Industry experts say the market has stabilized and is gaining traction for an upward push.
And despite the partly cloudy conditions, Houstonians are starting to hear the unthinkable — new construction is being planned again. Houston developers have several new office projects on the drawing boards and construction will begin on at least one new project in a few weeks.
“Houston is on the verge of a sooner-than-expected recovery,” says office leasing broker Charles Gordon of CB Richard Ellis.
The most surprising of the new office projects being discussed is the so-called Block 69 deal at Main Street and Texas Avenue in downtown Houston. Hines owns the block and it has retained an architect to design plans for a new tower there.
Hines just opened the 46-story BG Group Place in downtown a couple of months ago. So it’s surprising to see another new building discussed so soon. But if the anchor tenant is signed, another Hines tower could be under construction soon.
It’s been years since an office building has been constructed in the Galleria/Uptown area. But that’s about to change.
A joint venture of Redstone Cos. and Stream Realty Partners will begin work this summer on a 22-story office project on Post Oak Boulevard, just north of the Galleria. The building will be constructed on part of a six acre tract of land, leaving Redstone plenty of room for additional phases, including a hotel and another office tower.
The Redstone building will be anchored by the BBVA Compass bank, which has leased 150,000 square feet of the building’s 312,000 square feet. The building will have 12 levels of office space above a parking structure.
And even more new buildings are in the pipeline.
Actually, the office statistics are fairly underwhelming.
Houston’s citywide office vacancy rate is currently 13.6 percent, unchanged from a year ago and rental rates have decreased slightly, according to Commercial Gateway.
Bad news is just around the corner, too. The merger of Continental and United Airlines is expected to result in vacant office space in downtown Houston. Devon Energy is expected to vacate some downtown office space and Hess will leave behind several empty floors when it moves into its new tower this summer.
However, Houston still reigns as the energy capital of the world. The price of oil is over $100 a barrel and new exploration techniques have opened up major domestic fields for drillings. Overall, Houston’s economy has added over 51,000 jobs over the last year, creating more demand for office space.
“We are seeing tenants expand in virtually all properties, and specifically the new hiring growth in the energy and engineering industries has led to a fueling in absorption,” says David Baker, executive vice president of Transwestern.
The hiring has prompted new proposals from some developers, such as Houston-based Midway Cos.
Midway Cos. has two new buildings on the drawing board – the 250,000-square-foot City Centre III project and the proposed M Fifty Nine, a 74,000-square-foot building on Montrose Boulevard. The existing office space in Midway’s City Centre development, located near the Katy Freeway at Beltway 8, is 100 percent leased and groundbreaking on the next office building there will occur soon.
Make no mistake — Houston is a long way from construction boom times. But when developers are planning new projects, it injects optimism into the market.