By Patsy Fretwell
Twenty one office projects, totaling 4.5 million sf, are under construction in Houston as the city’s soaring economy continues to boost the commercial real estate market, according to Commercial Gateway, the commercial division of the Houston Association of Realtors.
The city’s office market finished the fourth quarter with a total of 1.1 million sf of positive net absorption, ending the year with a total 3.6 million sf. This is the seventh consecutive quarter of positive absorption. Class B space bounced back with a positive 713,218 square feet absorbed, ending the year with 1.3 million square feet or 29.9 percent of the space absorbed. Class A space is on top for yearend with 2.1 million square feet absorbed, representing 58.7 percent of the total absorption.
Six submarkets recorded positive net absorption of more than 300,000 square feet for the year with the Energy Corridor at 875,488 square feet taking the lead. The six submarkets account for 62.8% of the total absorption for the year. Two new buildings coming online in fourth quarter, Nexen Tower and CityCentre III, accounted for more than 342,000 square feet of absorption while FMC Technologies’ move into its new headquarters building in Beltway Lakes accounted for more than 162,000 square feet.
The Houston area’s strong job growth, including commercial construction, continues to positively impact the area’s office leasing activity and new projects. The office development pipeline continues to flow as more projects are both announced and started. Currently, 21 office properties totaling almost 4.5 million square feet are under construction, with Anadarko’s Tower II topping the list as the largest project, 549,260 square feet, and Energy Tower III, 450,532 square feet, the largest spec property with no pre-leasing. However, of the 21 projects, 10 are totally leased; 51.4 percent of the total space in the under-construction buildings is pre-leased.
The West area boasts eight buildings totaling 1.9 million square feet under construction, while The Woodlands currently has eight buildings totaling 1.5 million square feet. Several other projects, primarily in the submarkets to the west and north, have been announced since the first of the year, including Noble Energy’s 456,000-square-foot building scheduled to break ground in the summer.
The current 11.8 percent vacancy rate is an improvement over the 13.4 percent vacancy recorded during the same quarter a year ago.