www.colliers.com/houston Q1 2014 | OFFICE MARKET HOUSTON OFFICE MARKET INDICATORS Q1 2013 Q1 2014 CITYWIDE NET ABSORPTION (SF) (548)K 2.3M CITYWIDE AVERAGE VACANCY 12.8% 12.0% CITYWIDE AVERAGE RENTAL RATE $24.59 $26.09 CITYWIDE DELIVERED INVENTORY (SF) 100K 2.1M CLASS A RENTAL RATE CBD $37.13 $38.80 SUBURBAN $29.54 $31.83 CLASS A VACANCY CBD 10.2% 10.0% SUBURBAN 10.1% 8.5% RESEARCH & FORECAST REPORT HOUSTON OFFICE MARKET HOUSTON’S OFFICE MARKET POSTS 2.3M SF OF POSITIVE NET ABSORPTION IN Q1 Houston’s office market had a phenomenal first quarter, recording 2.3M SF of positive net absorption, the highest quarterly amount since 2.5M SF was recorded in Q2 2007. More than 2.1M SF was added to Houston’s office inventory and, at the close of Q1, 15.1M SF of new office development was under construction. Energy giants such as Apache, BHP, ExxonMobil, Phillips 66, and Shell have expansion projects in the construction pipeline currently, and many others have announced plans to build new office buildings to accommodate growth. The citywide average rental rate increased 2.5% from $25.45 per SF to $26.09 per SF over the quarter and 6.1% from $24.59 per SF over the year. Citywide, average Class A rents increased 3.7% and Class B rents increased 2.0% over the quarter. The Houston metropolitan area added 91,300 jobs between January 2013 and January 2014, an annual increase of 3.4% over the prior year’s job growth. Local economists have forecasted 2014 job growth to remain strong, adding between 68,000 and 72,000 jobs. Houston’s unemployment fell to 5.6% from 6.9% one year ago. Houston area home sales increased 8.35% between February 2013 and February 2014 and the average price of a single-family home rose 12.5% over the year. ABSORPTION, NEW SUPPLY & VACANCY RATES Houston UNEMPLOYMENT 1/13 1/14 HOUSTON 6.9% 5.6% TEXAS 7.0% 5.8% U.S. 8.5% 7.0% JOB GROWTH ANNUAL CHANGE # OF JOBS ADDED HOUSTON 3.4% 91.3K TEXAS 3.0% 330.9K U.S. 1.7% 2.3M JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted) 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% 17.0% -1,500,000 -1,000,000 -500,000 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 N etAbsorption N ew Supply Vacancy
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
www.colliers.com/houston
Q1 2014 | OFFICE MARKET
HOUSTON OFFICEMARKET INDICATORS
Q1 2013 Q1 2014
CITYWIDE NET ABSORPTION (SF) (548)K 2.3M
CITYWIDE AVERAGE VACANCY 12.8% 12.0%
CITYWIDE AVERAGE RENTAL RATE $24.59 $26.09
CITYWIDE DELIVERED INVENTORY (SF) 100K 2.1M
CLASS A RENTAL RATE
CBD $37.13 $38.80
SUBURBAN $29.54 $31.83
CLASS A VACANCY
CBD 10.2% 10.0%
SUBURBAN 10.1% 8.5%
RESEARCH & FORECAST REPORTHOUSTON OFFICE MARKET
HOUSTON’S OFFICE MARKET POSTS 2.3M SF OF
POSITIVE NET ABSORPTION IN Q1
Houston’s office market had a phenomenal first quarter, recording 2.3M SF of positive net absorption, the highest quarterly amount since 2.5M SF was recorded in Q2 2007.
More than 2.1M SF was added to Houston’s office inventory and, at the close of Q1, 15.1M SF of new office development was under construction. Energy giants such as Apache, BHP, ExxonMobil, Phillips 66, and Shell have expansion projects in the construction pipeline currently, and many others have announced plans to build new office buildings to accommodate growth.
The citywide average rental rate increased 2.5% from $25.45 per SF to $26.09 per SF over the quarter and 6.1% from $24.59 per SF over the year. Citywide, average Class A rents increased 3.7% and Class B rents increased 2.0% over the quarter.
The Houston metropolitan area added 91,300 jobs between January 2013 and January 2014, an annual increase of 3.4% over the prior year’s job growth. Local economists have forecasted 2014 job growth to remain strong, adding between 68,000 and 72,000 jobs. Houston’s unemployment fell to 5.6% from 6.9% one year ago. Houston area home sales increased 8.35% between February 2013 and February 2014 and the average price of a single-family home rose 12.5% over the year.
Houston’s economy is expected to remain strong in 2014 due to healthy job growth and continued expansion in the energy sector.
One BriarLake Plaza 2000 W Sam Houston Pky Westchase 502,410 2000 97.5% 53,384 $47.56 TIER REIT, Inc.
One Hughes Landing 1800 Hughes Landing Blvd The Woodlands 197,719 2013 98.6% 2,853 $45.00 The Woodlands Development Company, L.P.
Two Hughes Landing 1790 Hughes Landing Blvd The Woodlands 197,719 2014 7.7% 182,537 $38.38 The Woodlands Development Company, L.P.
3 Waterway Square Place
3 Waterway Ave The Woodlands 231,589 2013 98.4% 3,693 $43.92 The Woodlands Development Company, L.P.
Note: Avail. SF includes direct and sublet space. Source: CoStar Property
COLLIERS INTERNATIONAL | P.
VACANCY & AVAILABILITY
Houston’s citywide vacancy rate fell 10 basis points between quarters to 12.0% from 12.1%, and dropped by 80 basis points annually from 12.8% in Q1 2013. Between quarters, the average CBD vacancy rate remained at 12.4%, while the average suburban vacancy rate decreased 250 basis points to 11.8% from 14.3%.
The average CBD Class A vacancy rate increased 20 basis points between quarters from 9.8% to 10.0%, and the average CBD Class B vacancy rate fell 10 basis points from 13.5% to 13.4%. The average suburban Class A vacancy rate decreased 60 basis points from 9.1% to 8.5%, and the average suburban Class B vacancy rate remained at 14.9%.
Of the 1,644 existing office buildings in our survey, only 43 have 100,000 SF of contiguous space available for lease or sublease. Further, only 16 have 200,000 SF of contiguous space available. Citywide, available sublease space totals 4.0 million SF or 1.9% of Houston’s total office inventory, but only 1.8 million SF of this sublease space is currently vacant.
ABSORPTION & DEMAND
Absorption increased in Q1 as new space was delivered and tenants expanded. Houston’s office market posted 2.3M SF of positive net absorption, a significant improvement over the 548,000 SF of negative net absorption posted in the same quarter one year ago.
Suburban Class A space posted the largest gain, with 2.2M SF of positive net absorption, mostly due to tenants expanding into new space in The Woodlands and Katy Freeway submarkets. Class A space in the CBD posted the largest loss, with 37,190 SF of negative net absorption.
Some of the larger tenants that moved into new space during Q1 include: Wood Group Mustang (186,000 SF) moved into Westgate II in the Katy Freeway submarket; C & J Energy Services (125,000 SF) moved into 3990 Rogerdale located in the Westchase submarket; Alliantgroup (125,000 SF) moved into 3009 Post Oak Blvd in the West Loop/ Galleria submarket; and JGC America, Inc. (52,000 SF) moved into Granite Briarpark Green in the Westchase submarket.
RENTAL RATES
The average citywide rental rate increased 2.5% from $25.45 per SF to $26.09 per SF over the quarter, and 6.1% from $24.59 per SF over the year. Average citywide Class A rents increased 3.7% and Class B rents increased 2.0% over the quarter.
The Class A average rental rate in the CBD increased 1.1% from $38.38 per SF to $38.80 per SF between quarters, while the suburban Class A average rental rate increased 4.9% from $30.34 per SF to $31.83 per SF. The average Class B rental rate in the CBD rose 4.4%, while the average suburban Class B rental rate increased 1.7% between quarters.
100,716 1979 US Builders Velocis Partners $15.5M $154 7.5 2/2014
3COLLIERS INTERNATIONAL | P.
SALES ACTIVITY
Houston’s office investment sales activity included 14 sales transactions with a total sales volume of approximately $508 million, averaging $274 per SF. Listed below are a few significant transactions that closed during the first quarter.
LEASING ACTIVITY
Houston’s office leasing activity reached 2.8 million SF in the first quarter. Below is a list of select Q1 2014 top lease transactions, the majority of which were new.
1Renewal 2Expansion3Sublease4Pre-lease/proposed or under construction
Building name/address Submarket SF Tenant Lease date
One Greenspoint Place North Belt/Greenspoint 224,833 American Bureau of Shipping1 Mar-14
Greenway Plaza Greenway Plaza 38,006 RealEC Technologies Jan-14
Greenspoint Park III North Belt/Greenspoint 29,447 China Shipping1 Feb-14
Two Greenspoint Place North Belt/Greenspoint 27,161 American Bureau of Shipping Jan-14
Weslayan Tower Greenway Plaza 24,568 Patterson & Sheridan, LLP Jan-14
Ashford Place II Katy Freeway West 20,504 WorleyParsons Feb-14
South Tower-Penzoil Place CBD 20,429 Gensler2 Mar-14
Two Hughes Landing The Woodlands 16,249 BusinesSuites4 Jan-14
Main Link Biotechnology Park South Main/Medical Center 15,437 Companion DX Reference Lab, LLC Jan-14
333 Northbelt North Belt/Greenspoint 15,110 Norlyn Enterprises (Diligent)1 Feb-14
Blvd Place 2 Galleria/Uptown 12,520 Business Suites4 Mar-14
1001 Fannin CBD 10,420 Concho Resources Mar-14
Central Brazoria County Business Park Southwest Far 10,136 Furmanite Jan-14
Houston’s construction pipeline continues to expand with 15.1 million SF under construction at the end of Q1 2014. The table below includes buildings containing 100,000 SF or greater.
COLLIERS INTERNATIONAL | P. 7
Building Name ADDRESS SUBMARKET SFPRE-
LEASED DEVELOPEREST.
DELIVERYExxonMobil Campus 23125 I-45 S Woodlands 3,000,000 100.0% Gilbane Building Company Jun-14
609 Main at Texas 609 Main St CBD 1,050,000 9.7% Hines Feb-17
CyrusOne West Campus Expansion
5150 Westway Park Blvd Northwest Far 800,000 100.0% CyrusOne Sep-14
Energy Center Four 925 N Eldridge Pky Katy Freeway West 600,000 100.0% Trammell Crow Company Dec-16
Four Oaks Place 1500 Post Oak Blvd Galleria/Uptown 600,000 100.0% Transwestern Oct-16
Energy Center Three 935 N Eldridge Pky Katy Freeway West 546,604 100.0% Trammell Crow Company May-15
Southwestern Energy HQ Interstate 45 & Grand Pky Woodlands 515,000 100.0% Patrinely Group, L.L.C. Dec-14
Noble Energy Center II SH 249 & Louetta Rd FM 1960/Hwy 249 456,000 100.0% Trammell Crow Company Jun-15
Air Liquide Center- South 9811 Katy Fwy Katy Freeway East 452,370 37.8% Anslow Bryant Construction Ltd. Nov-15
Energy Tower IV 11750 Katy Fwy Katy Freeway West 428,831 6.1% Mac Haik Realty LLC Dec-14
3737 Buffalo Speedway 3737 Buffalo Speedway Ave Greenway Plaza 400,000 22.9% PM Realty Group Aug-15
Shell Woodcreek 200 N Dairy Ashford Rd Katy Freeway West 375,000 100.0% Hines Apr-14
Two BriarLake Plaza 2050 W Sam Houston Pky S Westchase 337,888 6.0% Cassidy Turley Apr-14
West Memorial Place 15375 Memorial Dr Katy Freeway West 334,147 36.6% Skanska Commercial Development
Jan-15
Westchase Park 3600 W Sam Houston Pky S Westchase 300,000 0.0% PM Realty Group Dec-14
Beltway Lakes Phase III 5775 N Sam Houston Pky E Northwest Far 271,384 0.0% Radler Enterprises, Inc. Sep-14
Beltway Lakes Phase IV 5725 N Sam Houston Pky W Northwest Far 271,384 0.0% Radler Enterprises, Inc. Mar-15
Kirby Grove 3801 Eastside Dr Greenway Plaza 260,437 39.6% Midway Companies Jun-15
Town Centre I 700 Town & Country Blvd Katy Freeway East 254,489 0.0% Moody Rambin Jan-15
Mustang Engineering 17325 Park Row Rd Katy Freeway West 225,885 100.0% Transwestern Jul-14
Legacy at Fallbrook 10720 W Sam Houston Pky N Northwest Far 208,013 0.0% Liberty Property Trust Feb-15
The Offices at Greenhouse 19219 Katy Fwy Katy Freeway West 203,149 67.1% Stream Realty Partners Jul-14
LISA R. BRIDGESDirector of Market Research | HoustonDirect +1 713 830 2125Fax +1 713 830 [email protected]
The Colliers AdvantageEnterprising Culture
Colliers International is a leader in global real estate services, defined by our spirit of enterprise. Through a culture of service excellence and a shared sense of initiative, we integrate the resources of real estate specialists worldwide to accelerate the success of our partners.
When you choose to work with Colliers, you choose to work with the best. In addition to being highly skilled experts in their field, our people are passionate about what they do. And they know we are invested in their success just as much as we are in our clients’ success.
This is evident throughout our platform—from Colliers University, our proprietary education and professional development platform, to our client engagement strategy that encourages cross-functional service integration, to our culture of caring.
We connect through a shared set of values that shape a collaborative environment throughout our organization that is unsurpassed in the industry. That’s why we attract top recruits and have one of the highest retention rates in the industry. Colliers International has also been recognized as one of the “best places to work” by top business organizations in many of our markets across the globe.
Colliers International offers a comprehensive portfolio of real estate services to occupiers, owners and investors on a local, regional, national and international basis.
*Information herein has been obtained from sources deemed reliable, however its accuracy cannot be guaranteed.