Today's Office Market: Get Ready for Co-Working Space, Major Amenities and Going Long

HOUSTON – The “co-working” phenomenon is coming to the Houston office market in a big way, says Chip Colvill, president of Colvill Office Properties.

Co-working operators, including WeWork, Tech-Space and Regus, have been examining the Houston office market and will take large chunks of space for co-working outlets. The office-sharing spaces appeal to start-up firms and Fortune 500 firms with a recurring need for a small office in major market, Colvill said.

Colvill was a panelist at a recent Houston event sponsored by CoreNet and IFMA.

Another major trend, says Brandi McDonald of Newmark Grubb Knight Frank, is a growing demand by tenants for more amenities, such as fitness centers, conference centers and mixed-use walk-able environments.

McDonald told the CoreNet/IFMA audience that mixed-use locations where employees can walk to lunch can save time and improve productivity. A growing number of tenants are focused on walk-ability, McDonald said.

“It’s all about employee recruitment and retention,” Colvill said.

The need to recruit Millennials can lead companies to select office space located near urban areas that are more popular with younger people, instead of the outer suburbs. “It’s more expensive Inside the Loop, but many companies are willing to pay that premium,” Colvill said.

The Houston office market has softened in recent years as 17 million square feet of new construction has been absorbed while energy companies have been shrinking. More than 12 million SF of sublease space was placed on the market and rental rates declined.

But the Houston office market won’t stay down forever and tenants should consider taking advantage of today’s rates and lock in a long-term deal.

“I think, from a tenant rep’s perspective, now is a time to do a deal and go long,” said Colvill, who specializes in representing the owners of Class A office buildings.

The Houston office market has hit bottom, or is close to it, and will begin to improve.

“I still think the bottom of the market is ahead of us,” McDonald said. “But we will hit bottom in 2017.”