Safeguards in Place to Combat High-Ticket Rent Hikes

HOUSTON-The CBD’s revitalization, which has 2.6 million sf under construction, might not bring the kinds of rents that building owners are expecting.

Sanford Criner, executive vice president and principal of Trione & Gordon ONCOR International, tells GlobeSt.com that new construction is looking to fetch rates in excess of $32 per sf plus parking. In some cases, this is a $10 per sf differential from suburban rates. But, he says, the ease and strong history of the city’s suburban office space is a natural lid to CBD rental rates. If rates get too steep, tenants historically head for the suburbs.

The new supply in downtown’s class-A office space will increase 10%, but it’s already 78% pre-leased to existing CBD tenants, explains Criner. Thus, move-ins to 5 Houston Center, Enron Tower and 1000 Main will merely serve to open up additional class-A space. “There will be some excess space in downtown at some point,” he says. But it’s definitely not a crisis and not a return to the mid-1980s when the CBD had doubled in size in four years to create staggering vacancies.