Houston's 12 Largest Office Leases Of The Year
Business is still buzzing in the Bayou City. Despite the much-maligned office market sitting at an overall vacancy rate of 21.6%, deals are still getting done. As Houston looks to turn over a new leaf in 2020, we look back at the largest deals of 2019 that helped Houston's absorption stay in the black.
Houston's diversification has become a part of the city's narrative, but energy tenants still made up the majority of the year's largest deals. Nearly half of the top dozen deals were renewals, indicative of the city's overall lack of demand. One positive for the city is that no one office market seems to be overly dominant. Powerhouses like the Central Business District and Galleria areas remain strong, but some of the largest deals of the year were in suburbs, where a competitive market has tenants finding favorable deals. With the help of research from NAI Partners, let's look at the largest leases of the year.
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Houston's largest office deal of the year was a 218K SF expansion and renewal by full-service engineering firm Burns & McDonnell to accommodate the company's growth at its Houston office. The extra 70K SF will help the firm hire 300 new employees over the next two years. Two years ago, the 14-story building changed hands for $52M. LingerFelt CommonWealth Partners agreed to move out of its recently purchased office building and improve the property's fitness facilities as part of the deal, according to the Houston Business Journal. With the new deal, Burns & McDonnell now occupies 85% of the building.
Alight Solutions, 180K Sf, 8770 New Trails Drive, The Woodlands |
Houston's second-largest deal of the year is actually 30 miles north in The Woodlands, where the payroll and cloud solutions tech company Alight Solutions struck a deal with The Howard Hughes Corp. for a new four-story, 180K SF office building to be rented and solely occupied by the firm. The build-to-suit office joins a smaller office park along New Trails Drive, where Alight will soon move its employees from its current home on Technology Forest Boulevard when the project is completed early next year.
Kiewit Engineering, 156K SF, Energy Center I, Energy Corridor |
Houston's Energy Corridor has been particularly hard hit by the city's struggling oil and gas sector. Energy Center I has been representative of that struggle, sitting functionally vacant for months. With Kiewit's deal, the building is now 52% leased. The office isn't Kiewit's first in Houston. The firm has another close by at Energy Tower IV and additional offices in The Woodlands.
Bank Of America, 122K SF, Pennzoil Place, Downtown |
Bank of America, one of the city's largest employers, has been mixing up its real estate footprint in Downtown Houston. After announcing its plans to vacate its namesake building for Skanska's new office tower, the bank announced several other changes, including a new 122K SF lease at the iconic southern tower of Pennzoil Place, across the street from its former home. For those keeping up at home, Bank of America Tower is now TC Energy Center and Skanska's Capitol Tower is now Bank of America Tower.
Noble Corp., 115K SF, Sugar Creek Place, Sugar Land |
Amid the flight to quality sweeping across Houston, the offshore drilling contractors' 115K SF lease renewal at its home of over two decades is a positive sign for Sugar Land's office market, which continues to outpace Houston averages. The Sugar Creek Campus itself has some digesting to do, with close to three full floors still available. Strong tenant demand in the supply-limited market should bode well for the property.
Honeywell, 114K SF, CityWest, Westchase |
CityWestPlace, a 1.5M SF office campus, is getting in on the leasing action with a large deal with Honeywell. The new 114K SF lease will accommodate up to 750 employees for the tech firm, which quickly outgrew its location just to the north of its new home. The deal brings CityWest to 88% leased, anchoring a resurgent Westchase District.
UniversalPegasus International, 113K SF, 4848 Loop Central, Bellaire |
UniversalPegasus International, part of Huntington Ingalls Industries, renewed the 113K SF lease on its HQ in Bellaire, where the company has operated for 15 years. As part of the deal, the joint venture ownership, Griffin Partners and Wheelock Street Capital, will invest in new amenities for the three-building office campus, adding outdoor seating and walking trails.
Engie, 110K SF, Post Oak Tower, Galleria |
Engie North America, a Houston-based subsidiary of the French Utility company Engie, signed a deal to move its Galleria HQ from Post Oak Central to Post Oak Tower, BHP Billiton's former HQ. The deal was a threeway transaction, according to the lease. The space, up for sublease, was surrendered to the landlord by BHP and leased directly to the tenant. Even with the deal, tens of thousands of square feet of BHP's lease remain functionally vacant, up for sublease.
Forum Energy Technology, 109K SF, Sam Houston Crossing II, West Belt |
Houston's Northwest area may be a hotbed of industrial and manufacturing activity, but office deals are getting done in the area. Forum Energy Technology, an oilfield product company, renewed its 109K SF lease, bringing the 159K SF Class-A office to 100% occupied.
Empyrean Benefit Solutions, 106K SF, 3010 Briarpark, Westchase |
Empyrean Benefit Solutions, which manages employee health and benefit programs, was forced out of its offices in the wake of Hurricane Harvey, and ended up in Westchase. Since that time, the company has liked what it has seen, and decided to turn its short-term lease into a new home. Now that the company has decided to say long term, sweeping renovations will begin at 3010 Briarpark.
Direct Energy, 105K SF, 2 Houston Center, Downtown |
Direct Energy took advantage of the leasing market to downsize its Houston footprint. The electricity retailer is in the process of moving from its 191K SF space in Greenway Plaza to its new 105K SF space at 2 Houston Center. Brookfield Properties's Houston Center is in the midst of a renovation, adding glass facades, new finishes and redesigned common spaces. Gensler, the architect behind the renovations, is also designing its own new office at 2 Houston Center.
Houston Methodist, 100K SF, 4800 Fournace Place, Bellaire |
Chevron's former 30-acre campus in Bellaire has been the subject of much speculation since the energy giant listed the campus for sale in 2016. Last year it found a buyer, SLS Properties, which invested heavily in site improvements, most notable of which was a new parking garage. Now the campus has a new tenant, Houston Methodist, where the hospital system will execute its administrative duties.
