Investors Start To Pounce On What's Left In Houston's Hot Office Investment Sales Market

One brokerage saw half as many Houston office investment sales in the first quarter of 2025 as it did in all of 2024, indicating a prediction early this year that the city would triple sales dollar volume in 2025 could prove true.

JLL closed 21 office building sales last year versus nine in Q1 2025 alone, according to Marty Hogan, managing director in the Houston office of JLL Capital Marketing Americas.

As developers exit investments, distress causes forced sales, and a diminished construction pipeline limits supply, Houston’s office investment sales market is seeing plenty of action, and investors are scrambling for what they can get.

Some of the first quarter’s deals were carryovers from last year, but the type of office product now on the market suggests dollar volume will surge this year, Hogan said.

“We're absolutely seeing that play out,” he said. “We've got a number of larger deals in our pipeline that are in the market right now.” 

Those include Montrose Collective, the 189K SF mixed-use project at 888 Westheimer developed by Radom Capital. Montrose Collective was 97% occupied in its first year of operation and is now full, according to JLL.

Estimates suggest the project could trade for $140M to $150M, which would be three times the largest transaction in Houston last year of $47M, Hogan said.

“Montrose Collective, everyone’s holding their breath to see what it trades at,” Lincoln Property Co. Executive Vice President Gabe Lerner said at a Bisnow event this month, adding that it will help developers determine what their exit cap rates could be on upcoming projects.

JLL has also listed Nine Ninety, an office building at the entrance to the CityCentre mixed-use development. Hines developed the office in 2022 for Marathon Oil Corp., which was acquired by ConocoPhillips last year. 

“They're moving out,” Hogan said. “And so we are selling it. It's a 450K SF office building ... a brand-new, kick-ass, unbelievable building that will be vacant.” 

Nine Ninety offers a compelling story because big institutions are on the hunt for new, vacant office buildings as tenants flock to those properties. Newer buildings end up empty for a reason, and this is a desirable one, Hogan said.

Part of the interest in buying office is due to a shortage of new product. There is about 710K SF of office space under construction in the Houston market, according to JLL’s first-quarter office report. But that includes the 308K SF CityCentre Six, which is largely preleased by The Dow Chemical Co., and a new 210K SF building that Service Corporation International is building to occupy at 1945 Allen Parkway. 

Distress is also driving office trades. LFFP Ashford Portfolio bought a three-building Energy Corridor office portfolio totaling 570K SF from a court-appointed receiver, JLL announced this month. 

SLS Properties acquired 2425 W. Loop S., the I.M. Pei-designed, 285K SF office building that was the subject of a lengthy court battle tied to foreclosure and bankruptcy, the Houston Business Journal reported. That comes as SLS Properties, which is also behind the redevelopment of a former Chevron campus in Bellaire, has moved to expand its local property portfolio. 

Another major sale reported this month was 5555 San Felipe, another former headquarters of Marathon Oil. Starwood Property Trust gained ownership of the 1.2M SF skyscraper through foreclosure in 2022 and had considered it for residential conversion. 

Instead, Starwood sold the building to Energy Transfer, a pipeline and gas company that is expected to occupy the nearly vacant building, according to Realty News Report. 

Interest in older, distressed buildings could grow as newer buildings fill up. Class-A office properties built in 2015 or later have a vacancy rate below 12%, well under the Houston market average of 26.3%, according to JLL.

The low vacancy rate drives rents up and pushes tenants to the next tier of buildings, perhaps those built in the ’80s or ’90s, Hogan said. JLL is telling investors to look at the “top-tier, Tier 2 buildings.”  

“That’s where you’re going to see a lot of the next wave of absorption and rental rate growth over the next year or two, trying to get ahead of the trend,” Hogan said. “If you can buy a Tier 1 building, that’s great. There’s just really not too many on the market.”