By Ralph Bivins
Vacancy in Houston’s Class A office buildings recently dipped to 8.8 percent, the lowest vacancy rate since 2008, according to the CBRE commercial realty firm.
“It’s just good news all over,” says office leasing expert Sanford Criner of CBRE.
Sure, there are a number of new office buildings under construction. It’s scary to see so many cranes on the skyline at once. Seven office buildings broke ground in the third quarter, CBRE reported. But the developers are disciplined and no wild overbuilding is occurring, Criner says.
“We anticipate that the office market will continue to strengthen over the next two years as Houston continues to be a national leader in job creation,” says David Baker of Transwestern.
The office market sailed smoothly through some of the rough waters it faced, such as Continental Airlines abandonment of downtown Houston. But there are still some big negatives and question marks coming up on the horizon, says Jay Wall, senior vice president of Moody Rambin Interests.
Exxon Mobil and Devon Energy are expected to leave behind big blocks of vacant space in downtown, Wall says. Exxon Mobil will leave a one-million square-foot office tower at 800 Bell and Devon is a major tenant departing from the Allen Center office complex, near the Hyatt Regency.
Another potential problem is corporate buyouts. Reportedly, Anadarko and EOG Resources have been named as buyout targets recently. Mergers and acquisitions in the oil patch could be real drags on the office market, Wall says. When a big energy company buys a smaller one, they typically shed employees and empty office space.
What could go wrong?
The boom in Houston real estate blossomed because of sustained job growth that has outpaced most other cities in the nation in recent years. The city added some 90,000 new jobs over the last year alone. Energy jobs, including the white-hot shale fracking business, generated loads of commercial real estate activity in Houston. But the fracking business could be derailed or reduced, or pinched by new environmental regulations.
A reduction in job creation would hurt office buildings, multi-family, single-family — every segment of Houston real estate.
And consider this two-edged sword. Exxon Mobil is constructing a huge 3.25 million square foot office campus just south of The Woodlands and when the company moves there, it will leave vacate office space across the city, including two million square feet at Greenspoint, near Bush Airport. Digesting the Exxon Mobil move will be challenging, especially for Greenspoint.
Nothing last forever. What goes up, must come down. But for now, Houston can enjoy it’s time in the sun – a bright spot in the realty world.
Mark Taylor, senior managing director of CBRE’s local operations says: “Compared to the rest of the nation, it’s good to be in Houston.”