Office Highlights
Houston . Q1 2013
2013 continues 2012 trend,
with record job growth and
robust office activity
throughout Houston
Houston’s office market continues to benefit from being “last in, first out”
of the recession. While the nationwide office market lags behind in the
recovery, Houston continues to be a leader in both job growth and
market activity. Leasing within tight submarkets such as the CBD or
West Houston markets continues to fare well, as landlords maintain a
hold on the marketplace with flat to slightly decreased offerings of
concessions and free rent. However, as we enter into 2013, a savvy
tenant and broker can find value options throughout the market.
Houston’s burgeoning economy, the main driving force behind its office
market, continues its robust trendsetting. The Houston MSA added
approximately 118,200 new jobs, a 4.5 percent annual increase, in the
12 months ending January 2013. Much of the job growth stems from the
private sector, with 87,500 new jobs being added during the same time
period. Houston continues to lead the overall economy in the state of
Texas, as no other MSA added as many jobs. On the national front,
Houston had the fastest growing GDP of the top 10 largest metro areas,
with a 3.7 percent increase. All signs point to Houston continuing to be a
market of growth and prosperity in 2013.
Citywide, look for rates to continue their climb, vacancies to tighten and
competition for space to intensify. Recent construction starts in several
of the more resilient submarkets will eventually alleviate market
tightness. However, with most of the new construction slated for delivery
in the second half of 2013 and into 2014, rents are projected to continue
their upward climb, vacancies to decrease and absorption to remain
positive in most major Houston submarkets, all signs of a landlordfavorable market.
Leasing activity
• Occidental Oil and Gas has renewed its nearly 600,000 square feet
at 3 and 5 Greenway Plaza. In addition, Occidental leased
approximately 62,000 square feet of additional space formerly
occupied by Camden Property Trust in 3 Greenway Plaza.
• Energy XXI has expanded its space in One City Centre. The firm
recently took an additional 28,168 square feet of space, bringing its
total to 128,133 square feet at 1021 Main in the CBD.
• Cameron has leased 106,801 square feet at 8 West Centre (3505
W. Sam Houston Parkway). Cameron and Helix Energy will be
taking the entirety of the 227,000-square-foot Katy Freeway building,
which is scheduled to be completed in July.
Tour activity
Leasing volume
Rents
Concessions
Sales volume
Construction
deliveries
Construction
starts
Arrows represent change from prior quarter
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Transcanda recently announced its anticipated move into six floors at
Bank of America Center in the CBD. The oil pipeline company will be
occupying floors 7, 10-12, and 14-15, totaling approximately 180,084
square feet.
Camden Property Trust moved to 11 Greenway Plaza in Q3 2013.
The company will be taking floors 23-25, totaling 86,733 square feet,
expanding 26,000 square feet from its current space.
Marathon Oil Tower (5555 San Felipe) in the Galleria submarket
reported several new leases, including Baker Hughes taking 41,119
square feet of new space and Duke Energy renewing 42,576 square
feet of space in the Class A building.
BakerHostetler signed a 75,737-square-foot lease for space at BG
Group Place (811 Main) in the CBD and will move into the space
during Q3 2013. The law firm will occupy floors 11-13.
ReedSmith entered the Houston office market by signing a lease in
BG Group Place (811 Main). The Pittsburgh-based law firm will
occupy two full floors in the building.
PriceWaterhouseCoopers is leasing approximately 125,000 square
feet on floors 54-58 at Wells Fargo Plaza (1000 Louisiana) in the CBD
commencing in 2015.
Tenants in the market
• Bechtel Corporation, 630,000 square feet (West Houston).
• American Bureau of Shipping, 400,000 square feet (Woodlands).
Sales activity
On an investment front, Houston remains a market to watch, as investors
are passing on the inflated prices in the costal markets (New York, San
Francisco, Washington, DC and Boston) and adjusting their strategies to
focus on markets that provide yield and price advantages. This was
further enforced when Houston was named fourth best U.S. city (and fifthbest worldwide) for real estate investment dollars. Houston ranks behind
only New York, San Francisco and Washington DC within the United
States (with London out-ranking Houston on a global scale).
Jones Lang LaSalle • Houston Office Highlights • Q1 2013 1
• Invesco RE purchased the iconic Williams Tower (2800 Post Oak
Boulevard) from Hines REIT for $412.0 million, or $278 per square
foot.
• Cousins Properties agreed to purchase the three-building Post Oak
Central office complex for $232.0 million. With a total square
footage of 1.3 million square feet, this equates to $182 per square
foot.
• Griffin Capital has agreed to purchase 1200 Enclave in the Katy
Freeway submarket. The purchase price is rumored to be $48.0
million or $325 per square foot with a 6.3 percent cap rate.
• APF Properties has a contract out on 2200 West Loop South in the
Galleria submarket. This 201,720-square-foot building sold in early
2012 for $30.0 million, or $153 per square foot.
• Shorenstein Properties has purchased the former ExxonMobil
building at 800 Bell in the CBD. The sale price for the 1.2 millionsquare-foot building is roughly $40 per square foot.
• Investcorp JV/Griffith Partners purchased the Offices at Pin Oak
Park in the Bellaire submarket from McCord Development. The
complex totals 504,721 square feet over five buildings, and was
purchased for a total price of $78.7 million, or $156 per square foot.
• The Reserve at Westchase, a 193,000-square-foot building, was
purchased by Amberjack from Acron USA for a sale price of $228
per square foot.
• Principal Real Estate Investors purchased the 2000 St James Place
office building located in the Galleria submarket from CORE Realty
for $273 per square foot.
• Buildings on the market include:
• 811 Main (BG Group Place): 972,000 square feet, Class A, CBD.
• 10777 Westheimer (One Westchase Center): 466,026 square
feet, Class A, Westchase.
• 919 Milam: 542,919 square feet, Class B, CBD.
• 10001 and 10003 Woodloch Forest Drive (Waterway Plaza I and
II): 366,043 square feet, Class A, Woodlands.
Construction activity
The continued focus in Houston is the large-scale development push
with regards to office space. This is mainly evident in suburban West
Houston, specifically the Energy Corridor submarket.. Five projects
have recently initiated construction over the past few months and 18
proposed developments are being marketed for build-to-suit
opportunities. Tenants such as Bechtel Corporation and
ConocoPhillips are actively canvassing this region for land purchases
or build-to-suits. This submarket has recently exhibited one of the
lowest Class A vacancy levels in the city, an indication of its appeal
and coveted location. However, there has been a recent uptick in new
developments slated for the CBD, Greenway Plaza and Woodlands
submarkets as well.
•
ExxonMobil corporation continues to develop its 385-acre site
along I-45 and Spring Creek. This site will serve to consolidate all
upstream Houston ExxonMobil activities into one large office
development, and its projected completion will add value to an
already booming Woodlands submarket.
• Transwestern has recently initiated construction on Westgate in the
Katy Freeway (Energy Corridor) submarket. The site will contain
660,000 square feet across three buildings and is already 68.0
percent pre-leased.
• Anadarko Petroleum Corporation will occupy a 31-story building at
the corner of Woodloch Forest Drive and Lake Robbins Drive in the
booming Woodlands submarket. This 550,000-square-foot-building
will be adjacent to Anadarko’s existing 817,000-square-foot Lake
Robbins Tower, and is projected to deliver in September of 2014.
• Mac Haik Development has embarked construction on Energy
Tower III, a 17-story, 450,000-square-foot-building at 11740 Katy
Freeway slated to be completed in January of 2014.
• MetroNational nears completion on 9805 Katy Freeway, a 14-story,
336,000-square-foot building. Murphy Exploration & Production will
be the anchor tenant.
• Skanska USA Commercial Development Inc. has completed
construction on 3009 Post Oak Boulevard in the Galleria submarket.
The 302,000-square-foot, LEED-Platinum building will have 12
stories of office space on top of eight levels of garage parking and
has recently secured its first full floor(s) tenant.
• Granite Properties has recently broken ground on Briarpark Green
(3141 Briarpark Drive) in the Westchase submarket. This 300,000square-foot speculative building will have 12 stories upon completion
in September 2013.
• The Woodlands Development Company has embarked construction
on 3 Waterway Square Place in the Woodlands region. This 11story, 234,000-square-foot Class A building will house tenants such
as Nexeo Solutions and Waste Connections Inc.
• CityCentre IV in the Katy Freeway submarket has initiated
construction, featuring six floors of space for approximately 125,000
square feet of office space, including 16,809 square feet of groundfloor retail space. Projected delivery will be August 2013; ERM will
be the lead tenant.
• Capitol Tower in the CBD is being developed by Skanska and
Gensler on the former Houston Club space. The Class A building is
expected to be 33 stories and between 700,000 and 800,000
square feet.
• 609 Main is in the development stages with Hines and Colville. The
new Class A tower in the CBD will be 41 floors and roughly 800,000
square feet. In order to break ground, preleasing in the 30.0 to 50.0
percent range needs to be achieved.
• International Tower in the CBD is being developed by Stream Realty
and Essex Commercial Properties. This 925,000-square-foot, 37
story, Class A building in the CBD is being marketed as Houston’s
first 50-story office tower in 30 years.
• 3737 Buffalo Speedway is being developed. This 320,000-squarefoot Class A building in the Greenway Plaza submarket will take the
place of the current Solvay office building, and when complete will
have 240,000 square feet of Class A office space available for lease.
Solvay has already agreed to lease 80,000 square feet of space.
• Levy Park in the Greenway Plaza submarket is being brought on line
by Colville Office Properties and Midway. The mixed-use
development will feature a 240,000-square-foot Class A office
building, as well as a loft-style apartment complex and adjacent
retail development site.
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