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Market News and Trends
Office building sales transactions have slowed significantly since the credit markets have tightened and financing has become harder to come by. Over the past 12 months, the dollar volume of sales of Houston-area office buildings $2.5 million and higher was down 89% compared with a year earlier, according to data from LoopNet and Real Capital Analytics.
As the local economy weakens, office vacancy is projected to finish 2009 at 14.9%, a 220 basis point rise from year-end 2008. Overall average asking rents are forecast to slip to $23.31 F/S per SF by year end while effective rents retreat to $19.81 F/S per SP, annual declines of 3.1% and 4.1%, respectively.
“Commercial real estate bubble looms UPI reports” The Federal Reserve has extended a program six months to buy $200 billion of securities backed by commercial property; a program that has to date only lent investors $29.6 billion. Commercial mortgage defaults could reach 4.1% by the end of the year, up from 2.25% in the first quarter of 2009. Lenders however, are becoming more reluctant to push a commercial property into foreclosure, which would force them to resell the properties at lower prices or take on the responsibilities of managing the asset.
Houston Office Report:
Companies in Houston are expected to cut payrolls by 55,000 positions this year, a 2.1% decline in overall employment. Office-using head counts are projected to decline by 5.6%, or 31,400 workers.
Leases
• Tax Masters Inc. signed a long-term lease of 107,890 SF at Dairy Ashford Plaza in the Katy Freeway West submarket. The IRS tax relief representation company will move into its new space during Q4 2009.
• ExxonMobil signed a 10,200 SF lease at 14950 Heathrow Forest Parkway in Houston. The energy firm now occupies nearly 109,000 SF at The Meadows at Interwood office building. The 147,825 SF, 4-story, Class B property is in the North Belt East submarket. ExxonMobil handled the transaction internally. |
• Tricon Geophysics, Inc. expanded at 10111 Richmond Avenue. Tricon Geophysics is now Westchase Corporate Center’s largest tenant occupying 22,190 of the building’s nearly 184,000 SF. Drew Morris from Studley represented Tricon Geophysics in the transaction.
• Advanced Pharmacy signed a 25,091 SF lease at 2040 W. Sam Houston Parkway N in Houston. Cushman & Wakefield represented the tenant.
• The Houston Police Department signed a 50,800 SF lease at 7125 Ardmore St. in Houston. The single-tenant, 50,800 SF office building is in the South Main/Medical Center submarket. Economics for the 10 year deal were $18 gross with 2% increases per annum and turn-key construction +/- $25.00. Chip Horne of Cushman & Wakefield represented HPD.
• Goodrich Petroleum Corp. leased 37,000 SF on the top three floors of 801 Louisiana in the Houston CBD. Rumored economics are $30 gross with $60/SF in TI. Goodrich Petroleum will move into its new headquarters next month. Bob Parsley and Stan Voelkel with Colliers International represented the tenant.
• Mercuria Energy Trading will open a Houston office at 5 Greenway Plaza. The Cyprus-based firm has leased approximately 9,500 SF.
• Nexus Health Systems has renewed its lease of 12,051 SF at One Riverway in the Galleria submarket. Mitch Pearl of UGL Equis represented the tenant.
• IrvineDCS Team, an investment holding company, has leased 6,150 SF in Woodway Tower at 4900 Woodway. Philip Price of Cushman & Wakefield represented the tenant.
• IntegraNet Physician Resource has expanded and relocated its offices to a 12,419 SF space at 333 N. Sam Houston Parkway East. André Granello and Jeff Peltier with Gibson & Granello Realty Partners represented the tenant.
• Greystar Corp., has renewed its lease of 6,486 SF at Millennium Tower at 10375 Richmond. David Price of Cresa Partners represented the tenant.
Deals in Play
• Chicago Bridge & Iron is in the market for a contract- based 80,000 SF requirement. CB&I is represented by Scott Wegmann with Cushman & Wakefield of Texas, Inc. |
• Insurance Alliance is looking at Class B Galleria options for a 25,000-30,000 SF requirement. Timing is 1st quarter of 2010.
• Trans Canada is in the market for 100,000 SF. Primary focus will be in the Houston CBD. Louis Rosenthal with Jones Lang LaSalle is representing the prospect.
• Rowan Companies, currently at Williams Tower, is looking for 90,000 SF of Class A space. Trey Strake and Scott Wegmann of Cushman & Wakefield are the brokers.
• Vopac, located at 2000 West Loop South, is in the market for 25,000 SF. Vopac is represented by Mark O’Donnell with Studley.
• Goodwill Houston is in the market for 70,000 to 100,000 SF for their Headquarters facility. Gilbert Grey with CBRE is representing the prospect.
Investment Activity
• PM Realty Group announced the sale of White Rock Commercial’s recently completed West Pointe Center located at 9420 W. Sam Houston Parkway North and features 3-stories of class A office space totaling 170,823 SF. The seller was represented by Wade Bowlin and Doug Little of PM Realty Group. The purchaser was represented by Bob Parsley and Bill Byrd of Colliers International.
• JPMorgan Chase is marketing its Houston headquarters building as it seeks to get out of the real estate business. The property at 712 Main downtown is part of a portfolio of 23 office buildings around the country being offered for sale by Chase, which last year acquired Bear Stearns and the banking operations of Washington Mutual. If the building is sold, it will remain the bank's local headquarters through a long-term lease.
Development Activity
• Radler Enterprises Inc. has completed construction on Phase II of the Beltway Lakes office complex. The development's two Class A buildings are located at Beltway 8 and State Highway 249 in Northwest Houston. Beltway Lakes consists of identical 6-story buildings with a total of 323,000 SF of office space. Deep Marine Technology is currently the only tenant in the complex. The firm occupies 12,000 SF in the first building. |
