Greenspoint: Opportunity or Dying?
Greenspoint has been suffering lately, with Exxon and others leaving the submarket for new campuses elsewhere. But is that creating opportunity? We're excited to hear the experts debate the point at Bisnow’s Future of Greenspoint event Sept. 22, starting at 7:30am at the Hilton Houston North.
Our panelist Transwestern EVP Michelle Wogan says there's been a lot of investment sale activity in Greenspoint recently because the soft market is creating opportunities to buy well below replacement cost. Recent sales include 400 North Belt (pictured below), 550 Greens Pkwy, 15710 JFK Blvd and 13401 North Fwy. Many more are on the market, including 785 Greens Pkwy, 16676 Northchase, 450 Gears, 2 Northpoint and 100 Glenborough. Many of those properties have large blocks of vacancy; 13401 North Fwy and 16676 Northchase are completely empty. Michelle says that presents an opportunity to lease or buy in the area at very competitive pricing (especially compared to market pricing in the rest of Houston), implement capital improvements, lease up the properties, and sell for a nice ROI in four or five years.
Michelle says there's a fair amount of leasing activity in the market, including some high-density tenants (like schools and service companies) that are working on leases now. Class-A rents are holding pretty firm despite the 3M SF of available space, she tells us. However, those rates are substantially lower than other parts of town, and concessions have increased recently, which means companies can upgrade from Class-B in other submarkets to Class-A product in Greenspoint. Michelle says several users in the market are looking to buy buildings (typically those tenants are 100k SF or smaller and want to control their own environment), so she’s got some big blocks of availability that she’s marketing for either lease or sale.
CBRE EVP Lucian Bukowski, another panelist, isn’t optimistic about Greenspoint. Exxon leaving is just the tip of the iceberg, he tells us; Southwestern Energy and Noble Energy have already left, and Newfield and NOV are leaving soon. FMC hasn’t left, but any growth it does will probably be in its Generation Park campus. These aren’t minor groups, Lucian says—this is an exodus of the submarket’s anchors. He predicts most leasing over the new few years will be cannibalizing within Greenspoint rather than new demand.
Lucian says Greenspoint has something major going for it, and it’s the one thing you can’t change: location. It’s right between Downtown and The Woodlands, has great highway access, and is near the airport. But its very weak surrounding residential community (he says nearby housing creates problems rather than demand and an employment base) and lack of retail amenities are keeping it down. Previous attempts to redevelop those have failed, and he feels they’d have to be the first step in turning the submarket around.
KDC Real Estate Development Houston partner William Peeples (our panelist is pictured with sons Holland and James) agrees the lack of amenities is the biggest issue he hears from prospects. And that won’t be easy to resolve, he says—those need day and night populations, and Greenspoint doesn’t have the mix of residents to support that. He thinks Greenspoint needs a major corporate commitment (like 1M SF-plus) that’ll command an amenity and resident base and get the area moving in the right direction.
That said, William says Greenspoint has its place in Houston’s real estate market. KDC is about to complete a 70k SF build-to-suit for Lennar in Greens Crossing Office Park and it’s marketing 40 acres there for office and data center build-to-suit users. He says Greenspoint’s value (KDC can deliver nice Class-A product at mid-teens NNN rents) and access to infrastructure make it a good play for many companies. He’s been pleasantly surprised by the amount of interest KDC’s been getting from medical users, traditional office users, and data centers looking to build 50k to 150k SF in Greens Crossing. Powers Brown has created a flexible master plan for KDC and its partner Sarofim Realty Advisors so they can accommodate whatever requirements come along. William's far left here with Friendswood Development president John Hammond, Lennar controller Jason Longo and Friendswood Development acquisitions manager Robert Santini in front of the Lennar construction site.