Skanska Banking On Downtown Diversification With Launch Of Spec Development
Amid millions of square feet of vacancy and oil prices struggling to gain momentum, Skanska is kicking off a 754K SF tower in Downtown Houston. With Bank of America signed on as an anchor tenant for 28% of the building, the project is the biggest sign in months of Houston's long-term strength.
Considering the project will not be complete until Q2 2019, Skanska and BoA both had to look at the long-term view of Houston's Downtown market. Total vacancy for Houston office space has risen for nine consecutive quarters and sits at 20.9%. The absorption rate has been negative for five quarters in a row. But by 2019, the market could look very different.
“We are optimistic that the long-term Houston market will continue to present new opportunities not only for the Capitol Tower project but for Skanska in general," Skanska USA executive vice president Matt Damborsky said. "Although Houston has primarily been known as an oil and gas town, the marketplace — especially Downtown — is becoming increasingly diversified."
“Houston is an important growth market for Bank of America,” Bank of America Houston president Hong Oglen said.
Bank of America, which is taking 210K SF or 28% of the spec tower, shares Skanska's long-term commitment to Downtown Houston. Bank of America market manager David Ruiz said the move is really about solving a problem its Houston operation has dealt with for years — being too spread out. With three different buildings, the Houston team is constantly trekking back and forth.
"It wasn’t for the sake of moving, but to bring together employees from a number of client-facing teams," Ruiz said. "Being able to walk down the hall or down one floor to talk about what’s going with a transaction or prospect. We just don’t have that ability right now working in three different buildings."
Ruiz said Bank of America started its search in the middle of last year. The company looked at all the options, including consolidating operations at Bank of America Center, but it did not work out.
Ruiz admitted Downtown's market conditions helped Bank of America's search. "It worked out well for us in terms of availability. The pricing was right. It benefited us."
“Capitol Tower is a game-changer for Downtown office space in Houston, so it is an honor to have such a prestigious, global firm like Bank of America as our lead tenant,” Damborsky said.
Skanska and Bank of America are not alone in their optimism. Though Houston is down, experts say the metro is far from out. With a booming retail sector, a growing industrial sector and the nation's leading medical sector, Houston remains a strong market. In oil's darkest hour, Houston maintained positive job growth. If the oil recovery continues, Skanska and Bank of America will be sitting pretty.