HOUSTON – Bank of America is poised to become an anchor tenant in Skanska’s proposed Capitol Tower office building in downtown Houston, where vacancy rates have been rising and Hines is delivering a new 1 million SF tower in the first quarter. The Skanska site is bounded by Capitol, Rusk, Milam and Travis streets. The foundation for the new tower was poured in August 2015. But sudden downturn in the energy industry has damaged the Houston office market. So Skanska’s office proposed office building, a 750,000-SF, 35-story office project – called the Capitol Tower – was thought to be on the back burner. But last fall, Skanska engaged CBRE to find tenants. And now Bank of America has been negotiating to lease more than 200,000 SF, which should be enough for Skanska to start construction on top of the foundation it poured in 2015. Skanska and Bank of America – which will eave the Bank of America Center, 700 Louisiana if the deal goes through – have declined to comment on the pending lease. Skanska has just appointed Matt Damborsky as executive vice president to lead Skanska USA Commercial Development’s Houston office. Here is Realty News Report ‘s Q&A with Damborsky.
REALTY NEWS REPORT: Downtown Houston has a considerable amount of vacant space. So what’s the status of Skanska’s proposed 35-story Capitol Tower now? When will construction begin?
Matt Damborsky: Capitol Tower is still under development and we are continuing the phasing of the project as planned. With this project, we are extremely focused on capturing the energy of downtown Houston as it continues to grow. Despite market trends over the last year or so, we are optimistic about the current leasing market and look forward to going from “in development” to “under construction.”
REALTY NEWS REPORT: When and why did Skanska enter the Houston market?
Matt Damborsky: Skanska launched its real estate development operations in Houston in 2009, but we have had a presence here since 2000, when we built NRG Stadium as part of a joint venture. As the energy capital of the world, Houston was a very attractive market for us. Submarkets like downtown, the Galleria and the Energy Corridor offer a wealth of potential for innovative, forward-thinking projects, especially Class A office space.
REALTY NEWS REPORT: Can you say anything at all about potential tenants?
Matt Damborsky: We have had tenant interest in Capitol Tower, but the current market climate has been a challenge. We are continuing to explore new and exciting opportunities and are optimistic that we will see the market begin to improve as we move through 2017.
REALTY NEWS REPORT: Before the energy markets declined, Skanska bought 14 acres just across Interstate 45 from the new 3 million SF Exxon Mobil campus north of Houston. Skanska announced plans for the 850,000-sf Spring Crossing office campus there. What are your plans for this site now?
Matt Damborsky: We are proceeding as planned with Spring Crossing. Despite challenges in the current market climate, we are continuing to see exciting things come out of this submarket, given its close proximity to the Woodlands and Springwoods Village. Once the right opportunities arise, we will begin construction. Spring Crossing provides an excellent alternative for tenants that want to be in this emerging submarket in order to serve a growing portfolio of clients and surrounding businesses.
REALTY NEWS REPORT: With the Houston office market still in recovery mode, what kinds of projects and activities will Skanska focus on in 2017?
Matt Damborsky: Leasing our current developments will be a key focus for us as we move into 2017. We are also closely monitoring the multifamily market. Although we have not developed multifamily here in Houston, it’s something that Skanska has done nationally with great success. That also opens the door to mixed-use. With all of the development downtown, we expect to see a resurgence of retail and some unique tenant mixes.
REALTY NEWS REPORT: Other than Capitol Tower and Spring Crossing, does Skanska have other new projects to announce?
Matt Damborsky: We are always looking for new opportunities but right now, but we have plenty on our plate as we finish up West Memorial Place and finalize our development of Capitol Tower and Spring Crossing.
REALTY NEWS REPORT: What about your new Energy Corridor buildings, West Memorial Place I and II? The Energy Corridor is a tough market right now. What percent of the space is leased in these buildings?
Matt Damborsky: Currently, we are 55 percent leased in West Memorial Place I, and Phase II, which was completed in the middle of 2016, is around 45 percent. Phase II will see its first major tenant, IHI E&C, take occupancy this quarter as well. Although current market conditions have slowed things down a bit more than we initially anticipated, we are optimistic that, when the market begins to trend upwards, West Memorial Place is uniquely positioned to compete because of its location, with easy access to Terry Hershey Park and the overall quality of the development. The complex is also LEED Platinum, which is an advantage.
Jan. 9. 2017 Realty News Report Copyright 2017