Market Brief...
Houston
OFFICE
3Q2020 Property Pictured Above: The Rotunda Building | 5819 Highway 6, Missouri City, Texas 77459
HOUSTON OFFICE MARKET BRIEF 3Q 2020
TABLE OF CONTENTS 1. HOUSTON OFFICE TEAM AND SUBMARKETS
1 2 3
2. HOUSTON OFFICE MARKET A. Facts and Figures
2. SUBMARKET INTELLIGENCE
A. CBD B. West Loop C. Katy Freeway West D. The Woodlands E. Westchase F. Greenspoint/IAH G. FM 1960 Corridor H. Greenway Plaza I. Medical Center J. Southwest K. Katy Freeway East L. Northwest M. Sugar Land N. Clear Lake O. Midtown P. West Belt Q. East Houston/Pasadena R. Far West S. Kingwood T. Suburban Outliers
1
2
HOUSTON HLC SUBMARKET COVERAGE
OTHER SUBMARKETS 1 CBD | 49,515,794 SF 2 WEST LOOP | 35,049,265 SF 3 WESTCHASE | 18,019,843 SF 4 GREENWAY PLAZA | 11,053,255 SF 5 MEDICAL CENTER | 10,206,796 SF 6 MIDTOWN | 6,769,551 SF 7 SUBURBAN OUTLIERS | 10,494,696
THE WOODLANDS 20,519,062 SF
TOMBALL
KINGWOOD 2,385,511 SF SPRING
FM 1960 CORRIDOR 11,557,716 SF
HUMBLE
GEORGE BUSH INTERCONTINENTAL AIRPORT
CYPRESS
GREENSPOINT/IAH 12,635,627 SF
WEST BELT 5,872,304 SF
NORTHWEST 8,545,828 SF
KATY FREEWAY WEST 27,067,696 SF
KATY
KATY FREEWAY EAST 9,345,185 SF
FAR WEST 4,260,974 SF
LAKE HOUSTON
HOUSTON 6
EAST HOUSTON/ PASADENA 5,511,909 SF
1
2 3
GALLERIA
SHIP CHANNEL
4 5
SOUTHWEST 9,444,420 SF
BAY TOWN
MEDICAL CENTER
PASADENA LA PORTE HOBBY AIRPORT
SUGAR LAND
SUGAR LAND 7,784,180 SF
ELLINGTON AIRPORT
RICHMOND
TRINITY BAY
MISSOURI CITY PEARLAND
CLEAR LAKE 6,967,763 SF
LEAGUE CITY
3
HLC HOUSTON OFFICE MARKET EXPERTS
Brandon Avedikian joined Holt Lunsford Commercial (HLC) in 2016 as a Market Analyst for the Dallas Office Group. He most recently served the Dallas Office Group as a Market Director, 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 to serve as Senior Vice President of the Houston Office Group, where he is responsible for project leasing and growing HLC’s office portfolio. 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. During this time, he gained valuable experience working on complicated transactions and providing excellent service to his clients. BRANDON AVEDIKIAN Senior Vice President 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 The Real Estate Council, 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
4
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.
PIONEER AT TELFAIR
NEW LISTING
13310 University Boulevard: 20,800 SF class A office building in Sugar Land
5
NEW LISTING RIVERPARK RIDGE BUILDINGS B & C
2819 Imperia Drive Building B: 7,026 SF class A medical/professional office building in Sugar Land
2819 Imperia Drive Building C: 24,740 SF class A medical/professional office building in Sugar Land
6
NEW LISTING RIVERPARK RIDGE OFFICE CONDOS REPRESENTATIVE PROPERTY
2819 Imperia Drive Condo: 22,050 SF of medical/professional office condos in Sugar Land
REPRESENTATIVE PROPERTY
7
HLC HOUSTON OFFICE OVERALL MARKET
HOUSTON OVERALL At the close of 3Q 2020, the overall Houston office market had a vacancy rate of 20.1% which was slightly higher than the 19.3% at the close of 2Q 2020. Absorption was negative with 1.5M SF of space given back, up from the 1.2M SF of negative absorption in 2Q 2020. Leasing fell considerably with more than 1.9M SF of deals completed, much lower than the 3.7M SF of deals completed in 2Q 2020. There is currently more than 5.6M SF of class A and B office space under construction with 590K SF of space delivered in 3Q 2020.
VACANCY - OVERALL HOUSTON
CONSTRUCTION - OVERALL HOUSTON
25.0% 19.3%
6,000,000 5,000,000
20.0%
18.4%
4,000,000
15.0%
3,000,000
10.0% 2,000,000
5.0%
1,000,000
0.9% 0.0% 4Q 17
1Q 18
2Q 18 Direct
3Q 18
4Q 18
1Q 19
2Q 3Q 19 19 Sublet
4Q 19
1Q 20
2Q 20 Total
3Q 20
0 4Q 17
6,000,000 5,000,000
4Q 17
1Q 18
2Q 18
3Q 4Q 18 18 Total Net
1Q 19
2Q 19
3Q 19
4Q 1Q 2Q 19 20 20 Leasing Activity
3Q 20
3Q 4Q 1Q 2Q 19 19 20 20 Under Construction
3Q 20
4,000,000
20.0%
3,000,000
19.0% 18.0% 17 .0%
2,000,000
16.0%
(1,000,000)
2Q 19
21.0%
4,000,000
0
3Q 4Q 1Q 18 18 19 Delivered Inventory
22.0%
3,000,000
1,000,000
2Q 18
OVERVIEW - OVERALL HOUSTON
ABSORPTION - OVERALL HOUSTON 7,000,000
1Q 18
2,000,000
1,000,000
15.0% 0
14.0% 13.0%
(1,000,000)
12.0%
(2,000,000)
11.0%
(3,000,000)
10.0%
(2,000,000) 3Q 17
4Q 17
1Q 18
2Q 18
Absorption
3Q 18
4Q 18
1Q 19
2Q 19
Deliveries
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
Vacancy
Source: CoStar 3Q 2020 Office Report
8
HLC HOUSTON OFFICE OVERALL MARKET
Market
Existing Inventory #Bldgs.
Total RBA
Vacancy Direct SF
Total SF
Vac. %
YTD Net Absorption
YTD Deliveries
Under Const. SF
Quoted Rates
CBD
91
49,515,794
9,733,917
10,447,942
21.1%
(592,214)
0
1,251,856
$39.96
West Loop
195
35,049,265
6,966,177
7,384,594
21.1%
(835,373)
207,753
122,825
$33.37
Katy Freeway West
165
27,067,696
5,420,426
6,158,901
22.8%
(221,097)
0
150,000
$27.39
The Woodlands
169
20,519,062
2,920,205
3,058,577
14.9%
(870,834)
334,938
603,000
$32.56
Westchase
104
18,019,843
4,386,125
4,622,284
25.7%
(197,902)
0
0
$27.76
Greenspoint/IAH
96
12,635,627
5,469,423
5,492,090
43.5%
398,959
0
0
$19.18
FM 1960 Corridor
147
11,557,716
2,296,345
2,369,151
20.5%
(39,750)
48,000
182,374
$21.18
Greenway Plaza
57
11,053,255
1,867,228
1,982,223
17.9%
(89,998)
0
0
$35.44
Medical Center
58
10,206,796
695,128
714,193
7.0%
(158,593)
0
756,361
$27.88
Southwest
88
9,444,420
2,088,915
2,110,948
22.4%
2,344
0
0
$17.59
Katy Freeway East
67
9,345,185
996,467
1,107,616
11.9%
36,040
170,000
1,200,000
$35.13
Northwest
91
8,545,828
1,643,174
1,660,266
19.4%
159,499
114,349
0
$21.80
Sugar Land
99
7,784,180
986,489
1,040,991
13.4%
7,538
87,937
56,000
$27.27
Clear Lake
97
6,967,763
980,640
1,021,835
14.7%
75,383
81,446
53,000
$21.33
Midtown
64
6,769,551
845,168
879,517
13.0%
(170,560)
64,488
475,372
$31.82
West Belt
68
5,872,304
1,387,314
1,565,876
26.7%
(432,647)
0
0
$25.60
East Houston/Pasadena
96
5,511,909
745,054
779,971
14.2%
(9,661)
30,500
64,396
$21.34
Far West
58
4,260,974
717,038
757,060
17.8%
58,188
182,645
20,758
$28.73
Kingwood
44
2,385,511
307,414
307,414
12.9%
39,868
94,106
270,000
$25.58
Suburban Outliers
183
10,494,696
1,312,137
1,329,021
12.7%
(25,966)
114,664
409,386
$27.28
2,037
273,007,375
51,764,784
54,790,470
20.1%
(2,866,776)
1,530,826
5,615,328
$27.41
Totals
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HOUSTON CENTRAL BUSINESS DISTRICT SUBMARKET INTELLIGENCE Absorption (98,181)
vs. Prev. Qtr (136,613)
(111,239)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
21.1%
20.9%
20.7%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
199,569
618,911
vs. Prev. Qtr
vs. 12 Mths Ago
-
780,341
403,009 Delivered SF Quoted Rates $40.01
VITAL STATS
vs. 12 Mths Ago
vs. Prev. Qtr
vs. 12 Mths Ago
$39.76
$41.46
22.0%
1,200,000 1,000,000
20.0%
800,000 600,000
18.0%
400,000 200,000
16.0%
0 (200,000)
14.0%
(400,000) (600,000)
12.0%
(800,000) 3Q 17
4Q 17
1Q 18
2Q 18
3Q 18
4Q 18
Absorption
1Q 19
2Q 19
Deliveries
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
Vacancy
Source: CoStar 3Q 2020 Office Report
HLC OUTLOOK The Central Business District (CBD) is the largest Houston office submarket, containing more than 50M SF of class A and B office space in an area totaling less than two square miles. Houston’s CBD continues to command the highest rents in the city with a current YTD average of $39.96 per square foot for class A and B property types. The submarket is home to a large concentration of energy, professional and business services, and government tenants. Recent residential and retail developments, and the existing infrastructure of the underground tunnel system, have helped Houston’s CBD become a true live-work-play environment. At the close of 3Q 2020, the CBD submarket had a vacancy rate of 21.1%, slightly higher than 2Q 2020. Absorption was negative with 98K SF of space given back, slightly higher than the 136K SF given back in 2Q 2020. Leasing activity increased with 400K SF of deals completed and activity was more than double the deals completed in 2Q 2020. Currently, 1.2M SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • JP Morgan Chase & Co. has signed a 256K SF lease in JP Morgan Chase Tower.
• Indigo Minerals has signed a 45K SF lease in JP Morgan Chase Tower.
• Rockcliff Energy has signed a 41K SF lease in 717 Texas. • Momentum has signed a 26K SF lease in JP Morgan Chase Tower.
• DLR Group has signed a 9K SF lease in Wells Fargo Plaza.
• Broad Reach Power has signed a 9K SF lease in Three Allen Center.
• Caliche Development Partners has signed a 6K SF lease in 919 Milam
10
DEALS IN THE MARKET • 1801 Smith Street – a 458K SF class A office building • 1111 Fannin Street – a 428K SF class A office building • The Tamborello Building | 1901 Milam Street – a 24K SF class B office building
NEW DEVELOPMENTS • Texas Tower | 845 Texas Avenue – a 1.1M SF class A office building
• Post Houston | 401 Franklin Street – a 150K SF class A office building
LARGE EXISTING VACANCIES • 800 Bell | 800 Bell Street – 1,314,350 SF • 1001 Fannin Street – 753,837 SF • Fulbright Tower | 1301 McKinney Street – 549,453 SF • Wells Fargo Plaza | 1000 Louisiana Street – 483,162 SF • GreenStreet Tower | 1201 Fannin Street – 481,442 SF • 1600 Smith Street – 480,649 SF • One City Centre | 1021 Main Street – 467,803 SF • 4 Houston Center | 1221 Lamar Street – 460,178 SF • Two Allen Center | 1200 Smith Street – 437,612 SF • 919 Milam | 919 Milam Street – 426,282 SF • TC Energy Center | 700 Louisiana Street – 407,966 SF • 1000 Main | 1000 Main Street – 318,546 SF • Pennzoil Place South Tower | 711 Louisiana Street – 309,151 SF
• 1801 Smith Street – 308,513 SF • One Allen Center | 500 Dallas Street – 308,249 SF • Wedge Tower | 1415 Louisiana Street – 306,239 SF • 2 Houston Center | 909 Fannin Street – 289,102 SF
WEST LOOP SUBMARKET INTELLIGENCE Absorption (348,905)
vs. Prev. Qtr (318,087)
VITAL STATS
vs. 12 Mths Ago (290,944)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
21.0%
21.1%
20.1%
19.2%
20.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
614,371
706,009
vs. Prev. Qtr
vs. 12 Mths Ago
207,753
-
vs. Prev. Qtr
vs. 12 Mths Ago
$99.31
$32.97
218,148 Delivered SF
600,000
22.0%
350,000
100,000 19.0% (150,000) 18.0% (400,000)
17.0%
Quoted Rate $32.92
16.0%
(650,000) 3Q 17
4Q 17
1Q 18
Absorption
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
4Q 19
Deliveries
1Q 20
2Q 20
3Q 20
Vacancy
Source: CoStar 3Q 2020 Office Report
HLC OUTLOOK CoStar’s Galleria, Uptown, Post Oak Park, San Felipe/Voss, Richmond/Fountain View, Riverway, and Bellaire submarkets make up HLC’s West Loop submarket. This submarket contains approximately 35M SF of class A and B office space. Thanks to the high-profile location and assets, asking rents here are among the highest in the city. Historically, the West Loop submarket commands average YTD rents of $33.37 per square foot, second only to the CBD. At the close of 3Q 2020, the West Loop submarket had a vacancy rate of 21.1%, which was 1.0% higher than 2Q 2020. Absorption was negative by 349K SF, slightly higher than the 318K SF of negative absorption in 2Q 2020. Leasing activity fell with just 218K SF of deals completed, much lower than the 614K SF of completed deals in 2Q 2020. Currently, 122K SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • DRW Trading Group has signed a 10K SF lease in Three Riverway.
• Transition Home Health has signed a 5K SF lease in Loop Central I.
• Goree Architects has signed a 4K SF lease in Sage Plaza.
• Alcon has signed a 3K SF lease in Bellaire Park. • Yang Research Center has signed a 2K SF lease in 675 Bering.
DEALS IN THE MARKET • 9009 West Loop South – a 472K SF class B office building
• 6500 West Loop South – a 351K SF class B office building
• 1220 Augusta – a 126K SF class B office building
• 5850 San Felipe Street – a 102K SF class B office building
• 6300 Richmond Avenue – a 43K SF class B office building
• 5606 South Rice Avenue – a 20K SF class B office building
NEW DEVELOPMENTS • 1801 Post Oak Boulevard – a 130K SF class A office building
• Bissonnet Medical Plaza | 4460 Bissonnet Street – a 53K SF class A office building
LARGE EXISTING VACANCIES • Marathon Oil Tower | 5555 San Felipe Street – 834,433 SF
• Williams Tower | 2800 Post Oak Boulevard – 334,119 SF • Sage Plaza | 5151 San Felipe Street – 264,644 SF • San Felipe Plaza | 5847 San Felipe Street – 249,501 SF • Two Post Oak Central | 1980 Post Oak Boulevard – 239,290 SF
• Five Post Oak Park | 4400 Post Oak Parkway – 231,121 SF
• TwentyFour25 | 2425 West Loop South – 204,590 SF • Three Riverway | 3 Riverway – 192,572 SF • 5718 Westheimer | 5718 Westheimer Road – 185,367 SF • 2000 West Loop | 2000 West Loop South – 181,918 SF • Three Post Oak Central | 1990 Post Oak Boulevard – 181,689 SF
• One Riverway | 1 Riverway – 179,785 SF • Four Oaks Place | 1330 Post Oak Boulevard – 174,246 SF
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KATY FREEWAY WEST SUBMARKET INTELLIGENCE Absorption (475,743)
vs. Prev. Qtr
vs. 12 Mths Ago
30,992
106,122
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
22.8%
21.0%
24.2%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
322,324
648,044
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
121,319 Delivered SF Quoted Rates $27.30
vs. Prev. Qtr
vs. 12 Mths Ago
$28.71
$30.28
24.0%
VITAL STATS
1,000,000
26.0% 500,000
800,000
300,000
600,000
22.0% 24.0%
20.0% 100,000
400,000
22.0%
200,000
18.0%
(100,000)
0
20.0% (300,000)
16.0%
(200,000) 14.0%
18.0%
1Q 16
(500,000) 3Q 17
2Q 16
4Q 17
1Q 18
2Q 18
3Q 4Q 16 16 Absorption
Absorption
3Q 18
1Q 17
4Q 18
2Q 17
1Q 19
2Q 19
3Q 4Q 17 17 Deliveries
3Q 19
1Q 18
4Q 19
2Q 18
Deliveries
1Q 20
2Q 20
3Q 20
3Q 4Q 18Vacancy 18
(400,000)
1Q 19
Vacancy Source: CoStar 3Q 2020 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 landlord-driven to a tenant-driven submarket. This submarket, along with most of the metro, has experienced a recent and significant flight-to-quality helping these large corporations to continue attracting a talented workforce. At the close of 3Q 2020, the Katy Freeway West submarket had a vacancy rate of 22.8%, nearly 2.0% higher than 2Q 2020. Absorption turned negative with 476K SF of space given back, down from the 31K SF absorbed in 2Q 2020. Leasing activity fell with 121K SF of deals completed with almost a third of deals completed in 2Q 2020. Currently, 150K SF of office product is under construction in this submarket.
TOP LEASE TRANSACTIONS • • • •
GATE Inc. has signed a 24K SF lease in Republic Square 1. Robert Half has signed a 20K SF lease in Energy Tower I. Insperity has signed s 5K SF lease in Energy Tower I. Petrolink Technical Services has signed a 3K SF lease in The Westchester. • Fleming Law PC has signed a 2K SF lease in 11777 Katy Freeway.
HLC Deal
DEALS IN THE MARKET • Two WestLake | 580 Westlake Park Boulevard – a 455K SF class A office building • 15721 Park Row – a 154K SF class A office building • Ten West Plaza | 15915 Katy Freeway – a 105K SF class B office building • 1250 Woodbranch Park Drive – a 102K SF class B office building
12
• 16000 Memorial Drive – a 28K SF class B office building • Ashford Corner | 1710 South Dairy Ashford Road – a 24K SF class B office building
NEW DEVELOPMENTS • Park Ten Center Phase II – a 150K SF class A office building
LARGE EXISTING VACANCIES • Two WestLake | 580 Westlake Park Boulevard – 434,565 SF • Three WestLake Park | 550 Westlake Park Boulevard – 407,832 SF • Eldridge Oaks Phase 1 | 1080 Eldridge Parkway – 363,086 SF • Three Eldridge Place | 737 North Eldridge Parkway – 308,182 SF • Energy Center II | 575 North Dairy Ashford Road – 301,486 SF • West Memorial Place 2 | 15377 Memorial Drive – 267,087 SF • Two Eldridge Place | 757 North Eldridge Parkway – 232,818 SF • Republic Square 1 | 13501 Katy Freeway – 203,949 SF • One Eldridge Place | 777 North Eldridge Parkway – 169,021 SF • Energy Center I | 585 North Dairy Ashford Road – 160,907 SF • Schlumberger Building | 1325 South Dairy Ashford Road – 155,320 SF • Ashford 5 | 14701 St. Mary’s Lane – 146,658 SF • Energy Tower IV | 11750 Katy Freeway – 138,064 SF • Ashford IV | 900 Threadneedle Street – 133,292 SF • Energy Tower III | 11740 Katy Freeway – 130,912 SF
12
THE WOODLANDS SUBMARKET INTELLIGENCE Absorption (153,821)
vs. Prev. Qtr
vs. 12 Mths Ago
(553,489)
(312,960)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.9%
13.6%
9.9%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
133,770
344,041
vs. Prev. Qtr
vs. 12 Mths Ago
20,000
48,840
vs. Prev. Qtr
vs. 12 Mths Ago
71,398 Delivered SF 134,938 Quoted Rates $32.58
$32.98
$31.04
16.0%
VITAL STATS
300,000
16.0%
800,000
250,000 600,000
200,000
14.0%
400,000 150,000
14.0%
100,000
12.0%
200,000
50,000 0
10.0%
12.0%
0
(200,000) (50,000) 8.0%
(100,000)
(400,000)
(150,000) 10.0%
6.0%
1Q 16
(600,000) 3Q 17
2Q 16
4Q 17
1Q 3Q 18
16
2Q 4Q18
16
Absorption
Absorption
3Q 1Q18
4Q 18 2Q
1Q 19 3Q
2Q 19 4Q
3Q 191Q
4Q 192Q
17
17
17
17
18
18
Deliveries
1Q 2Q 3Q 203Q 20 4Q 20
18
Deliveries
18
Vacancy
(200,000)
1Q 19
Vacancy
Source: CoStar 3Q 2020 Office Report
HLC OUTLOOK The Woodlands submarket continues to be one of the most active Houston office submarkets. It has grown so much that it now competes with other premier submarkets such as the CBD, West Loop, Greenway Plaza, and the two Katy Freeway submarkets. This submarket continues to outperform averages in Houston by commanding higher rents and maintaining a vacancy rate well below the city average.
NEW DEVELOPMENTS • HPE Buildings 3 & 4 | City Place Drive – two (2) 284K SF class A office buildings • LifeTime Co-Work | Six Pine Drive – a 35K SF class B office building
LARGE EXISTING VACANCIES
At the close of 3Q 2020, The Woodlands submarket had a vacancy rate of 14.9%, which was over 1.0% higher than 2Q 2020. Absorption was negative by more than 153K SF but better than the 554K SF of negative absorption in 2Q 2020. Leasing activity consisted of just 71K SF of deals completed, lower than the 134K SF of deals completed in 2Q 2020. Currently, more than 600K SF of office space is under construction in this submarket.
• The Woodlands Towers at The Waterway | 9950 Woodloch Forest Drive – 453,263 SF
TOP LEASE TRANSACTIONS
• 24955 I-45 North – 148,104 SF
• Sterling Construction Company has signed a 12K SF lease in One Hughes Landing.
• Hewitt Lake Woodlands | 9500 Lakeside Boulevard – 360K SF • SWN South Tower | 10000 Energy Drive – 288,609 SF • Hughes Landing | 1725 Hughes Landing Boulevard – 151,527 SF • 9709 Lakeside Boulevard – 134,938 SF • 9201 Pinecroft Drive – 112,299 SF
• Woodlands Midstream has signed a 4K SF lease in 24 Waterway.
• CityPlace 1 | 1700 City Plaza Drive – 102,038 SF
• MedCare has signed a 2K SF lease in 2219 Sawdust Road.
• Wildwood Corporate Centre I | 460 Wildwood Forest Drive – 76,354 SF
DEALS IN THE MARKET • 8800 Technology Forest Place – a 269K SF class B office building • Venture Tech VIII | 8708 Technology Forest Drive – a 70K SF class B office building • The Gateway Building | 26865 I-45 North – a 24K SF class B office building • 143 Vision Park Boulevard – a 20K SF class B office building
• 2001 Timberloch Place – 76,620 SF
• Two Hughes Landing | 1790 Hughes Landing Boulevard – 72,506 SF • Lake Front North | 2107 Research Forest Drive – 64,834 SF • The Woodlands Medical Plaza 4 | 9180 Pinecroft Drive – 62,135 SF • Waterway Plaza Two | 10001 Woodloch Forest Drive – 57,081 SF • Chase Bank Building | 25025 I-45 North – 55,821 SF • Havenwood Office Park | 25700 I-45 North – 50,844 SF • Chase Building | 1400 Woodloch Forest Drive – 49,907 SF • Technology Professional Plaza | 4055 Technology Forest Boulevard – 48,328 SF
13
13
WESTCHASE SUBMARKET INTELLIGENCE Absorption (101,918)
vs. Prev. Qtr
vs. 12 Mths Ago
(18,315)
159,911
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
25.7%
25.1%
23.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
160,377
670,612
vs. Prev. Qtr
vs. 12 Mths Ago
79,331 Delivered SF Quoted Rates $27.54
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$27.80
26.74
20.0%
VITAL STATS 26.0%
300,000
18.0%
600,000 200,000
16.0% 14.0%
400,000
24.0% 100,000
12.0% 10.0% 22.0%
0
8.0% 6.0%
200,000 0 (200,000)
(100,000) 20.0%
(400,000)
4.0%
(200,000)
(600,000)
2.0% 0.0%
800,000
18.0%
1Q 16
(300,000) 3Q 17
2Q 16
4Q 17
3Q 16
1Q 18
2Q 4Q18
3Q 1Q18
16
17
Absorption
4Q 18 2Q
1Q 19 3Q
2Q 19 4Q
3Q 191Q
17
17
17
18
Absorption
Deliveries
Deliveries
4Q 1Q 19 2Q 20
18
3Q 18
2Q 20
3Q 4Q 20
18
Vacancy
(800,000)
1Q 19
Vacancy
Source: CoStar 3Q 2020 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 3Q 2020, The Westchase submarket had a vacancy rate of 25.7%, slightly higher than 2Q 2020. Absorption was negative by 102K SF, up from the 18K SF of negative absorption in 2Q 2020. Leasing activity consisted of 79K SF of deals completed, nearly half of the 160K SF of deals completed in 2Q 2020. Currently, no office space is under construction in the submarket.
• 2929 Briarpark Drive – a 140K SF class B office building
• The Colonnade | 11111 Richmond Avenue – a 96K SF class B office building
• 10590 Westoffice Drive – a 26K SF class B office building
• 2610 West Sam Houston Parkway South – a 26K SF class B office building
LARGE EXISTING VACANCIES • 10200 Bellaire Boulevard – 568,458 SF • Pinnacle Westchase | 3010 Briarpark Drive – 356,648 SF
• 3250 Briarpark Drive – 212,587 SF • CityWestPlace Building 4 | 2103 CityWest Boulevard – 178,255 SF
• Towers at Westchase I | 10370 Richmond Avenue – 161,936 SF
TOP LEASE TRANSACTIONS • Ranger Energy Services has signed a 9K SF lease in the Towers at Westchase II.
• STV Energy Service Division has signed a 6K SF renewal in the Towers at Westchase I.
• J. Patrick Homes has signed a 4K SF renewal in Westchase Central I.
• VN Systems has signed a 1K SF lease in 2500 Wilcrest Drive.
DEALS IN THE MARKET • Columbia Centre | 11011 Richmond Avenue – a 167K SF class A office building
14
• Millennium Tower | 10375 Richmond Avenue –158,303 SF • 2500 CityWest | 2500 CityWest Boulevard – 147,487 SF • Towers at Westchase II | 10350 Richmond Avenue – 144,121 SF
• Westchase Point | 1250 West Sam Houston Parkway – 137,333 SF
• Westchase Park II | 3600 West Sam Houston Parkway – 125,660 SF
• Westchase Park I | 3700 West Sam Houston Parkway – 125,231 SF
• West8 Tower | 10205 Westheimer Road – 123,928 SF • One BriarLake Plaza | 2000 West Sam Houston Parkway – 115,220 SF
14
GREENSPOINT/IAH SUBMARKET INTELLIGENCE Absorption (21,842) Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
186,164
(4,607)
vs. Prev. Qtr
vs. 12 Mths Ago
43.5%
43.3%
45.6%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
180,415
162,257
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
64,572 Delivered SF Quoted Rate $19.18
$19.02
$18.63
VITAL STATS
25.0%
48.0%
200,000
300,000
24.5% 100,000
24.0%
46.0%
23.5%
200,000
0
100,000
(100,000)
0
(200,000)
(100,000)
(300,000)
(200,000)
23.0% 44.0% 22.5% 22.0% 42.0% 21.5% 21.0%
40.0%
20.5% 20.0%
(400,000)
38.0%
1Q 16
3Q 17
2Q 16
4Q 17
1Q
3Q18 16
2Q
4Q18 16
Absorption
Absorption
3Q
18 1Q 17
4Q 18 2Q
17
1Q 193Q
17
2Q 194Q
3Q 19
17
Deliveries
Deliveries
1Q 18
4Q 19
1Q
2Q 20 18
2Q
3Q20 18
3Q
4Q20 18
Vacancy
(300,000)
1Q 19
Vacancy
Source: CoStar 3Q 2020 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. Rents have fallen significantly and investors have been working persistently to rebrand the submarket. At the close of 3Q 2020, the Greenspoint/IAH submarket had a vacancy rate of 43.5%, which was slightly higher than 2Q 2020. Absorption turned negative once again with 22K SF of negative absorption, down from the 186K SF absorbed in 2Q 2020. Leasing activity consisted of 65K SF of deals completed, nearly a third of the 180K SF of deals completed in 2Q 2020. Currently, no office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Pharm-Olam International has signed a 19K SF lease in 450 North Sam Houston Parkway East.
• Hapag-Lloyd has signed a 15K SF lease in CityNorth 2. • Yusen Logistics has signed a 4K SF lease in 15355 Vantage Parkway West.
• American West Steel has signed a 3K SF lease in 400 North Belt.
• Greens Crossing I | 810 Gears Road – a 79K SF class B office building
• 14450 John F Kennedy Boulevard – a 46K SF class B office building
• 1030-1034 Regional Park Drive – a 23K SF class B office building
• 3808 World Houston Parkway – a 22K SF class B office building
LARGE EXISTING VACANCIES • CityNorth 5 | 17001 Northchase Drive – 458,331 SF • CityNorth 6 | 12450 Greenspoint Drive – 343,495 SF • 363 North Sam Houston Parkway East – 272,207 SF • CityNorth 1 | 233 Benmar Drive – 253,562 SF • 222 Benmar | 222 Benmar Drive – 198,256 SF • Glenborough Tower | 100 Glenborough Drive – 181,984 SF
• 10700 North Freeway – 165,048 SF • 396 West Greens Road – 164,411 SF • World Houston Plaza | 15710 John F. Kennedy Boulevard – 158,352 SF
• North Houston Tech Tower | 12707 North Freeway – 157,276 SF
DEALS IN THE MARKET • 10700 North Freeway – a 182K SF class A office building
• EM Houston | 13401 I-45 North – a 143K SF class A
• CityNorth 4 | 16945 Northchase Drive – 148,874 SF • 16666 Northchase Drive – 147,135 SF • 450 Gears | 450 Gears Road – 146,073 SF
office building
• Northborough Business Park | 220 Meadowfern Drive – a 102K SF class B office building
• Intercontinental Park III | 16701 Greenspoint Park Drive – a 86K SF class B office building
15
15
FM 1960INTELLIGENCE CORRIDOR SUBMARKET Absorption
VITAL STATS
vs. Prev. Qtr
vs. 12 Mths Ago
74,269
(190,522)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
24.0%20.0%
20.5%
19.9%
20.0%
23.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
22.0%
106,061
156,116
vs. Prev. Qtr
vs. 12 Mths Ago
(65,463)
148,094 Delivered SF Quoted Rate $20.86
48,000
-
vs. Prev. Qtr
vs. 12 Mths Ago
$20.58
$20.09
26.0%22.0%
200,000
300,000 250,000
25.0% 100,000
0
200,000 150,000 100,000
18.0% (100,000)
21.0%
16.0%
50,000 0
(200,000)
20.0% 19.0%14.0%
(300,000)
18.0%
(50,000) (100,000) (150,000)
12.0%
(400,000)
17.0%
1Q 16
3Q 17
4Q 2Q 17
1Q 3Q18
2Q 18 4Q
3Q 18 1Q
4Q 18 2Q
16
16
16
17
17
Absorption
Absorption
1Q 193Q
17
2Q 19 4Q
3Q 19
17
Deliveries
1Q 18
4Q 19
1Q 2Q 20
2Q 3Q20
18
18
Deliveries
3Q 4Q20
18
Vacancy
(200,000)
1Q 19
Vacancy
Source: CoStar 3Q 2020 Office Report
HLC OUTLOOK HLC’s FM 1960 Corridor office submarket includes CoStar’s FM 1960/Highway 249, Champions, and I-45 North submarkets. The submarket follows Farm-to-Market Road 1960 from Clay Road in West Houston up to Northeast Houston and stops just before George Bush International Airport. This submarket is home to nearly 12M SF of class A and B office space. At the close of 3Q 2020, the FM 1960 Corridor had a vacancy rate of 20.5%, which was slightly higher than 2Q 2020. Absorption turned negative with 65K SF of space given back, opposite the 74K SF absorbed in 2Q 2020. Leasing activity increased with 148K SF of deals completed. Currently, 182K SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • DPIS Engineering has signed a 19K SF lease in Chasewood Crossing II. • The Law Office of Bryan Fagan has signed a 10K SF renewal in Cornerstone Tower. • NextHome Realty Center has signed a 6K SF lease in Kluge Lakes Center. • Shaw has signed a 6K SF lease in Chasewood Crossing II. • VLS Recovery has signed a 3K SF lease in Chasewood Crossing I.
DEALS IN THE MARKET • Denmark House | 12777 Jones Road – a 119K SF class B office building • Wells Fargo Cypress | 12337 Jones Road – a 85K SF class B office building • Olde Oaks Atrium | 3724 FM 1960 West – a 62K SF class B office building • Steeplechase Corner Professional Building | 11301 Fallbrook Drive – a 61K SF class B office building • Highway Six Professional Building | 16100 Cairnway Drive – a 60K SF class B office building • Cairnway Plaza | 16125 Cairnway Drive – a 28K SF class B office building • Building One | 8403 Louetta Road – a 25K SF class B office building • West Road Office Building | 14025 West Road – a 23K SF class B office building • Falling Creek II | 3910 FM 1960 West – a 23K SF class B office building 16
• 3910 FM 1960 West – a 23K SF class B office building • 6810 FM 1960 West – a 20K SF class B office building • Copperfield Professional Building | 8711 Highway 6 North – a 20K SF class B office building
NEW DEVELOPMENTS • North Cypress Physician Office Building III – a 110K SF class B office building • 8900 Point Six Circle – a 35K SF class B office building • 17910 Coventry Park Drive – a 24K SF class B office building
LARGE EXISTING VACANCIES • Noble Energy Center II | 1002 Noble Energy Way – 437,793 SF • 11403 Compaq Center West Drive – 260,790 SF • University Park Buildings 9 & 10 | 11450 Compaq Center West Drive – 208,841 SF • Creekridge II | 140 Cypress Station Drive – 122,311 SF • Chasewood Crossing III | 19350 State Highway 249 – 108,250 SF • 7310 Eldridge Parkway – 81,800 SF • 616 FM 1960 West – 79,086 SF • Chasewood Crossing I | 19500 State Highway 249 – 73,186 SF • Northwest Medical Plaza | 800 Peakwood Drive – 56,618 SF • Chasewood Crossing II | 19450 State Highway 249 – 54,410 SF • Cypress Station Medical Building | 1140 Cypress Station Drive – 52,038 SF • One Northchase Park | 4201 FM 1960 West – 46,191 SF • 3648 FM 1960 West – 44,335 SF • The Willowbrook Building | 7915 FM 1960 West – 43,993 SF • 14405 Walters Road – 43,577 SF • Willowchase Atrium | 8203 Willow Place Drive South – 40,306 SF • 9720 Cypresswood Drive – 39,025 SF • Two Kuykendahl Place | 15531 Kuykendahl Road – 39K SF • Cy-Fair Medical Office Building | 13114 FM 1960 West – 38,789 SF • Cypress Court | 110 Cypress Station Drive – 37,476 SF
16
GREENWAY PLAZA SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
51,311
104,787
vs. Prev. Qtr
vs. 12 Mths Ago
(165,240) Vacancy 17.9%
16.4%
14.8%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
976,158
247,742
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
116,016 Delivered SF Quoted Rates $35.04
$34.96
$32.26
VITAL STATS
20.0% 20.0%
200,000
300,000 250,000
19.0%
150,000 200,000
16.0% 18.0%
150,000 17 .0%
100,000 100,000
12.0% 16.0%
50,000
15.0%
0
50,000
(50,000)
8.0% 14.0%
(100,000)
0
13.0%
(150,000)
4.0%
12.0%
(200,000)
(50,000)
11.0%
0.0%
(250,000)
10.0%
1Q 16
3Q 4Q 1Q 17 2Q 17 3Q 18
16
16
2Q
4Q18 16
Absorption Absorption
3Q
1Q18 17
4Q
18 2Q 17
1Q
19 3Q 17
2Q 19 4Q
3Q 191Q
4Q 192Q
1Q 203Q
17
18
18
18
Deliveries Deliveries
(300,000) (100,000) 2Q 3Q 20 4Q 20 1Q
18
Vacancy Vacancy
19
Source: CoStar 3Q 2020 Office Report
HLC OUTLOOK The Greenway Plaza office submarket received its name from the eleven building, fifty acre, master-planned complex at the heart of the submarket. Given its convenient location between the West Loop, Medical Center, and CBD submarkets, Greenway Plaza continues to be one of the most desirable submarkets in Houston. Recent improvements to the master-planned Greenway Plaza complex and other recent developments in the area have helped breathe life back into this submarket. At the close of 3Q 2020, the Greenway Plaza submarket had a vacancy rate of 17.9% which was 2.5% higher than 2Q 2020. Absorption turned negative with 165K SF of space given back, up from the 51K SF absorbed in 2Q 2020. Leasing activity fell with just 116K SF of deals completed, significantly lower than the 976K SF of deals in 2Q 2020. Currently, no office space is under construction in the submarket.
TOP LEASE TRANSACTIONS • Xavier Educational Academy has signed a 13K SF lease in 3100 Weslayan.
• Orchard Global Asset Management has signed a 12K
LARGE EXISTING VACANCIES • Nine Greenway Plaza | 9 Greenway Plaza – 261,521 SF • Four Greenway Plaza | 4 Greenway Plaza – 242,628 SF • Phoenix Tower | 3200 Southwest Freeway – 225,460 SF • Twelve Greenway Plaza | 12 Greenway Plaza – 209,916 SF
• Three Greenway Plaza | 3 Greenway Plaza – 204,604 SF
• Eight Greenway Plaza | 8 Greenway Plaza – 110,250 SF • Eleven Greenway Plaza | 11 Greenway Plaza – 100,490 SF
• 3737 Buffalo Speedway Avenue – 92,804 SF • 3800 Buffalo Speedway – 82,130 SF • 3355 West Alabama | 3355 West Alabama Street – 78,394 SF
• Weslayan Tower | 24 Greenway Plaza – 78,286 SF • 20 Greenway Plaza – 76,555 SF • 3555 Timmons Lane – 71,311 SF • Two Greenway Plaza | 2 Greenway Plaza – 64,808 SF
SF lease in 3737 Buffalo Speedway.
• The Calderwood Group has signed a 5K SF renewal in 2900 Weslayan.
• Quality Team Dental has signed a 4K SF lease in T-Mobile Tower.
• SSL Corp has signed a 3K SF lease in the Spirit of Texas Bank Building.
17
17
MEDICAL CENTER SUBMARKET INTELLIGENCE Absorption 8,831
vs. Prev. Qtr
vs. 12 Mths Ago
(163,794)
63,412
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
7.0%
7.1%
5.5%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
83,260
100,875
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
35,832 Delivered SF Quoted Rates $27.65
$26.80
$26.08
VITAL STATS
14.0%
200,000
8.0%
100,000
50,000
12.0%
10.0% 6.0%
8.0%
0
100,000
(50,000)
50,000
(100,000)
0
5.0% (150,000)
6.0%
150,000
7.0%
4.0%
(200,000) 3Q
4Q
1Q 17 2Q 17 16 16
1Q
3Q18 16
2Q
4Q18 16
Absorption
Absorption
3Q
18 1Q 17
4Q 18 2Q
17
1Q 193Q
17
2Q 19 4Q
3Q 19
17
Deliveries
Deliveries
4Q
1Q
1Q 19 2Q 20 18 18
2Q
3Q20 18
3Q
20 4Q 18
Vacancy
(50,000)
(100,000)
1Q 19
Vacancy Source: CoStar 3Q 2020 Office Report
HLC OUTLOOK The Medical Center submarket is located three miles southwest of the CBD and is a specialty market focused heavily on the healthcare sector. It is home to the Texas Medical Center, the largest medical center in the world. More than two-thirds of the 10M SF of office space in this submarket is considered medical office space. Major medical institutions, such as the M.D. Anderson Cancer Center and Memorial Hermann Hospital, are among the top medical office tenants in this submarket. Historically this submarket holds the lowest vacancy rate in the city. At the close of 3Q 2020, the Medical Center submarket had a vacancy rate of 7.0% which was barely lower than 2Q 2020. Absorption was positive with 9K SF absorbed, up considerably from the 163K SF of negative absorption in 2Q 2020. Leasing activity was steady with 36K SF of deals completed. Currently, 1.3M SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • The Houston Launch Pad has signed a 1K SF lease in 2646 South Loop West.
• The Gourrier Law Firm has signed a 1K SF lease in the NRG Office Complex.
NEW DEVELOPMENTS • Horizon Tower | 6929 Main Street – a 522K SF class A office building
• O’Quinn Medical Tower | 7200 Cambridge Street – a 427K SF class A office building
• Museo Plaza Office Building | 5115 Fannin Street – a 160K SF class A office building
LARGE EXISTING VACANCIES • 6624 Fannin Tower | 6624 Fannin Street – 155,177 SF • Texas Medical Center | 7501 Fannin Street – 95,306 SF • Museum Medical Tower | 1213 Hermann Drive – 76,140 SF
• 7505 Fannin Street – 48,434 SF • One Fannin | 7400 Fannin Street – 46,060 SF • Greenpark One | 7515 South Main Street – 39,353 SF • US Pain & Spine Institute | 5445 La Branch Street – 36,394 SF
• Memorial Hermann Medical Plaza | 6400 Fannin Street – 36,024 SF
• Fannin South Professional | 7707 Fannin Street – 32,656 SF
• Greenpark II Professional Building | 7505 Main Street – 32,190 SF
• 7900 Fannin | 7900 Fannin Street – 29,248 SF • Atrium 2656 | 2656 South Loop Freeway West – 28,766 SF
• 1200 Binz | 1200 Binz Street – 26,819 SF • Prosperity Bank Plaza | 5020 Montrose Boulevard – 24,370 SF
• NRG Office Complex | 2626 South Loop Freeway West – 23,160 SF
• Southside Medical Plaza | 7700 Main Street – 22K SF • Houston Medical Plaza | 6655 Travis Street – 16,747 SF • 3003 South Loop | 3003 South Loop West – 16,048 SF • Main Link Biotechnology Park | 10301 Stella Link Road – 15,437 SF
• 7500 Fannin Street – a 126K SF class B office building • 8000 Greenbriar Drive – a 52K SF class A office building
18
18
SOUTHWEST SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
5,775
(88,683)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
22.4%
21.1%
23.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
(118,097)
120,833 Delivered SF Quoted Rates $16.45
114,918
174,506
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$16.46
$15.08
VITAL STATS
23.0%24.0%
1,000,000 200,000
22.0%
800,000 100,000 22.0%
21.0%
600,000 0
20.0%
400,000
20.0%
19.0%
200,000 (100,000)
18.0% 18.0%
0 (200,000)
17.0% 16.0%
(200,000) 16.0%
(300,000) 3Q
4Q
1Q 17 2Q 17 16 16
1Q
3Q 18 16
2Q
4Q18 16
Absorption Absorption
3Q
1Q18 17
4Q
2Q 18 17
1Q
3Q 19 17
2Q 4Q 19
17
Deliveries Deliveries
3Q 191Q
18
4Q 192Q
18
1Q 203Q
18
2Q 3Q 20 4Q 20 1Q
18
(400,000)
19
Vacancy Vacancy
Source: CoStar 3Q 2020 Office Report
HLC OUTLOOK HLC’s Southwest office submarket includes CoStar’s Southwest Freeway and Southwest Beltway 8 submarkets. The submarket extends to Missouri City and northwest to the Buffalo Bayou just west of the Energy Corridor. The submarket’s geographic boundaries extend much further than those of neighboring West Houston submarkets but deliveries here have been significantly fewer than in other submarkets recently. At the close of 3Q 2020, the Southwest submarket had a vacancy rate of 22.4%, which was over 1.0% higher than 2Q 2020. Absorption was negative with 118K SF of space given back, down from the 6K SF absorbed in 2Q 2020. Leasing activity remained steady with 120K SF of deals completed. Currently, no office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Firstsource has signed a 36K SF lease in West Beltway Office Center I.
DEALS IN THE MARKET • Regency Square Tower | 6200 Savoy Drive – a 225K SF class A office building
• American First Tower | 9999 Bellaire Boulevard – a 212K SF class A office building
• 11111 South Wilcrest Drive – a 190K SF class B office building
• Westwood Green | 9494 Southwest Freeway – a 140K SF class B office building
• 6100 Corporate Drive – a 73K SF class B office building
• 5999-6057 Savoy Drive – a 38K SF class B office building
• 9200 West Sam Houston Parkway South – a 23K SF class B office building
LARGE EXISTING VACANCIES • Houston Technology Center | 5959 Corporate Drive – 250,578 SF
• Southwest Corporate Center | 9700-9702 Bissonnet Street – 214,536 SF
• 11111 South Wilcrest Drive – 190,398 SF • Arena Place Two | 7324 Southwest Freeway – 185,057 SF
• Arena Place One | 7322 Southwest Freeway – 141,910 SF
• 7011 Southwest Freeway – 112,590 SF • Centre One | 9800 Centre Parkway – 73,885 SF • Southwest Medical Plaza 1 | 7777 Southwest Freeway – 73,078 SF
• Westwood Green | 9494 Southwest Freeway – 71,230 SF
• Southwest Medical Plaza 2 | 7737 Southwest Freeway – 70,072 SF
• 6464 Savoy Drive – 64,550 SF • The Center | 8323 Southwest Freeway – 60,407 SF • The Center | 8303 Southwest Freeway – 56,988 SF • Merlyn Plaza | 9301 Southwest Freeway – 52,336 SF • 9896 Bissonnet Street – 50,794 SF • 6001 Savoy Drive – 46,687 SF • The Atrium Tower | 9894 Bissonnet Street – 44,668 SF • Park Green I | 8300 Bissonnet Street – 44,665 SF • The Ranchester Building | 10333 Harwin Drive – 43,150 SF
• 9945 Bissonnet Street – a 28K SF class B office building
19
19
KATY FREEWAY EAST SUBMARKET INTELLIGENCE Absorption (50,475)
vs. Prev. Qtr
vs. 12 Mths Ago
63,588
168,356
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
11.9%
11.3%
10.2%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
214,848
143,239
vs. Prev. Qtr
vs. 12 Mths Ago
126,348 Delivered SF Quoted Rates $34.75
150,000
-
vs. Prev. Qtr
vs. 12 Mths Ago
$36.17
$34.41
VITAL STATS
12.0%
16.0%
250,000
200,000
200,000 160,000
15.0% 11.0%
150,000 120,000
14.0% 10.0%
80,000 100,000
13.0% 40,000 50,000
9.0%
12.0%
0
0
8.0%11.0%
(40,000)
10.0%
(80,000)
(50,000)
7.0%
1Q 16
3Q 4Q 1Q 2Q 3Q 2Q 3Q 4Q 1Q 17 16 17 16 18 16 18 1718 Absorption Absorption
4Q
2Q 1718
1Q
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 1917 1918 19 18 20 18 20 18 20 19 Deliveries Vacancy Deliveries Vacancy
(100,000)
3Q 19 17
Source: CoStar 3Q 2020 Office Report
HLC OUTLOOK The Katy Freeway East office submarket benefits greatly from the demographics of the Memorial Villages. The submarket is centrally located along Interstate 10 and Beltway 8 near the Energy Corridor and Houston’s western suburbs. It is home to MetroNational’s Memorial City and Midway’s CityCentre mixed-use developments. At the close of 3Q 2020, the Katy Freeway East submarket had a vacancy rate of 11.9%, which was slightly higher than 2Q 2020. Absorption turned negative with 50K SF of space given back, opposite the 64K SF absorbed in 2Q 2020. Leasing activity consisted of 126K SF of deals completed which was lower than the 215K SF of deals completed in 2Q 2020. Currently, more than 1.2M SF of office space is under construction in this submarket.
LARGE EXISTING VACANCIES • 10777 Clay Road – 227,484 SF • Two Memorial City Plaza | 820 Gessner Road – 152,490 SF
• One Memorial City Plaza | 800 Gessner Road – 133,742 SF
• Memorial Hermann Tower | 929 Gessner Road – 115,414 SF
• 920 Memorial City Way – 98,500 SF • Three Memorial City Plaza | 840 Gessner Road – 70,840 SF
• CityCentre One | 800 Town & Country Boulevard – 64,772 SF
• CityCentre Two | 818 Town & Country Boulevard – TOP LEASE TRANSACTIONS • Geophysical Insights has signed a 7K SF renewal in 8584-8588 Katy Freeway.
• Origin Spine Institute & MRI has signed a 5K SF lease in the Offices at Hedwig.
• Marqet Group has signed a 2K SF lease in 8558 Katy Freeway.
• MetroMarketing Services has signed a 2K SF lease in
HLC Deal
Hedwig Square Office Park.
NEW DEVELOPMENTS • Marathon Oil HQ | 990 Town & Country Boulevard – a 440K SF class A office building
• 8020 Katy Freeway – a 420K class A office building • 9753 Katy Freeway – a 190K SF class A office building • Village Tower II | 9655 Katy Freeway – a 150K SF class
53,905 SF
• Medical Plaza 3 | 915 Gessner Road – 44,435 SF • Hedwig Place | 8731 Katy Freeway – 28,650 SF • 952 Echo Lane – 28,070 SF • Town & Country Central I | 10497 Town & Country Way – 27,168 SF
• Memorial City Place | 9821 Katy Freeway – 26,927 SF • Village Tower I | 9655 Katy Freeway – 26,332 SF • Nexen Building | 945 Bunker Hill Road – 25,076 SF • Piney Point Offices II | 2500 Fondren Road – 24,314 SF • 950 Corbindale Road – 23,909 SF • Park Centre I | 9950 Westpark Drive – 23,405 SF • Block 10 West Office Park | 10496 Katy Freeway – 22,293 SF
A office building
20
20
NORTHWEST SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(6,222)
93,249
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
19.4%
19.3%
21.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
112,431
203,846
80,920
97,306 Delivered SF 114,349 Quoted Rates $21.73
vs. Prev. Qtr -
VITAL STATS 12.0%24.0%
200,000 11.0%
vs. Prev. Qtr
vs. 12 Mths Ago
$20.96
$20.92
110,000
22.0%
150,000 60,000
10.0%
100,000
20.0%
10,000
50,000
9.0%
(40,000)
vs. 12 Mths Ago -
250,000 160,000
0
18.0%
8.0%
(90,000)
(50,000)
7.0%
16.0%
(140,000) 3Q
4Q
1Q 17 2Q 17 16 16
1Q
3Q 18 16
2Q
4Q18 16
Absorption Absorption
3Q
1Q18 17
4Q
18 2Q 17
1Q
19 3Q 17
2Q 19 4Q
17
Deliveries Deliveries
3Q 191Q
18
4Q 192Q
18
1Q 2Q 3Q 20 3Q 20 4Q 20 1Q
18
18
Vacancy Vacancy
(100,000)
19
Source: CoStar 3Q 2020 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 and also includes CoStar’s Northwest Near and Northwest Far submarkets. The struggles in this submarket over the past few years are primarily attributable to the extensive expansion and reconstruction of the major freeways which have impacted traffic flow within the submarket. The 290 project is now complete and the submarket is starting to see an increase in activity but recovery is sure to take some time. Most of the more than 10M SF of class A and B office space is located at Loop 610 and Highway 290 or in the vicinity of Highway 290 and Hollister Road. At the close of 3Q 2020, the Northwest submarket had a vacancy rate of 19.4%, which was barely higher than 2Q 2020. Absorption turned positive with 80K SF of space absorbed, up from the 6K SF of negative absorption in 2Q 2020. Leasing activity remained strong with 97K SF of deals completed. Currently, there is no office space under construction in this submarket.
TOP LEASE TRANSACTIONS • Endurance International Group Holdings has signed a 39K SF renewal in 5005 Mitchelldale Street.
• IDS Engineering Group has signed a 37K SF renewal in Granite Tower at 290.
DEALS IN THE MARKET • Washington Place | 7155 Old Katy Road – a 90K SF class B office building
• 10050 Northwest Freeway – a 43K SF class B office building
21
LARGE EXISTING VACANCIES • Brookhollow Central II | 2900 North Loop Freeway West – 142,401 SF
• Brookhollow Central III | 2950 North Loop Freeway West – 123,515 SF
• 2727 North Loop Freeway West – 123,103 SF • Brookhollow Central I | 2800 North Loop Freeway West – 90,793 SF
• Northwest Crossing III | 13105 Northwest Freeway – 78,920 SF
• Northwest Crossing | 13333 Northwest Freeway – 71,271 SF
• One Northwind Plaza | 7600 West Tidwell Road – 68,179 SF
• 13111 Northwest Freeway – 67,303 SF • Granite Tower at 290 | 13430 Northwest Freeway – 66,737 SF
• Northwest One | 13100 Northwest Freeway – 66,353 SF • North Loop Center | 1235 North Loop Freeway West – 65,505 SF
• Wells Fargo Building | 13201 Northwest Freeway – 60,795 SF
• 5252 Hollister Road – 59K SF • 600 North Shepherd Drive – 55,950 SF • 1919 North Loop West Building | 1919 North Loop West – 34,341 SF
• 1415 North Loop West – 30,920 SF • Hollister & Hillmont Building | 5300 Hollister Street – 30,704 SF
• 2600 North Loop West – 28,660 SF • Washington Place | 7155 Old Katy Road – 28,204 SF • 2180 North Loop West – 27,649 SF 21
SUGAR LAND SUBMARKET INTELLIGENCE Absorption
VITAL STATS
vs. Prev. Qtr
vs. 12 Mths Ago
(123,466)
23,857
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
13.4%
13.4%
11.6%
12.0% 12.0%
vs. 12 Mths Ago
10.0%
54,583
Leasing Act. 43,347 Delivered SF 60,937 Quoted Rates $27.20
vs. Prev. Qtr 76,023 vs. Prev. Qtr
103,416 vs. 12 Mths Ago
27,000
-
vs. Prev. Qtr
vs. 12 Mths Ago
$27.19
$26.50
18.0% 14.0%
125,000600,000
16.0%
500,000 75,000
400,000 25,000
200,000
(25,000)
8.0% 6.0%
300,000
100,000 (75,000)
10.0%
0
4.0%
(100,000) (125,000)
2.0%
(200,000) (17 5,000)
8.0%
0.0% 1Q 16
3Q 17
2Q 16
4Q 17
3Q
1Q 18
2Q 18
4Q
16 16 Absorption
3Q 18
1Q 17
4Q 18
2Q 17
Absorption
1Q 19
3Q 17
2Q 19
4Q
17 Deliveries
3Q 19
1Q 18
4Q 19
Deliveries
2Q 18
1Q 20
3Q 18
2Q 20
4Q
3Q 20
18 Vacancy
(300,000) 1Q 19
Vacancy
Source: CoStar 3Q 2020 Office Report
HLC OUTLOOK The Sugar Land office submarket in Southwest Houston is home to a variety of energy and engineering firms. Large corporations such as Fluor Enterprises, Schlumberger, and Nalco Champion have a large presence in this submarket. The submarket is also home to a variety of non-energy tenants including Coca-Cola, Imperial Sugar, and Kelsey-Seybold Clinic. With its proximity to Houston’s growing population centers and workforce, the submarket continues to be a great suburban alternative to other major Houston office submarkets such as West Loop, Westchase, and Greenway Plaza. At the close of 3Q 2020, the Sugar Land submarket had a vacancy rate of 13.4%, the same as 2Q 2020. Absorption was positive with 55K SF of space absorbed, much better than the 123K SF of negative absorption in 2Q 2020. Leasing activity included 43K SF of deals completed. Currently, 56K SF of office space is under construction in this submarket.
NEW DEVELOPMENTS • 13151 West Airport Boulevard – a 56K SF class B office building
LARGE EXISTING VACANCIES • Sugar Creek on the Lake | 14141 Southwest Freeway – 274,778 SF
• Sugar Creek Tower II | 13131 Dairy Ashford Road – 104,864 SF
• Building A | 1 Fluor Daniel Drive – 85,927 SF • Sugar Creek Place I | 14100 Southwest Freeway – 76,145 SF
• ABB Network Management | 1601 Industrial Boulevard – 69,250 SF
• Two Sugar Creek Center | 77 Sugar Creek Center Boulevard – 53,744 SF
TOP LEASE TRANSACTIONS • Horn Solutions has signed a 12K SF lease in 301 Commerce Green Boulevard.
• Dr. Evans has signed a 3K SF lease in 1441 Highway 6. • Luxed Vans has signed a 3K SF lease in 15500 Voss Road.
DEALS IN THE MARKET • Sugar Land Physicians Center | 7616 Branford Place – a 56K SF class A office building
• Offices at Telfair | 300 Promenade Way – a 20K SF class A office building
22
• Sugar Creek Tower I | 13135 Dairy Ashford Road – 52,964 SF
• 12603 Southwest Freeway – 43,137 SF • The Glenn Lakes Professional Building | 3634 Glenn Lakes Lane – 39,500 SF
• The Minute Maid Building | 2150 Town Square Place – 38,540 SF
• The Texas Drive Building | 2245 Texas Drive – 38,497 SF • Commerce Green One | 14090 Southwest Freeway – 38,120 SF
• Comerica Office Tower | 1 Sugar Creek Center Boulevard – 36,237 SF
• 7619 Branford Place – 35,031 SF
22
CLEAR LAKE SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
16,545
44,213
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.7%
15.0%
14.6%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
55,357
178,252
vs. Prev. Qtr
vs. 12 Mths Ago
24,324
44,543 Delivered SF Quoted Rates $21.44
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$21.48
$22.34
VITAL STATS 12.0% 16.0%
90,000250,000 70,000
200,000
11.0%
50,000
150,000
30,000
10.0%
10,000100,000 14.0% (10,000)
50,000
9.0%
(30,000)
0
(50,000)
8.0% (70,000) (50,000)
7.0%
12.0%
(90,000) 3Q
4Q
1Q 17 2Q 17 16 16
1Q
3Q 18 16
2Q
4Q18 16
Absorption
Absorption
3Q
1Q18 17
4Q
18 2Q 17
1Q
19 3Q 17
2Q 19 4Q
17
Deliveries
3Q 191Q
18
4Q 192Q
18
1Q 203Q
Deliveries
18
2Q 3Q 20 4Q 20 1Q
18
Vacancy
(100,000)
19
Vacancy
Source: CoStar 3Q 2020 Office Report
HLC OUTLOOK Located southeast of the CBD, the Clear Lake office submarket is home to the Lyndon B. Johnson Space Center and a large concentration of government jobs. Office space in this submarket relies heavily on the Space Center but is also home to a diverse mix of industries. The area boasts strong demographics given the high volume of NASA scientists, well-paid workers at the Houston Ship Channel, and related downstream industries who choose to live in communities close to the water. At the close of 3Q 2020, the Clear Lake submarket had a vacancy rate of 14.7% which was lower than 2Q 2020. Absorption was positive with 24K SF of space absorbed, up from the 17K SF absorbed in 2Q 2020. Leasing activity fell slightly with 45K SF of deals completed, lower than the 55K SF of deals completed in 2Q 2020. Currently, 53K SF of office space is under construction in this submarket.
• 2222 Bay Area Boulevard – a 65K SF class B office building • 2200 Nasa Parkway – a 66K SF class B office building • 17300 El Camino Real – a 26K SF class B office building • 17300 Saturn Lane – a 24K SF class B office building
NEW DEVELOPMENTS • Phase I | 13150 Space Center Boulevard – a 53K SF class B office building
LARGE EXISTING VACANCIES • Clear Lake Central | 600 Gemini Street – 317,198 SF • Atrium Crest | 18333 Egret Bay Boulevard – 71,178 SF • Boeing Building | 3700 Bay Area Boulevard – 66,195 SF
TOP LEASE TRANSACTIONS • Acuren has signed a 11K SF renewal in Clear Lake Tech Center. • Barrios Technology has signed a 10K SF renewal in 16441 Space Center Boulevard. • Titronix has signed a 2K SF lease in The Cimarron Building.
DEALS IN THE MARKET • Two Corporate Plaza | 2625 Bay Area Boulevard – a 161K SF class A office building • Jacobs Building | 2224 Bay Area Boulevard – a 139K SF class B office building • Atrium @ Nassau Bay Building | 2100 Space Park Drive – a 116K SF class B office building • One Corporate Plaza | 2525 Bay Area Boulevard – a 114K SF class A office building
• 13100 Space Center Boulevard – 61,840 SF • Two Corporate Plaza | 2625 Bay Area Boulevard – 47,521 SF • One Corporate Plaza | 2525 Bay Area Boulevard – 42,874 SF • Clear Lake Tech Center | 17146 Feathercraft Laned – 38,474 SF • Hercules II | 1290 Hercules Avenue – 32,389 SF • Hercules I | 1300 Hercules Avenue – 31,071 SF • Space Park Office Building | 2200 Space Park Drive – 27,402 SF • 16055 Space Center Boulevard – 25,487 SF • 12000 Aerospace Avenue – 24,467 SF • 1322 Space Park Drive – 21,875 SF • Camino Center I | 17629 El Camino Real – 20,683 SF
• Space Park Office Building | 2200 Space Park Drive – a 77K SF class B office building
23
23
MIDTOWN SUBMARKET INTELLIGENCE Absorption
VITAL STATS
vs. Prev. Qtr
vs. 12 Mths Ago
(146,197)
44,125
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
13.0%
12.1%
10.5%
12.0% 12.0%
vs. 12 Mths Ago
10.0%
(1,188)
Leasing Act. 10,573 Delivered SF 64,488 Quoted Rate $32.04
vs. Prev. Qtr 124,889 vs. Prev. Qtr
177,616 vs. 12 Mths Ago
-
35,363
vs. Prev. Qtr
vs. 12 Mths Ago
$31.87
$28.90
18.0% 14.0%
200,000 600,000
16.0%
150,000
500,000 400,000
100,000
300,000 50,000
8.0% 6.0%
0 10.0% (50,000)
4.0%
100,000 0 (100,000)
(100,000)
2.0% 0.0%
200,000
(200,000) 8.0%
1Q 16
(150,000) 3Q 17
2Q 16
4Q 17
3Q
1Q 18
2Q 18
4Q
16 16 Absorption
Absorption
3Q 18
1Q 17
4Q 18
2Q 17
1Q 19
3Q 17
2Q 19
4Q
17 Deliveries
Deliveries
3Q 19
1Q 18
4Q 19
2Q 18
1Q 20
3Q 18
2Q 20
4Q
3Q 20
18 Vacancy
(300,000)
1Q 19
Vacancy
Source: CoStar 3Q 2020 Office Report
HLC OUTLOOK The Midtown office submarket is centrally located, due west of CBD, and has recently been dubbed the “Millennial Corridor.” The submarket includes the Heights to the north; Montrose, the Museum District, and Upper Kirby to the west; and Rice Village to the south. Further west along the Washington Corridor, the submarket has seen considerable interest from developers of all property types along Allen Parkway and Washington Avenue. At the close of 3Q 2020, the Midtown submarket had a vacancy rate of 13.0% which was nearly 1.0% higher than 2Q 2020. Absorption was negative with just 1K SF of space given back, considerably different from the 146K SF of negative absorption in 2Q 2020. Leasing activity also fell with just 11K SF of deals completed, less than a tenth of deals completed in 2Q 2020. Currently, 475K SF of office space is under construction in this submarket.
TOP LEASE TRANSACTIONS • Regent Law Firm has signed a 1K SF lease in 500 Lovett Boulevard.
DEALS IN THE MARKET • 2303 Smith | 2303 Smith Street – a 23K SF class B
LARGE EXISTING VACANCIES • America Tower | 2929 Allen Parkway – 152,478 SF • Wortham Tower | 2727 Allen Parkway – 148,074 SF • Central Square | 2100 Travis Street – 114,383 SF • HCC Building | 3100 Main Street – 108K SF • 2777 Allen Parkway – 79,849 SF • 2000 Crawford | 2000 Crawford Street – 41,560 SF • 100 Waugh | 100 Waugh Drive – 40,508 SF • 2302 Fannin Street – 38,995 SF • The Bellevue | 2323 South Shepherd Drive – 31,604 SF • River Oaks Medical | 3720 Westheimer Road – 30,861 SF
• 55 Waugh Drive – 28K SF • 2800-2810 San Jacinto Street – 27,484 SF • Midtown Plaza | 5225 Katy Freeway – 24,254 SF • Buffalo Heights | 3663 Washington Avenue – 23,642 SF • 5300 Memorial Drive – 23,587 • River Oaks Bank Building | 2001 Kirby Drive – 23,250 SF • 5900 Memorial | 5900 Memorial Drive – 21,270 SF
office building
NEW DEVELOPMENTS • The Ion | 4201 Main Street – a 270K SF class A office building
• Montrose Collective | 888 Westheimer Road – a 170K SF class A office building
• 190 TC Jester Boulevard – a 35K SF class B office building
24
24
WEST BELT SUBMARKET INTELLIGENCE Absorption (11,805) Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
(262,359)
13,482
vs. Prev. Qtr
vs. 12 Mths Ago
26.7%
26.5%
17.9%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
39,596 Delivered SF Quoted Rate $25.49
50,473 vs. Prev. Qtr
130,516 vs. 12 Mths Ago
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$25.10
$24.95
VITAL STATS 12.0%30.0%
250,000 200,000 150,000
200,000
28.0%
11.0%
100,000 50,000150,000
26.0%
10.0%
0
24.0%
100,000
(50,000) 22.0%
50,000
(100,000)
9.0%
(150,000)
20.0%
0
(200,000)
8.0%
18.0%
(50,000)
(250,000) (300,000)
16.0%
7.0%
3Q
1Q 17 16
4Q
2Q 17 16
1Q
3Q18 16
2Q
4Q18 16
Absorption
3Q
1Q 18 17
Absorption
4Q
2Q 18 17
1Q
3Q 19 17
2Q 4Q 19
17
Deliveries
Deliveries
3Q 191Q
18
4Q 192Q
18
1Q 20 3Q
18
2Q 3Q 20 4Q 20
18
Vacancy
(100,000)
1Q 19
Vacancy
Source: CoStar 3Q 2020 Office Report
HLC OUTLOOK The West Belt submarket spans a quarter-mile along the West Sam Houston Parkway/Beltway 8 between Clay Road and Highway 249. This submarket houses nearly 7M SF of class A and B office space. The submarket’s proximity to the Energy Corridor makes it one of the most energydriven office markets in Houston. With the submarket’s heavy concentration of energy related tenants, the West Belt submarket felt the oil downturn more than most other submarkets. However, the outlook for this submarket looks promising given its close proximity to the population center of Houston. At the close of 3Q 2020, the West Belt submarket had a vacancy rate of 26.7% which was slightly higher than 2Q 2020. Absorption remained negative by 12K SF, much lower than the 262K SF of negative absorption in 2Q 2020. Leasing activity remained flat with 40K SF of deals completed, lower than the 50K SF of completed deals in 2Q 2020. Currently, no office space is under construction in this submarket.
DEALS IN THE MARKET • 11100 Brittmoore Park Drive – a 76K SF class B office building
• Tanner Office Building | 11302 Tanner Road – a 58K SF class B office building
• 8400 North Sam Houston Parkway West – a 40K SF
LARGE EXISTING VACANCIES • Westway II | 4424 West Sam Houston Parkway North – 231,666 SF
• Beltway Lakes Phase III | 5775 North Sam Houston Parkway West – 154,792 SF
• Westway One | 11220 Equity Drive – 143,960 SF • Westway Plaza | 11330 Clay Road – 118,450 SF • Beltway Lakes Phase I | 5825 North Sam Houston Parkway West – 100,387 SF
• Westway Building Two | 11000 Corporate Centre Drive – 88,394 SF
• Sam Houston Crossing One | 10343 Sam Houston Park Drive – 62,329 SF
• Concourse at Westway | 4700 West Sam Houston Parkway North – 56,993 SF
• Heron Lakes | 10740 North Gessner Drive – 53,796 SF • Beltway 8 Corporate Centre | 5300 West Sam Houston Parkway North – 50K SF
• 10603 West Sam Houston Parkway North – 49,314 SF • Tanner Office Building | 11302 Tanner Road – 43,498 SF • Westway Building Four | 4920 Westway Park Boulevard – 35,675 SF
• York Centre | 10235 West Little York Road – 35,388 SF
class B office building
• 15000 Northwest Freeway – a 38K SF class B office building
• 9949 West Sam Houston Parkway North – a 36K SF class B office building
• 16060 Dillard Drive – a 24K SF class B office building • 16000 Dillard Drive – a 24K SF class B office building
25
25
EAST HOUSTON/PASADENA SUBMARKET INTELLIGENCE VITAL STATS
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(82,227)
66,801
(52,779)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
14.2%
12.2%
12.9%
12.0%
vs. 12 Mths Ago
10.0%
Leasing Act. 19,826 Delivered SF 30,500
vs. Prev. Qtr 105,058
81,587
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
Quoted Rates
vs. Prev. Qtr
vs. 12 Mths Ago
21.12
22.4
21.17
18.0% 18.0%
600,000 120,000
16.0% 16.0%
100,000
500,000
80,000
400,000
60,000
300,000
40,000
14.0%
8.0% 12.0%
20,000
200,000
0
100,000
(20,000)
6.0%
(40,000)
0
4.0% 10.0%
(60,000) (100,000)
2.0%
(80,000) 8.0%
0.0% 1Q 16
(200,000)
(100,000) 3Q 17
2Q 16
4Q 17
3Q
1Q 18
2Q 18
4Q
16 16 Absorption
Absorption
3Q 18
1Q 17
4Q 18
2Q 17
1Q 19
2Q 19
3Q 4Q 17 17 Deliveries
3Q 19
1Q 18
4Q 19
2Q 18
1Q 20
Deliveries
2Q 20
3Q 20
3Q 4Q 18 Vacancy 18
(300,000) 1Q 19
Vacancy
Source: CoStar 3Q 2020 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 3Q 2020, the East Houston/Pasadena submarket had a vacancy rate of 14.2% which was more than 2.0% higher than 2Q 2020. Absorption turned negative with 82K SF of space given back, higher than the 67K SF absorbed in 2Q 2020. Leasing activity fell with just 20K SF of deals completed, almost a fifth of the activity in 2Q 2020. Currently, 64K SF office space is under construction in this submarket.
NEW DEVELOPMENTS • 4400 Harrisburg Boulevard – a 32K SF class B office building • 2351 Oleander Drive – a 32K SF class B office building
LARGE EXISTING VACANCIES • 100 Pasadena Boulevard – 114,356 SF • 12727 Featherwood Drive – 31,763 SF • 1001 Shaw Avenue – 30,938 SF • Vibe Hobby | 8866 Gulf Freeway – 30,672 SF • Gulf Freeway Plaza | 9333 Bryant Street – 29,750 SF
TOP LEASE TRANSACTIONS
• Atrium 10 Tower | 11811 East Freeway – 28,940 SF
• Royal Oak Enterprises has signed a 2K SF lease in I-45 North Professional Building.
• Bank of America East Freeway | 12605 East Freeway – 28,902 SF
• The Law Offices of Pablo Rodriguez has signed a 1K SF lease in Vibe Hobby.
• BPM Airport | 8031 Airport Boulevard – 28,058 SF • Land Park | 11821 East Freeway – 27,613 SF • EaDo | 2339 Commerce Street – 25,549 SF
DEALS IN THE MARKET • Vibe Hobby | 8866-8876 Gulf Freeway – a two 90K SF class B office building complex
• Original US Schlumberger HQ (1938) | 2720 Leeland Street – 25,500 SF • 12600 North Featherwood Drive – 24,417 SF
• North Houston Medical Plaza | 7007 North Freeway – a 86K SF class B office building
• 3737-3743 Red Bluff Road – 23,934 SF
• 3737-3743 Red Bluff Road – a 86K SF class B office building
• The Fuqua Professional Center | 12505-12563 Gulf Freeway – 22,877 SF
• Bank of America East Freeway | 12605 East Freeway – a 86K SF class B office building
• Bayshore Medical Building | 3333 Bayshore Boulevard – 22,659 SF
• Atrium 10 Tower | 11811 East Freeway – a 85K SF class B office building
• Bank of America Building | 213 West Southmore Avenue – 22,629 SF
• The 1200 Building | 1200 Highway 146 South – 23,527 SF
• 12650 North Featherwood Drive – a 58K SF class B office building • 12727 Featherwood Drive – a 50K SF class B office building • 1702 Strawberry Road – a 22K SF class B office building
26
26
WEST SUBMARKETFARINTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
(3,343)
(51,480)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
17.8%
15.8%
12.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
50,259
18,135
vs. Prev. Qtr
vs. 12 Mths Ago
45,617
96,260 Delivered SF 152,645 Quoted Rates $28.90
-
-
vs. Prev. Qtr
vs. 12 Mths Ago
$28.23
$28.33
VITAL STATS 12.0% 20.0%
250,000 150,000
200,000
11.0% 18.0% 100,000
150,000
10.0% 16.0%
9.0%
50,000 100,000
14.0%
0
50,000 0
8.0%
12.0%
(50,000)
(50,000) 7.0%
10.0%
1Q 16
(100,000) 3Q 17
2Q 16
4Q 17
3Q 16
1Q 18
2Q 18
4Q 16
Absorption
3Q 18
1Q 17
4Q 18
2Q 17
Absorption
1Q 19
3Q 17
2Q 19
4Q 17
Deliveries
Deliveries
3Q 19
1Q 18
4Q 19
2Q 18
1Q 20
3Q 18
2Q 20
4Q 18
3Q 20
Vacancy
(100,000)
1Q 19
Vacancy
Source: CoStar 3Q 2020 Office Report
HLC OUTLOOK HLC’s Far West office submarket includes CoStar’s Katy Freeway/Grand Parkway submarket about 25 miles west of Houston’s CBD. Growth among all product types in West Houston has been a common theme and the office sector has been no exception as it is located close to Houston’s fastest-growing population center and the expanded Grand Parkway. Nearly 80% of the metro’s population growth since 2010 has occurred in the unincorporated areas of Harris County covering parts of this and neighboring submarkets. At the close of 3Q 2020, the Far West submarket had a vacancy rate of 17.8% which was 2.0% higher than 2Q 2020. Absorption turned positive with 46K SF of space absorbed, up from the 3K SF of negative absorption in 2Q 2020. Leasing nearly doubled with 96K SF of deals completed compared to 2Q 2020. Currently, 21K SF is under construction in this submarket.
LARGE EXISTING VACANCIES • Mason Creek Office Center II | 21700 Merchants Way – 127,955 SF
• Katy Ranch Phase II | 24279 Katy Freeway – 108,401 SF • The Offices at Greenhouse | 19219 Katy Freeway – 87,444 SF
• Greenhouse at Park Row | 2051 South Greenhouse Road – 66,119 SF
• Katy MOB II | 707 South Fry Road – 50,359 SF • Horizon Medical Plaza 2 | 19002 Park Row – 41,500 SF • Offices at 410 | 410 West Grand Parkway South – 33,985 SF
• Det Norske Veritas Phase 2 | 1400 Ravello Drive – 28,836 SF
• Westgreen Professional Building | 750 Westgreen Boulevard – 27,940 SF
TOP LEASE TRANSACTIONS • Escalate Workspace has signed a 25K SF lease in Katy Ranch Phase II.
• Hoover has signed a 18K SF lease in Katy Ranch Phase II.
• Ranch Office has signed a 16K SF lease in Kingsland
• Katy Medical Plaza I | 23510 Kingsland Boulevard – 27,874 SF
• 2002 Grand Parkway North – 24,891 SF • Katy MOB I | 705 South Fry Road – 23,368 SF • 25807 Westheimer Parkway – 21,892 SF
Boulevard & AMC Drive.
• NFM Lending has signed a 2K SF lease in Grand Ridge Office Condos.
NEW DEVELOPMENTS • 25220 Kingsland Boulevard – a 21K SF class B office building
27
27
KINGWOOD SUBMARKET INTELLIGENCE Absorption
VITAL STATS
vs. Prev. Qtr
vs. 12 Mths Ago
(4,645)
(12,777)
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
14.0%
12.9%
12.7%
11.8%
12.0% 12.0%
vs. 12 Mths Ago
10.0%
(4,715)
Leasing Act. 6,790 Delivered SF Quoted Rates $25.49
vs. Prev. Qtr 15,663
3,849
vs. Prev. Qtr
vs. 12 Mths Ago
39,106
-
vs. Prev. Qtr
vs. 12 Mths Ago
$25.46
$25.82
18.0% 16.0%
600,000
16.0%
140,000 500,000 14.0% 90,000
400,000 300,000
40,000
200,000
10.0% (10,000)
8.0% 6.0%
8.0%
4.0% 6.0%
(100,000)
(110,000)
2.0% 0.0%
100,000
(60,000)0
(200,000) 4.0%
1Q 16
(160,000) 3Q 17
2Q 16
4Q 17
3Q
1Q 18
2Q 18
4Q
16 16 Absorption
3Q 18
1Q 17
Absorption
4Q 18
2Q 17
1Q 19
3Q 17
2Q 19
4Q
3Q 19
17 Deliveries
Deliveries
1Q 18
4Q 19
2Q 18
1Q 20
3Q 18
2Q 20
4Q
3Q 20
18 Vacancy
(300,000)
1Q 19
Vacancy
Source: CoStar 3Q 2020 Office Report
HLC OUTLOOK HLC’s Kingwood office submarket is located in Northeast Houston and situated between the Sam Houston Tollway and the Grand Parkway. This smaller outlying office submarket has seen a recent boost in development thanks to the Grand Parkway, Houston’s third loop. The submarket currently contains just over 2M SF of class A and B office space. At the close of 3Q 2020, the Kingwood submarket had a vacancy rate of 12.9% which was slightly higher than 2Q 2020. Absorption remained negative by 5K SF, the same amount of negative absorption in 2Q 2020. Leasing activity also fell with 7K SF of deals completed, compared to the 16K SF of deals completed in 2Q 2020. Currently, 270K SF is under construction in this submarket.
NEW DEVELOPMENTS • Insperity Campus Building 5 | US-50 & Kingwood Drive – a 270K SF class A office building
LARGE EXISTING VACANCIES • Northeast Medical Tower II | 18980 North Memorial Drive North – 82,793 SF
• Kingwood West Tower | 22999 Highway 59 North – 31,906 SF
• Four Kingwood Place | 900 Rockmead Drive – 28,902 SF
• 215 Kingwood Executive Drive – 27,859 SF • Humble Medical Office Building | 1485 FM 1960 Bypass East – 26,516 SF
• Three Kingwood Place | 800 Rockmead Drive – 20,778 SF
• Kings Harbor | 4501 Magnolia Cove Drive – 17,578 SF • BRB Medical Office Building | 22751 Professional Drive – 16,566 SF
• 2300 Green Oak Drive – 16,464 SF • 22710-22720 Professional Drive – 14,468 SF • Two Kingwood Place | 700 Rockmead Drive – 13,526 SF • Kingwood Medical Plaza I | 22698 Professional Drive – 12,940 SF
• Woodforest National Bank Building | 1710 West Lake Houston Parkway – 11,063 SF
28
28
SUBURBAN OUTLIERS SUBMARKET INTELLIGENCE Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
58,719
48,363
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
12.7%
12.3%
11.5%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
36,304
41,760
vs. Prev. Qtr
vs. 12 Mths Ago
(7,937)
57,398 Delivered SF 31,672 Quoted Rates $27.16
33,320
99,230
vs. Prev. Qtr
vs. 12 Mths Ago
$26.91
$25.74
VITAL STATS 12.0%14.0%
500,000 250,000
200,000 400,000
11.0%
150,000
12.0%
300,000
10.0%
100,000 200,000
50,000
9.0%
10.0%
100,000
0 0
8.0%
(50,000) 7.0%
(100,000)
8.0% 3Q
1Q 17 16
4Q
2Q 17 16
1Q
3Q18 16
2Q
4Q18 16
Absorption Absorption
3Q
18 1Q 17
4Q
18 2Q 17
1Q
19 3Q 17
2Q 19 4Q
17
3Q 191Q
Deliveries Deliveries
18
4Q 192Q
18
1Q 2Q 3Q 20 3Q 20 4Q 20 1Q
18
18
Vacancy Vacancy
(100,000)
19
Source: CoStar 3Q 2020 Office Report
HLC OUTLOOK HLC’s Suburban Outliers office submarket consists of the remaining submarkets outside of the major Houston submarkets such as the CBD, Greenway Plaza, Westchase, and The Woodlands. These smaller submarkets are located on the outskirts of Houston and include just under 10.5M SF of class A and B office buildings. At the close of 3Q 2020, the Suburban Outliers submarket had a vacancy rate of 12.7% which was slightly higher than 2Q 2020. Absorption turned negative with 8K SF of space given back, opposite of the 60K SF of positive absorption in 2Q 2020. Leasing activity increased with 57K SF of deals completed, compared to the 36K SF of deals completed in 2Q 2020. Currently, 409K SF is under construction in this submarket.
B office building • 455 School Street – a 22K SF class B office building • Northpoint Crossing Office Building | 24445 State Highway 249 – a 21K SF class B office building • 3100 Gulf Freeway – a 21K SF class B office building • Baylor St. Luke’s Emergency Center | 4019 Interstate 45 North – a 20K SF class B office building
NEW DEVELOPMENTS • 24200 Via Mazzini Way – a 80K SF class A office building • 750 Fish Creek Thoroughfare – a 50K SF class B office building
TOP LEASE TRANSACTIONS • Bank of America has signed a 12K SF renewal in 1431 Graham Drive. • Home Services has signed a 4K SF lease in 7035 West Grand Parkway South. • Yollick Law Firm has signed a 3K SF lease in 104 West Davis Street. • Care ATC has signed a 3K SF lease in 17903 West Lake Houston Parkway. • NanoSeal has signed a 3K SF lease in Commercial Circle Offices.
DEALS IN THE MARKET
• Towne Lake Office Condos | 10242 Greenhouse Road – 50K SF of class B office condos • HCA Healthcare | 11200 Broadway Street – a 48K SF class A office building • I45 & Crescent Campus Boulevard – a 45K SF class B office building • 2080 Central Pine Street – a 42K SF class B office building • 2510 South Loop 336 West – a 40K SF class B office building • 12280 Broadway Street – a 25K SF class A office building
LARGE EXISTING VACANCIES
• Primary Medical Tower II | 2800 Garth Road – a 129K Class B office building
• 4005 Technology Drive – 257,399 SF
• Magnolia Landmark Building | 18230 FM 1488 Road – a 65K SF class B office building
• Cypress Medical Office Building | 27700 Highway 290 – 43,411 SF
• 301 South First Street – a 59K SF class B office building
• 4001 Technology Drive – 40,681 SF
• Towne Lake Office Condos – a 50K SF office condo community • 32100 Dobbin Huffsmith Road – a 47K SF class A office building • The Offices at Greatwood | 6514-6548 Greatwood Parkway – a 43K SF class B office building • Bank of America | 4000 Garth Road – a 33K SF class B office building • NOV | 10586 Highway 75 North – a 30K SF class B office building • Tomball Bank of America Building | 1431 Graham Drive – a 28K SF class B office building
• Westland Bunker | 550 Club Drive – 54,071 SF • UT Physicians Facilities | 1517 Thompson Road – 42,551 SF • 2765-2785 Gulf Freeway South – 39,112 SF • Oakbend Professional Building | 1601 Main Street – 36,767 SF • Pearland Medical Plaza 1 | 10905 Memorial Hermann Drive 35,088 SF • 17302 House Hahl Road – 33,956 SF • Primeline Pro Office Building | 2941 Broadway Bend Drive – 31,691 SF • 2401 Termini Street – 30,262 SF • NOV | 10586 Highway 75 North – 30K SF
• 12280 Broadway Street – a 25K SF class A office building
• Umar Syed Medical Tower/2802 Garth Road – 29,627 SF
• Pearland Medical Commons | 8540 Broadway Street – a 25K SF class A office building
• 7830 West Grand Parkway South – 28,218 SF
• The Lakes Professional Center | 6455 South Shore Boulevard – a 24K SF class B office building
• 10970 Shadow Creek Parkway – 25,100 SF
• Hughes Court Professional Building | 3828 Hughes Court – a 23K SF class B office building
• Magnolia Landmark Building | 18230 FM 1488 Road – 24,169 SF
• Baker Road Professional Building | 1010 Baker Road – a 22K SF class 29
• 1920 Country Place Parkway – 25,237 SF • Pearland Medical Commons | 8540 Broadway Street – 25K SF • Conroe Medical Office Building | 1501 River Pointe Drive – 22,393 SF 29
DALLAS
5950 Berkshire Lane Suite 900 Dallas, Texas 75225 T 972.241.8300 F 972.241.7955
FORT WORTH
1200 Summit Avenue Suite 300 Fort Worth, Texas 76102 T 817.710.1110 F 817.810.9017
www.holtlunsford.com
HOUSTON
11451 Katy Freeway Suite 300 Houston, Texas 77079 T 713.850.8500 F 713.850.8550