,454)
(26,366)
(183,467)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
18.7%
18.3%
17.9%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
81,763
57,852
95,583
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
$30.62
$30.23
$30.62
TOP LEASE TRANSACTIONS • XS Chemicals has signed a 3K SF lease in Sugar Creek on the Lake. • Atlas Healthcare Partners has signed a 3K SF lease in Building B at Riverpark Ridge.
HLC DEAL
VITAL STATS 20.0%
100,000 50,000
15.0% 0 10.0%
(50,000) (100,000)
5.0% (150,000) 0.0%
(200,000) Q2 19
Q3 19
Q4 19
Q1 20
ABSORPTION
Q2 20
Q3 20
Q4 20
Q1 21
Q2 21
DELIVERIES
Q3 21
Q4 21
Q1 22
Q2 22
VACANCY
• Sugar Creek Place I | 14100 Southwest Freeway – 105,906 SF • The Minute Maid Building | 2150 Town Square Place – 81,501 SF • Imperial Plaza | 3 Sugar Creek Center Boulevard – 71,588 SF
• NetWorth Realty of Houston has signed a 2K SF lease in 4800 Sugar Grove.
• ABB Network Management | 1601 Industrial Boulevard – 69,241 SF
• Genesis Medical Diagnostics has signed a 1K SF lease in the Riverpark Ridge Office Condos.
• Texas Instruments | 13905 University Boulevard – 55,195 SF
HLC DEAL
• H-Town Living, LLC has signed an executive suite lease at the Glenn Lakes Professional Building.
HLC DEAL
DEALS IN THE MARKET • Sugar Land Business Park | 1410 Gillingham Lane – a 150K SF class B office building • 7619 Branford Place – a 38K SF class B medical office building
LARGE EXISTING VACANCIES • Sugar Creek on the Lake | 14141 Southwest Freeway – 231,736 SF • Pod B | 1 Fluor Daniel Drive – 226,800 SF • Pod C | 1 Fluor Daniel Drive – 221,600 SF • Pod A | 1 Fluor Daniel Drive – 210K SF • Sugar Creek Tower II | 13131 Dairy Ashford Road – 118,050 SF • Sugar Creek Tower I | 13135 Dairy Ashford Road – 110,031 SF
• Comerica Office Tower | 1 Sugar Creek Center Boulevard – 51,788 SF • Sugar Creek Place II | 14140 Southwest Freeway – 49,569 SF • Two Sugar Creek Center | 77 Sugar Creek Center Boulevard – 46,775 SF • The Texas Drive Building | 2245 Texas Drive – 46,737 SF • The Plaza Building | 2277 Plaza Drive – 37,238 SF • 7619 Branford Place – 36,095 SF • Offices at Kensington Phase I | 1600 Highway 6 – 35,433 SF • Main Office | 15500 Voss Road – 35,028 SF • Commerce Green One | 14090 Southwest Freeway – 33,712 SF • 12603 Southwest Freeway – 32,609 SF • Building A | 18722 University Boulevard – 27K SF
21 Q2 2022 HOUSTON OFFICE MARKET REPORT
SUBMARKET INTELLIGENCE
CLEAR LAKE HLC OUTLOOK
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
95
(1,240)
87,514
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
13.2%
13.2%
13.6%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
54,964
70,821
42,310
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
$22.65
$22.69
$21.92
TOP LEASE TRANSACTIONS • OEC has signed a 7K SF lease in Hercules I. • JSC Federal Credit Union has signed a 5K SF lease in Hercules I. • Cyber One Solutions has signed a 5K SF lease in 1110 Nasa Parkway.
DEALS IN THE MARKET • Gemini Office Park | 600 Gemini Street – a 363K SF class B office building • Gemini Plaza | 1150 Gemini Street – a 159K SF class B office building • Jacobs | 2224 Bay Area Boulevard – a 139K SF class B office building • 12000 Aerospace | 12000 Aerospace Avenue – an 80K SF class B office building • Hercules I | 1300 Hercules Avenue – a 66K SF class A office building • Hercules II | 1290 Hercules Avenue – a 66K SF class A office building • 2222 Bay Area Boulevard – a 66K SF class B 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
VITAL STATS 20.0%
100,000 80,000
15.0% 60,000 10.0%
40,000 20,000
5.0% 0 0.0%
(20,000)
Q2 19
Q3 19
Q4 19
Q1 20
ABSORPTION
Q2 20
Q3 20
Q4 20
Q1 21
Q2 21
Q3 21
DELIVERIES
Q4 21
Q1 22
Q2 22
VACANCY
NEW DEVELOPMENTS • Axiom HQ | 13200 Space Center Boulevard – a 400K SF class A office building • Intuitive Machines HQ | 13150 Space Center Boulevard – a 125K SF class B office building • 11603 Aerospace Avenue – a 106K SF class B office building • 1715 South Friendswood – a 106K SF class A medical office building • Orion Medical Building | 13009 Gulf Commerce Drive – a 47K SF class A medical office building
LARGE EXISTING VACANCIES • Gemini Office Park | 600 Gemini Street – 363,050 SF • Gemini Plaza | 1150 Gemini Street – 158,976 SF • Two Corporate Plaza | 2625 Bay Area Boulevard – 86,685 SF • One Corporate Plaza | 2525 Bay Area Boulevard – 70,963 SF • 13100 Space Center Boulevard – 67,086 SF • Saturn One | 18050 Saturn Lane – 45,587 SF
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 Q2 2022, the Clear Lake submarket had a vacancy rate of 13.2% which was identical to the 13.2% at the close of Q1 2022. Absorption barely shifted back positive with 95 total SF of space absorbed, up from the 1,240 SF of negative absorption in Q1 2022. Leasing activity decreased with 55K SF of deals completed. No new office space was delivered in Q2 2022, but there is currently 784K SF of office space under construction.
22 Q2 2022 HOUSTON OFFICE MARKET REPORT
SUBMARKET INTELLIGENCE
SUBURBAN OUTLIERS HLC OUTLOOK HLC’s Far West office submarket includes CoStar’s Katy Freeway/Grand Parkway submarket which is about 25 miles west of Houston’s CBD. Growth among all product types in West Houston has been a common theme and the office sector has been no exception as it is located close to Houston’s fastestgrowing 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 Q2 2022, the Suburban Outliers submarket had a vacancy rate of 13.2% which was almost identical to the 13.3% at the close of Q1 2022. Absorption remained positive with 94K SF of space absorbed, down from the 198K SF of positive absorption in Q1 2022. Leasing activity dropped with 183K SF of deals completed. There is currently 599K SF of office space under construction, and 56K SF of space was delivered in Q2 2022.
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
94,162
197,767
87,607
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
13.2%
13.3%
14.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
182,777
206,238
252,466
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
56,040
181,272
189,502
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
$26.42
$26.06
$27.01
TOP LEASE TRANSACTIONS
VITAL STATS 16.0%
375,000 300,000
12.0%
225,000 150,000
8.0% 75,000 0
4.0%
(75,000) 0.0%
(150,000) Q2 19
Q3 19
Q4 19
Q1 20
ABSORPTION
Q2 20
Q3 20
Q4 20
Q1 21
Q2 21
Q3 21
Q4 21
DELIVERIES
Q1 22
Q2 22
VACANCY
LARGE EXISTING VACANCIES
•
Knight Materials has signed a 4K SF lease in Beltway Plaza.
•
Central Brazoria County Business Park | 4005 Technology Drive – 257,399 SF
•
Gabriella’s Beauty Bar has signed a 1K SF lease in the Kingsley Ridge Office Condos.
•
Mason Creek Office Center II | 21700 Merchants Way – 127,955 SF
•
Primary Medical Tower II | 2800 Garth Road – 102,084 SF
•
Katy Ranch Phase II | 24285 Katy Freeway – 87,334 SF
•
7524 Sherman Street – 75,280 SF
•
5616 Lawndale Street – 66,786 SF
•
Katy MOB II | 707 South Fry Road – 65,938 SF
•
12301 Kurkland Drive – 59,860 SF
•
The Offices at Greenhouse | 19219 Katy Freeway – 56,432 SF
•
Westland Bunker | 550 Club Drive – 56,379 SF
•
Det Norske Veritas | 1400 Ravello Road – 51,963 SF
•
New Park Drilling Fluids | 21920 Merchants Way – 51,256 SF
•
Printhouse | 2410 Polk Street – 51,107 SF
•
Magnolia Corporate Campus | 32100 Dobbin Huffsmith Road – 46,832 SF
HLC DEAL
DEALS IN THE MARKET •
Westland Bunker | 550 Club Drive – a 240K SF class B office building
•
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
•
5616 Lawndale Street – a 96K SF class B medical office building
•
Beltway Office Park | 3737-3743 Red Bluff Road – an 86K SF class B office building
•
11550 Fuqua Street – an 84K SF class B office building
•
1001 Shaw Avenue – an 80K SF class B office building
•
7524 Sherman Street – a 75K 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
Northeast Medical Tower II | 18980 North Memorial Drive North – 46,027 SF
•
Emancipation Center | 3131 Emancipation Avenue – 45,206 SF
•
Bldg G - Marcel Boulevard | 1135 Grand Central Boulevard – 45K SF
•
1517 Thompson Road – 42,551 SF Katy Ranch Phase I | 24275 Katy Freeway – 41,639 SF
NEW DEVELOPMENTS •
100 Jensen Drive – a 300K SF class A three (3) building mixed-use office complex
•
24200 Via Mazzini Way – a 80K SF class A office building
•
•
4001 Gulf Freeway – a 60K SF class B office building
•
Professional Building 6 | 2765-2785 Gulf Freeway South – 41,625 SF
•
17122 Telge Road – a 59K SF class B office building
•
2301 Commerce Street – 40,202 SF
•
4410 Reed Road – a 57K SF class B medical office building
•
Magnolia Medical Specialists | 3786 FM 1488 Road – a 53K SF class B medical office building
•
Towne Lake Office Condos | 10242 Greenhouse Road – a 50K SF class B office condo complex
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
