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Real Estate Bisnow (HOU)

Have Office Rents Peaked?

PM Realty Group (PMRG) is sponsoring our Energy Corridor event on Halloween morning (register here!). PMRG has purchased 35 acres in The Energy Corridor, including Exxon's HQ, to redevelop the site to include stores, restaurants, hotel, office, and residential. Click here.

Houston's Class-A office rents leveled off in Q3, actually sliding by $0.01. But don't worry, says PMRG managing director Wade Bowlin; most submarkets are still on the rise.

Wade says the tiny dip in rents is largely attributed to a 7.1% rent reduction in the Greenspoint/IAH/North Belt submarket. Exxon's looming vacancy there has driven owners to take an "occupancy over rents" outlook. On the other end of the spectrum, rents in the CBD increased 1.9% in Q3 to reach a record high of $43/SF. (They've gone up 11% in the past 12 months.) That's largely due to limited space options in the Tier 1 Class-A segment (those properties are 95% occupied), which has allowed second-tier Class-A properties to capture a larger share of deals and raise rents. For example, the Allen Center leased 17k SF to Suncor Energy and is close to finalizing 24k SF to Schlumberger.

Brookfield intext-4 HOU

Class-A direct leasing dropped for the fourth consecutive quarter (we soaked up 6.9M SF in the last 12 months, a 40% decrease from the same time last year and 15% below our 10-year historical average), but that shouldn't concern you, either. PM director of research Ariel Guerrero says it's due to Class-A tightness. Significant demand is still there, and construction is still increasing to fix that problem—1.4M SF broke ground last quarter, bringing us to 19M SF underway. 

Trammell Crow poured its slab on Energy Center Five, a 527k SF spec high-rise, two weeks ago. (It's rendered here; EC4 is also under construction there.) Our construction stats are at a 30-year high, and the product is 64% spoken for. (That includes corporate-owned projects, but taking it out still puts us at 44% pre-leased.) The Katy Freeway/Energy Corridor (EC5's home) is still the development darling, accounting for 43% of deliveries year to date and 35% of all construction underway—24 office buildings are under construction there now.

Brookfield (1600Smith-9) HOU
Howard Hughes (TwoHughesLanding2) HOU

CyrusOne's Love Affair With Texas

CyrusOne has been on a major expansion spree in Texas, investing $300M here since its 2013 IPO. (In fact, it's the only public data center company HQ'd here and is now the largest operator in the state, with more than 1M SF in a dozen locations.) CEO Gary Wojtaszek tells us it's completing the exterior shell of its third Houston facility this month. That'll add 640k SF of infrastructure, Class-A office, and raised white-floor space, and up to 86 MW of power. Most significantly, it'll make the Houston West data center site the largest campus for the oil and gas industry in Houston and a geophysical center of excellence for seismic exploration computing.

Here's the rendering of Houston III. CyrusOne has come a long way since opening its first data center in Houston over a decade ago, and it isn't slowing down—Gary says it has land and site capacity to grow to 2M SF in Texas. And it's upping its relationship with Texas as a whole, launching a new research initiative in partnership with universities across the state and committing to a five-year partnership with the Texas Rangers baseball team. (With the jobs it's creating in Houston, we can forgive it for that, right?)

Moody Rambin (1455WLoop)
Bisnow Hypnotic HALF

Sugar Land: New Plan for Prison Property

Sugar Land watchers, prepare for takeoff: the City is preparing to select a private partner to analyze the feasibility of developing a light industrial park on 230 acres of former prison property adjacent to the Sugar Land Regional Airport. This aligns with the success of the town's 25M SF of commercial space. Businesses flock here for the tax benefits and the desirable labor force, with over 54,100 employees and more than 15 Fortune 500 corporations with a significant presence. High-profile corporations here include Minute Maid, UnitedHealthcare, Texas Instruments, Schlumberger, and Fluor Corp. Nalco Champion, an Ecolab company, also announced a $45M HQ expansion that will bring 860 new jobs, and Applied Optoelectronics, a leading provider of optic services, is overseeing a $30M HQ expansion that will bring 530 new jobs over 10 years. For more info on Sugar Land, click here.

First American (KrissieVanyo) HOU

GSL Nabs High-End Build-to-Suit

GSL purchased two buildings totaling 53k SF at 14751 & 14805 Yorktown Plaza Dr from Adkisson Group. The property was a build-to-suit for Element Technologies, a material testing laboratory. CRC Real Estate's Richard Glass represented the seller; his teammate Fallon Hopper tells us the deal was challenging because the price/SF was over $150. (The large amount of office/lab space ran up the tab, and both buildings are 100% air conditioned.) But GSL was drawn to it because it's a new Class-A property with a 12-year lease in place. Stan Johnson Co's Brian Corriston repped the buyer.


Green Office Challenge Begins

Office buildings, start your engines. The Green Office Challenge and related IREM Sustainable Property Challenge are underway. Houston Office of the Mayor sustainability manager Lisa Lin tells us the City and IREM are partnering up this year to get whole buildings involved—tenants will work through the Green Office Challenge, while property managers will register in the IREM challenge—both groups will focus on education and outreach, energy, water conservation, materials and waste, and transportation. The programs launched Oct. 1 (Lisa shared this photo from the launching workshop with us) and end in Sept. 2015 with an awards ceremony. (This'll be the first time since 2011 that the challenge officially designates a winner—that year, Brookfield had the highest Energy Star score at 1600 Smith.) Lisa tells us Houston is currently tenth in the US for Energy Star certified buildings.

Tanglewood (5444Westheimer)

Don't Miss Future of the
Energy Corridor: Oct. 31!

The Energy Corridor has become Houston's second-largest employment center, with over 28M SF of office/mixed-use space and another 17M SF projected by 2030. All that construction activity means the submarket looks different every few weeks. We'll discuss that and more at Bisnow's Future of the Energy Corridor summit on Oct. 31. Join us at the Omni Westside at 7am for great networking and insider info from the submarket's biggest developers. Register now!

24 Days Until the Top Under 40 Developers / Investors
Meet in Miami

The top developers and investors under the age of 40 descend on the Ritz Carlton in South Beach for Bisnow's first annual "Ascent" multi-day summit. See who's attending and apply to be considered for one of the few remaining spots here.

PhiloWilke's Greg Johnson sent today's thought provoker: Why do 24-hour convenience stores have locks on their doors? Send your news to Catie Dixon, catie@bisnow.com.



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