Greater Houston Market Showing Signs of Boutique Office Scarcity

Local experts tell GlobeSt.com that area deals involving small, class A office properties make people sit up and take notice because the structures are so scarce. "The smaller markets have a few, but there isn't as much as you'd think there might be in a city of our size," says Doug Little, senior vice president of PM Realty Group in Houston.

But then again, there isn't a huge demand for what is termed "boutique" office buildings, either. "The profile of the tenant that might lease this type of space tends to be very cachet, fairly high-end and exclusive," says Mark Preston, senior vice president of Moody Rambin Interests' office group in Houston. "The size has appeal because these folks aren't thrown in among a lot of other tenants."

Tenants leasing that kind of space don't mind paying a premium for it either. Rents can average from $28 per sf to $30 per sf versus the more standard $19 per sf to $22 per sf that is Greater Houston's office average.

Location also is important for the boutique buildings, Preston points out. For example, the 151,000-sf Park Laureate Building at 10000 Memorial Dr. is in an exclusive area surrounded by high-end homes while the 142,000-sf Redstone Building at 109 N. Post Oak Lane is on wooded acreage near the high-class Houstonian Hotel, Club & Spa.

David Lee, senior vice president with locally based Transwestern Commercial Services that if the area has a trendy type of feel or offering, such as exclusive retail, that can be the ideal locale for a boutique building as well. He adds another reason for the scarcity of the class A smaller office buildings boils down to economies of scale. "Building a larger project makes it easier to reach a developer's financial parameters," he says. "More mass is better than less mass to a developer."

Little notes that while most of the smaller class A types are mainly build-to-suits, some spec is coming out of the ground, particularly along Beltway 8 on the city's west side. "They're a decent size and the owners have a little more control over their environment," he explains. "We'll see sporadic amounts continue in the smaller markets as well."

But don't expect developers to line up and create more boutique buildings in the future despite the inherent demand, the experts point out. "Most developers will want to create projects of greater scope," Lee says, "but there'll be a market for a smaller building, particularly in the urban areas, where land isn't quite as available. There will always be a market for this type of product."