Houston New Office Building
According to Grubb & Ellis the Katy Freeway and Energy Corridor areas had the greatest amount of office activity for the third quarter 2008.. This market area had 323,010 square feet of absorption during the third quarter. Placing the total absorption for this part of the Houston real estate market at 990,113 square feet for the year. Leaving the Katy Freeway and Energy Corridor with bragging rights of having the highest absorption rate for all submarkets metro wide.
Class A properties lead the way in activity for the third quarter with 363,570 square feet as the year-to-date tally rose to 946,640., Class B properties did not fair as well as they recorded a negative absorption of 13,335 square feet. Numbers for Class C properties absorption came in lower than Class B with 27,225 square feet of negative growth during the survey period. The Plaza at Enclave, a 343,541 square feet Class A office project at 1254 Enclave Parkway attributed greatly to the positive absorption numbers as Dow Chemical Company moved its Houston operations into the new building, filling up 280,000 square feet.
Energy Corridor vacancy increased by 60 basis points to 7 percent, as new construction added over 465,000 square feet of outstripped demand. Class A vacancy within the currently sits just below 4% but will likely be on the rise as new construction comes onto the market. This trend will likely continue into 2009 as developers complete the over 2.6 million square feet of new product under construction. Also contributing to the quarterly growth, the Westchase market posted 150,598 square feet of absorption increasing the annual total to 228,967 square feet. Again the quarterly gain was mostly attributed to Class A properties posting 132,346 square feet of positive absorption while Class B properties recorded 29,600 square feet of positive absorption.
With unison to the Houston housing market even as the market slowed during 3Q, overall full-service asking rents continued upward. Asking rents increased across the board, rising $0.31 to $26.44 per square feet per year. Class A asking rents posted the largest quarterly increase, gaining $0.57 to total $33.27 per square feet per year. Class A asking rents within Houston’s Central Business District now stand at $39.29 per square feet per year as Class A vacancy remains low at 6.8 percent. Citywide Class B and C full-service asking rents increased by $0.13 and $0.36 to $21.41 and $15.93 per square feet per year, respectively.
Speculative office space under construction stands at 8.4 million square feet citywide which could put the brakes on the overall positive trend observed over the year. The majority of the activity is taking place within Energy Corridor, CBD and Northwest Freeway Houston submarkets with nearly 6 million square feet underway. The largest project under construction remains Hines’ Main Place, a 46-story, 1 million square feet office building at 811 Main St. between Walker and Rusk. Information for this post was provided by the Real Estate Center at Texas A&M University, the Texas state contracted entity for the accumulation of real estate data.