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Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
Houston Office Market Review 4Q 2010 | The Tenant Advisor
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Houston Office Market Review 4Q 2010 | The Tenant Advisor

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  • 1. The Tenant Advisor Houston Office Market Review Year End 2010 Coy Davidson Senior Vice President Colliers International | Houston
  • 2. The Tenant Advisor Table of Contents Houston Office Market Review | 4Q 2010 Market Highlights Market Summary Market Indicators - Rental Rates - Vacancy - Net Absorption Submarket Profiles Sales Activity Development Pipeline
  • 3. Market Highlights Houston Office Market 4th Quarter Highlights On average Houston office building owners saw positive absorption in the 4th quarter of 2010 with suburban markets outperforming the CBD. As a result of the year-end push, vacancy rates decreased slightly with the year - over - year occupancy rate increasing from 83.5% to 84.0% citywide. Houston registered 548,000 square feet of positive net absorption in 2010 as a result of the strong 4th quarter when 618,000 square feet of positive absorption occurred. Despite the overall net absorption gain, tenants were still able to take advantage of declining rents. Class A buildings in the CBD experienced a 7.9% drop in average quoted rents to $34.60/SF from $37.30/SF a year ago. During the same period, Suburban Class A rates decreased by 0.6% to $27.11. Houston’s office leasing activity reached 3.0 million square feet in the 4th quarter, compared to 3.6 million square feet in the same quarter last year. Leasing activity is still below levels prior to the economic downturn, and an increasing number of office tenants are renewing lease commitments with better concession packages or relocating to buildings/submarkets offering more attractive terms. The most significant new office lease signed in the fourth quarter in the CBD was the British Gas lease of 354,000 SF in Hines’ new pre-certified Platinum LEED development, MainPlace. The new lease includes naming rights to the building, BG Place, which will be ready for occupancy in February 2011. BG Group will be relocating from their existing Galleria area space in mid to late 2011. The largest office lease renewal signed in fourth quarter was Invesco’s renewal of 400,000 square feet in 11 Greenway Plaza located in the Greenway submarket. Brookfield Properties acquisition of the 1.2M-square-foot Heritage Plaza from Goddard Investment Group for $322 million ($280 per square foot) in the CBD submarket was completed in December in what was the second highest sales price paid for an office building in Houston history.
  • 4. Market Summary CBD | Suburban | Citywide
  • 5. Market Indicators Where are we in the market cycle?
  • 6. Rental Rates Rental Rates Citywide rental rates have declined throughout the year. On a year-over-year basis, CBD Class A average quoted rental rates dropped by 7.9 % to $34.61 per square foot (from $37.36), while suburban Class A rates decreased 0.6 % to $27.11 per square foot. CBD Class B rates increased by 0.2 % to $23.95 per square foot (from $23.91), while suburban Class B rates fell 5.7 % to $17.11 per square foot on a full-service basis. Is the market improving? There is a natural sequence of events in a market recovery. The first sign of a recovery will be push back from Landlords in terms of the incentives or concessions packages (tenant improvement allowance, free rent, abated parking charges) offered to attract new tenants and even more so to retain existing tenants. We are seeing early signs of this in specific submarket where demand has been stronger. The second sequence will be compression in terms of the initial quoted rental rates and where deals actually get signed. Finally as the market continues recovery and these two phases occur, then we will begin to see upward movement in quoted rental rates. Until demand outpaces supply, the current office tenants’ market is expected to continue through the end of the year. Class A Rental Rates
  • 7. Rental Rates 5 Year Trend | Class A Average Asking Rental Rate
  • 8. Rental Rates Rental Rates | Class A By: Submarket
  • 9. Rental Rates Rental Rates | Class B By: Submarket
  • 10. Vacancy Vacancy & Availability Vacancy levels were down overall for suburban properties and up slightly overall for CBD properties. Houston’s citywide office vacancy for all property classes averaged 16.0% in the fourth quarter, compared to 16.6% this time last year. In the CBD, top-tier properties’ resilience waned between quarters, staying in the double-digits, with Class A vacancy at 10.4%, compared to 8.4% one year ago. CBD Class B properties posted 21.5% vacancy, down from 22.8% 12 months earlier. While the overall suburban vacancy rate remained in double-digits, Class A suburban vacancy actually dropped between quarters to 17.6% from 19.3%. By comparison, suburban Class B vacancy remained unchanged at 16.3%. Class A Office Space Citywide, a total of 53 office properties had a minimum of 100,000 square feet available for lease in both direct and sublease space—16 of those properties have over 200,000 square feet available—at the end of the fourth quarter. Sublease space totaled 4.3 million square feet, including 2.0 million square feet of vacant space and 2.3 million square feet of subleases available for occupancy over the next 12 months. The largest sublease space being marketed is Devon Energy’s space, 281,755 square feet in Two Allen Center and 120,551 square feet in Three Allen Center (available for occupancy 4/2011) in the CBD. In Westchase, 3600 Briarpark has the largest suburban sublease space available, 160,000 square feet.
  • 11. Vacancy Vacancy Rate | All Classes Citywide Overall Vacancy Rate
  • 12. Vacancy Vacancy Rate | Class A CBD & Suburban
  • 13. Vacancy Vacancy Rate | All Classes CBD & Suburban
  • 14. Vacancy Available Space by Class
  • 15. Absorption Net Absorption Houston recorded positive net absorption of 617,863 square feet in the fourth quarter, compared to 45,967 square feet negative net absorption at the same time last year. City-wide year-end net absorption was positive 475,779 square feet with suburban Class A space contributing most of that total with year-end positive net absorption of 748,190 square feet, followed by suburban Class B space with positive net absorption at 191,253 square feet. In contrast, CBD Class A and Class B space both reported negative net year-end absorption of 559,488 and 54,218 square feet, respectively.
  • 16. Absorption Net Absorption | Quarterly
  • 17. Absorption Top Performing Submarkets Net Absorption 2010
  • 18. Submarket Profiles Central Business District Galleria | West Loop Bellaire Greenway Plaza Allen Parkway | Midtown San Felipe | Voss Katy Freeway | Energy Corridor Westchase Southwest Sugar Land | East Fort Bend County Northwest Greenspoint | North Belt FM 1960 The Woodlands South Main | Medical Center Gulf Freeway | Pasadena NASA | Clear Lake Kingwood | Humble
  • 19. Submarket Profile Central Business District Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 20. Submarket Profile Galleria | West Loop Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 21. Submarket Profile Bellaire Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 22. Submarket Profile Greenway Plaza Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 23. Submarket Profile Allen Parkway | Midtown Year over Year Trend Weighted Average Quoted Gross Rental Rate
  • 24. Submarket Profile San Felipe | Voss Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 25. Submarket Profile Katy Freeway | Energy Corridor Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 26. Submarket Profile Westchase Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 27. Submarket Profile Southwest Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 28. Submarket Profile Sugar Land | East Fort Bend County Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 29. Submarket Profile Northwest Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 30. Submarket Profile Greenspoint | North Belt Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 31. Submarket Profile FM 1960 Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 32. Submarket Profile The Woodlands Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 33. Submarket Profile South Main | Medical Center Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 34. Submarket Profile Gulf Freeway | Pasadena Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 35. Submarket Profile NASA | Clear Lake Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 36. Submarket Profile Kingwood | Humble Weighted Average Quoted Gross Rental Rate Year over Year Trend
  • 37. New Construction Office Development Pipeline Houston’s development activity remained slow during the 4th quarter, with only Griffin Partners’ four-story 102,000 SF Nassau Bay Town Square office building being added to the list of office buildings already under construction. Located in the NASA/Clear Lake submarket, this pre-certified LEED silver office building is scheduled to come on line 60% pre-leased with Hamilton Sundstrand Corporation as the lead tenant. Also included in the 2.0 million square feet under construction is Greenwood’s corporations 156,000 SF Chasewood Crossing II in the FM 1960-Highway 249 submarket. (scheduled for completion in April 2011). Two CBD office projects-Hines’ 972,000 square-foot BG Group Place slated for delivery by February 2011) and Trammell Crow Company’s Hess Tower, scheduled for completion by January 2011-continue to be the sole high-profile buildings under construction at the end of the 4th quarter. Notably, both downtown projects began construction before the economic downturn of late 2008.
  • 38. The Tenant Advisor Colliers International | Houston 713.830.2128 coy.davidson@colliers.com www.coydavidson.com

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