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Houston Office Space Market Update

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The fourth most populous city in the U.S., Houston, Texas, is home to over 2.1 million people.  Initially the commercial and railroad hub for the export of cotton, Houston was pivotal in the development of the Texas petroleum industry upon the discovery of oil in 1901.  In the 1970’s, Houston experienced a population boom due to the numerous employment opportunities offered by the petroleum industry.  The 1990’s recession led to a more diversified economy, focusing less on petroleum and more on aerospace and health care.  Today, Houston is known for its energy industry, with renewable energy resources, such as wind and solar, growing.

Houston is a multi-cultural city with the heart of its business sector being located in the downtown district.  Downtown Houston is home to several Fortune 500 companies, such as Chevron, JPMorgan and Shell, with a workforce of over 150,000.  In the first quarter of 2013, Houston’s CBD office market experienced the majority of activity with over 558,000 sq ft of occupancy and overall Class A asking rents averaging $36.86 sq ft.

But the good news doesn’t stop there.  Houston’s office space market is made up of several core submarkets which are experiencing solid growth as well.  The 2013 office market outlook for Houston’s most in-demand submarkets is positive, with expected gains in absorption and increases in rental rates.  From a Tenant perspective, those willing to look outside the core submarkets are expected to see lower rental rates and more favorable concessions from landlords.  Overall, inside the core submarkets, Houston is expected to retain its landlord favorable conditions until new developments come to market.

Market

Vacancy

Net Absorption

Rental Rates

Downtown

9.8%

-291,698

$36.38

FM 1960

30.2%

1,508

$24.68

Katy Freeway

3.8%

157,085

$29.92

Northwest

11.3%

20,049

$22.80

South

0.00%

0

$25.63

Southwest

18.2%

-30,085

$17.01

Woodlands

2.3%

21,669

$31.49

*1Q 2013 - CoStar Property

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By: James Osgood

Houston Office Space

Houston Office and Commercial Real Estate Overview

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Like the rest of the nation Houston, Texas has been hit hard by the recession. Even with the economy taken into account, it remains one of the fastest growing metropolitan areas in the nation. More than five million people live in the Greater Houston Metro area, which encompasses all or parts of 10 different counties. With the great weather year round and nearby beaches of the Gulf Coast, it is a great city in which to locate any commercial venture. 

Houston actually began feeling the recession one year after the rest of the nation. Recovery is taking place, but as with many other areas, it remains sluggish. However, commercial real estate has benefits from core business growth, disciplined new development, and a great business environment, bringing businesses into the area. The workforce available to ventures both large and small offers plenty of trained professional as well as blue collar workers, making this region perfect for any type of business to locate and grow. 

Houston Office Rep
Our local Houston OfficeFinder rep tells us, “Despite the consequences of the recession, businesses forge ahead and some are experiencing banner years. National and international investors recognize Houston as an international, first-class metropolis.  Energy has always been our main driver but Houston also has the Texas Medical Center and the Port of Houston as strong underpinnings for our local economy.  Many authorities have cited the Panama Canal expansion as the next big step in the growth of goods flowing into and out of the Port of Houston.”  Our local office rep has served the Houston commercial real state market as a licensed agent since 1985, assisting businesses and association with relocation, renewal, expansion, and disposition of office and industrial space, so he has his finger on the pulse of the Houston market. 

The total commercial office inventory in Houston currently encompasses approximately 266 million square feet with a vacancy rate of 13.3%, with nearly 1 million square feet of net absorption in the second quarter of 2011. Class A properties account for the lion’s share of new leasing with positive absorption in the first and second quarters of 2011. Our local rep said, “While we have had some foreclosures, investors and users have typically rushed to the buying opportunities with deep pockets and a plan.” Recovery from the recession is clearly well on its way in Metro Houston. 

Some of the major news in commercial real estate include: 

Core Real Estate LLC purchased the former Minute Maid facility at 2000 St. James Place from Wachovia Bank after the bank took back the 335,000 square foot office building from a local partnership.  Core then leased the entire building to Weatherford International.

Lincoln Property Co. purchased Energy Crossing I from M&I Bank., on behalf of a public pension fund. The 240,000-square-foot office building is located in Houston’s Energy Corridor.  The new ownership recently leased 41,000 square feet to an energy-related company.

Chevron recently purchased a 50-story 1.3 million-square-foot downtown office tower from Brookfield Office Properties.  Chevron had been leasing the building.  The sale price was reportedly $340 million, or about $260 per square foot.

In a separate transaction, Brookfield Properties Corporation acquired Heritage Plaza, a 53-story, 1.2-million-square-foot trophy office tower in Houston’s central business district, reportedly for $321.5 million. 

ExxonMobil has finally announced the development of a new office campus in north Houston.  The 385-acre site is near the intersection of I-45 and the Hardy Toll Road. Company employees currently working in a variety of locations will be consolidated into the new facility upon completion.  Full occupancy of the development is expected by 2015.

Coventry Development Corp. will invest approximately $10 billion in their Springwoods Village development.  Springwoods Village will be a 1,800 acre master-planned community near the new Exxon Mobil campus.

Our local rep went on to say, “Even the former Astroworld site appears to be poised for new development.  The Mallick Group purchased this 104 acre site in 2010 after the Astroworld closure in  2005. Established companies are cautiously locking into today’s rental rates and new companies are looking to find short term, As-Is, opportunities.  Every business tenant has choices, but occasionally, their “short list” is shorter than the average business person would believe from reading the headlines.”

If you are considering starting a new business venture or wish to add a satellite location to your already-established venture Houston, Texas, is a great place to choose. With the end of the Space Shuttle program, many high tech workers from nearby Johnson Space Center are readily available and skilled trade crafts persons for any commercial venture can be found. With the growing recovery, much of this labor will be consumed in the coming years, but there are many young people entering the employment in every area to continue to feed the staff required to many any commercial venture a success. 

You can contact our Houston OfficeFinder Rep for help with your commercial office and industrial need at Officefinder.com. He will be happy to help you find the perfect home for your business. 

 

Houston Office Space , Office Space

National Office Space Update & Office Tenant Strategies PodCast

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National Office Update & Office Tenant/ User Strategies PodCast
Original Air Date:    4/2/11

Very informative broadcast about the office market and office space strategies for office space tenants.

"The office user show provides a national office market update and best practices for corporate office users. Chris Macke, Senior Real Estate Strategist with CoStar Group provides an update on national office market performance including top cities for investment and markets prime economically for corporate headquarters. He also shares market advice for office users and expectations for 2011 and 2012.

Show host Michael Bull and industry leading guests cover current topics important for office users including strategic lease provisions for tenants, protecting lease rights before foreclosure, prevalent lease situations in this economy and the guests share best practices when renewing leases and securing new locations.

If your company uses office space or you advise companies that do, you will find this show very informative and enlightening."

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The Nation's Strongest Economies

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POLICOM releases annual rankings for the 366 metropolitan areas and 576 so-called micropolitan areas nationwide.

The Top Ten Economies

1.Seattle-Tacoma-Bellevue, Wash.
2. Washington Metropolitan Area
3. Denver-Aurora-Broomfield, Colo.
4. Houston-Sugar Land-Baytown, Texas
5. Sacramento-Arden-Arcade-Roseville, Calif.
6. Salt Lake City
7. Des Moines-West Des Moines, Iowa
8. San Diego-Carlsbad-San Marcos, Calif.
9. Madison, Wis.
10. Dallas-Fort Worth-Arlington, Texas

With their stronger economies, these are the office space markets that we would expect to lead the recovery.

Dallas Office Space , Houston Office Space , San Diego Office Space , Seattle Office Space , Washington DC Office Space

National Office Vacancy at 15.2% and rising

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A recent article in the Wall Street Journal reports that office vacancy has reached 15.2% and is expected to continue rising to 19.3% over the next year. The data comes from REIS, Inc a provider of commercial real estate performance and analysis data for over 25 years. Over 25 million square feet were returned to the market in the first quarter of 2009 driving vacancy rates up and rents down. "Effective rents, which include free rent and other landlord concessions, fell 2% in the first quarter to a national average of $24.16, the largest drop since the first quarter of 2002, according to REIS. Sublet space, on average, is going for between 10% and 15% less than what landlords are charging."

It is a great market for tenant looking for space or renewing during the next 12 months.  Smart Landlords cutting deals to keep their buildings full during this downturn providing tenants a great opportunity.

Markets such as Houston and Washington DC, with less exposure to financial services, is weathering the downturn better than others like New York City. The vacancy rate in New York increased two percentage points in one quarter, from 8% to 10.2% and rents dropped over 5% to $52.00 per square foot, still over double the national average.

How can you, as a tenant, take advantage of this opportunity? Make sure you get professional assistance. OfficeFinder tenant representative specialists can provide you the answers to your questions and help you find and negotiate (or re-negotiate) a great deal. There is no obligation to contact them and there is usually no cost to you for their services. Request a contact.

Houston Office Space , Lease Negotiations , Manhattan Office Space , Office Relocation , Office Space , Tenant Representation , Washington DC Office Space