How much progress is enough to celebrate?
Though Houston's office market remains far from healthy, several key fundamentals point to a recovery, and Q4 had a number of sizable leases contributing to solid absorption.
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The overall vacancy rate stands at 16% for Q4 2018, according to Avison Young's quarterly office report. That is a slight improvement from 17.2% at year-end 2017, riding the wave of back-to-back quarters of positive absorption.
"The growth we will see will be organic," Avison Young principal Charlie Neuhaus said. "It should be pretty stable to positive absorption for the year."
The Energy Corridor is expected to improve faster than other submarkets, he said. Companies are attracted to the area due to the more affordable residential offerings in West Houston compared to the Inner Loop.
"It is a tenant's market, and it will be for a while," he said.
Bisnow compiled a list of the most significant leases announced to close out 2018, based on data from CBRE Houston.
Hewlett Packard Enterprise
Size: 568K SF
Developer/Building Owner: Patrinely Group, USAA Real Estate and CDC Houston
Building: Springwoods Village
Address: In CityPlace, Spring
Submarket: North
Hewlett Packard Enterprise joined other big-time companies like Exxon Mobil with corporate campuses within Springwoods' 60-acre CityPlace mixed-use development. The campus includes two buildings at the southwest corner of Easy Mossy Oaks Road and Lake Plaza Drive. Springwoods Village is a 2,000-acre master-planned community in Spring.
McDermott International
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Size: 524K SF
Developer/Building Owner: Trammell Crow, TCH Energy Venture Corridor LLC
Building: Energy Center V
Address: 915 North Eldridge Parkway
Submarket: Energy Corridor
Houston-based McDermott International, an engineering firm that services energy companies, will become the sole tenant at Energy Center V. The 18-story tower will serve as the company's headquarters and will consolidate 1,700 employees from five locations in the Houston area. The firm will move into the building in Q3 2019 and gradually relocate its workforce through the rest of the year.
McDermott also acquired CB&I in May in a deal valued at $6B. CB&I owned two buildings in The Woodlands, which were sold to Dallas-based The Howard Hughes Corp. for $53M.
Waste Management Inc.
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Size: 284K SF
Developer/Building Owner: Skanska USA
Building: Capitol Tower
Address: 800 Capitol St.
Submarket: CBD
Houston-based Waste Management Inc. will relocate its headquarters to nine floors in Capitol Tower in 2020. The national waste management company joins Bank of America, which signed a 210K SF lease in 2017. The tower will feature Understory, a public, open-air community hub with a full-service restaurant and a 9K SF culinary market with seven chef-driven concepts and a cocktail bar.
PROS Holdings
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Size: 118K SF
Developer/Building Owner: Thor Equities Group
Building: Kirby Collection
Address: 3200 Kirby Drive
Submarket: Greenway
PROS Holdings Inc., a cloud software company, will anchor the office portion of Kirby Collection. The company will relocate from 3100 Main St. in Midtown to 3200 Kirby Drive. Previously announced office tenants at Kirby Collection include Hancock Whitney Bank, Novum Energy Trading, Lukoil, The Alexander Group and Regency Centers. Move-in began in fall 2017.
BP Lower 48
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Size: 91K SF
Developer/Building Owner: Skanska USA
Building: West Memorial Place 2
Address: 15375 Memorial Drive
Submarket: Energy Corridor
Denver-based BP Lower 48, wholly owned by BP, plans to relocate its Houston office and occupy three full floors in the Energy Corridor. The deal includes 5,500 SF on the ground level to construct an amenity-rich, multiuse space for employees that will feature patio seating overlooking Terry Hershey Park.
Encino Energy
Size: 76K SF
Developer/Building Owner: Parkway
Building: San Felipe Plaza
Address: 5847 San Felipe St.
Submarket: West Loop / Galleria
Houston-based Encino Energy, an exploration and production company, inked a long-term lease at Parkway's San Felipe Plaza. The deal brings the property's occupancy to 90%.
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