Houston's 10 Largest Sublease Blocks
Houston’s office vacancy fundamentals are poised for dramatic fluctuation over the next two years.
After some bleak years, sublease space has begun decreasing, but much of that space is simply converting to direct vacancy. Nearly one-quarter of Houston’s sublease listings will expire in the next two years, potentially shuffling 1.9M SF from sublease to direct vacancy and no longer receiving rental payments. Bisnow looked at the blocks with the potential to create the biggest stir in the market.
The top 10 sublease listings total just under 2.6M SF, roughly 30% of the total 8.4M SF on the market, according to Transwestern research. Class-A space in the Energy Corridor accounts for 63% of the 10 largest blocks, and 60% of the top 10 sublease listings have been on the market for over a year.
10. West Memorial Place II — 158K SF
IHI E&C listed this 158K SF block in the Energy Corridor in February 2017. The lease runs through September 2029 and is being marketed by Savills Studley.
9. BHP Billiton Tower — 180K SF
The only Galleria listing in the top 10, BHP’s sublease space at 1360 Post Oak Blvd. has been shrinking. Six months ago, 320K SF was on the market, the second-largest sublease block available in Houston. Stewart Title took 156K SF of it off the market in November. BHP first listed the space in its build-to-suit in two waves in 2016, and will be paying rent through March 2025. Cushman & Wakefield is the broker.
8. Energy Center I — 183K SF
Amec Foster Wheeler has two blocks on the market in the Energy Corridor, and as an engineering firm is the only non-energy tenant reflected in the top 10. This 183K SF space at 585 North Dairy Ashford was put on the sublease market in October 2016. Cushman & Wakefield is marketing it, but it expires in August, making it unlikely this space will be leased before it converts to direct vacancy.
7. Clay Road Building — 189K SF
Amec Foster Wheeler’s other large block is 189K SF at the Clay Road Building in the Energy Corridor. This one has a longer lease term — it expires in December 2020. Cushman & Wakefield has the listing, which hit the market in two waves in 2015.
6. Three Westlake Park — 222K SF
Two major blocks are on the sublease market in Westlake Park. Phillips 66’s 222K SF space was posted more than three years ago and will expire in February. CBRE is handling the Energy Corridor listing.
5. One Shell Plaza — 246K SF
Shell has been listing space at 910 Louisiana Downtown since February 2016, but the size has been shrinking. At one point, it appeared about 800K SF would hit the sublease market from Shell’s departure, but BG Group relocated some workers into the building, law firm Fisher Phillips leased 10K SF and NRG took down 431K SF in Houston’s largest sublease deal ever. Shell’s lease runs through December 2025, and Cushman & Wakefield has been seeking sublessors for owner Busycon Properties.
4. NRG Tower — 262K SF
Cushman & Wakefield is listing 262K SF for NRG in this Downtown building. The block was put on the market in September and its lease runs through December 2020.
3. 1100 Louisiana — 271,500 SF
The largest block available in the central business district, Enbridge’s space will convert to direct vacancy in April 2020. CBRE put the listing on the market in July. Though the Energy Corridor dominates the largest blocks of availability, the CBD has more space on the sublease market overall.
2. Energy Tower II — 376K SF
Technip FMC just put this Energy Corridor space on the market in February, undoing much of Houston’s recent sublease gains by pushing Houston back over the 9M SF sublease mark. CBRE is working to backfill the lease, which runs through November 2024. Technip is consolidating in Energy Tower III.
1. Four Westlake Park — 504K SF
BP put this entire building in the Energy Corridor on the sublease market in July 2016. The good news: The lease doesn’t expire until June 2023, so the block will not affect direct occupancy numbers (or property owner Falcon Real Estate’s income) for another five years. JLL is handling marketing.