THE RALPH BIVINS PROJECT: The Future of the Office Market with Chip Colvill

HOUSTON – (Realty News Report) – As executive vice chair of Cushman & Wakefield, Chip Colvill is responsible for leasing and marketing of a large portfolio of Class A office properties located in Texas. Colvill began his commercial real estate career in 1984. Prior to joining Cushman & Wakefield, he was president and CEO of Colvill Office Properties, a company he formed in 2001 that was acquired by Cushman & Wakefield in 2020. Throughout his career, he has worked for numerous institutional real estate firms and significant landlords. Colvill has leased space in many skyscrapers on downtown Houston skyline and major office properties in the Energy Corridor, the Woodlands, and the Galleria area.

As the pandemic continues to impact the economy, Colvill sat down with The Ralph Bivins Project, a new podcast, to discuss the state of the market. This is an excerpt from the podcast.

Ralph Bivins: We have been in the throes of a coronavirus pandemic for most of 2020. As a result, what is the situation in downtown Houston right now?

Chip Colvill: Honestly, with the COVID, a lot of the companies are still in a kind of work from home mode. The downtown area is lightly populated, that’s for sure. We are working hard in all the buildings we are involved in to make 3D video tours for the potential tenants who are reluctant to come into the buildings and also to serve those potential tenants willing to take tours. The market is a little off right now, but, any day, we expect it to improve. We are down from the pre-COVID conditions, but every day, we are getting better—particularly once the kids are back in school and more employers are back in their offices. It has been a crazy time.

Ralph Bivins:The restaurants are having a tough haul right now; the lunch crowd is not what it should be. Hopefully, we will be back to normal soon. Chip, one of your biggest tasks is the Texas Tower, the 47-story structure being built by Hines, located on the site of the former Houston Chronicle building.

Chip Colvill: This is the kind of post-COVID style of construction we are into. This kind of high-end office product with natural lighting will be in high demand. We saw a flight to quality in the pre-COVID era, and employers will be looking even more vigorously for this type of building now. The Hines construction team has been pushing the project and it is running ahead of schedule. It will be a fantastic building. Michael Anderson (of Cushman & Wakefield) has been directing the leasing and construction has been great. We have been talking to several groups who will continue to elevate the downtown with these buildings. There is one at 609 Main that is 92 percent leased. This is a continuation of the flight to quality; I can see it. Before the building is topped off, I hope we will see them rolling out a vaccine for COVID. We have seen a lot of tenant interest in this building.

Ralph Bivins: A few years ago, I was not a true believer in the “flight to quality” that was being discussed in the office market. But now brand-new buildings are attracting tenants and the other structures are trying to catch up.

Chip Colvill: We’ve seen hundreds of millions of dollars get spent in the downtown. Right now, we represent about 33 percent of the Class A buildings. We have several new buildings that have been renovated or are just completing renovation. This is a good thing, as we have a lot of institutional owners who are spending the capital on these buildings. These new towers are forcing the owners of the buildings built in the 1970s and 1980s to look at their assets and bring them up to today’s standards. I am seeing a lot of fantastic renovation work.

Ralph Bivins: I look back at a place like Louisiana Street. We had all these buildings with all these towers, all renovated to compete on a Class A building level. From that, development into the northern part of the city, to Market Square. And east of Main Street. It’s gone beyond Louisiana Street with high-quality new buildings in new areas of downtown Houston.

Chip Colvill: Certainly, Hines is extremely bullish on the north end of the city. There are two or three high-rise residential projects of the finest quality going up. People can get outside and walk to restaurants. The tunnels are still appealing, but we are seeing more and more of the street level getting developed. Houston has needed this for a lot of years. A lot of retail is still in the tunnel. People come from out of town around lunch time and wonder where everyone is. They are underground. In Jones Plaza, a project is just kicking off – the Trammell Crow residential tower near the ballfield and Discovery Green. I remember going to Jones Plaza years ago for the outdoor concerts. Young and older folks are moving downtown. It’s fun to watch the evolution of downtown.

Ralph Bivins: What about co-working space, also called office sharing? How are those places performing in the pandemic?

Chip Colvill: We’ve done about 300,000 SF of co-working leases. Last week, I was involved in a 35,000-foot co-working deal out in West Houston, with an operator who will be a great operator, who’s bullish on co-working in the post-COVID era. I was lucky enough to be on a national call with Cushman & Wakefield representatives discussing co-working. Certainly, there will be a demand for this type of work setup. A lot of tenants will need flex space which is what co-working provides. Certainly, the co-working model will be different, the way the spacing is occupied, it likely will be wider. In Houston, we have probably signed about a million SF for co-working in this market. In Texas, we are not saturated in the co-working scene. A lot of tenants need the flex space; it is a necessary part of their buildings. This is also of interest to architects as they consider now to configure working spaces of the future. The days of private offices may be on the way back.