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CLEAR LAKE, TX-Practically one-fourth of the office inventory is up for sale in the NASA/Clear Lake submarket, where the US space program is the primary economic engine.

Seventeen of 86 office buildings are on “to go” rosters. It’s problematic because “NASA/Clear Lake is not on the radar screen for institutional investors,” Coy Davidson of the Houston office of Colliers International, tells GlobeSt.com. “Therefore, building owners are looking for entrepreneurial investors to buy these buildings.”

Davidson calculates 35% to 40% of all office tenancy comes from the US space program. The market is maintaining its occupancy for the most part, but it certainly isn’t in line for any major expansions. When it come to selling, the submarket’s dependency on government contracts historically has been a red flag for potential buyers or even developers.

Austin-based Capital Commercial is one of the owners hawking a property. Its class A 1150 Gemini, a 158,627-sf office building, is fully leased for the next nine years to United Space Alliance. The 19-year-old building has come to market at an asking price of more than $16 million. That price undoubtedly is tied to the fact that it’s just one of six class A properties in a 962,000-sf, high-end inventory that had slightly less than a 3% vacancy at the third-quarter close.

The balance of the submarket’s buildings aren’t so lucky. Class B product, accounting for 36 buildings and about three million sf, are shouldering a 17% vacancy. Class C buildings, 1.8 million sf in 44 structures, have an 18% vacancy. To date this year, the southeast Houston submarket has registered 166,380 to the negative in absorption.

Davidson says don’t blame the space program for the inventory that’s up for sale or the moderate negative absorption. “Despite ongoing concerns with government expenditures on the space programs, we have yet to see it have a negative impact on the office real estate market,” he contends.

The NASA/Clear Lake submarket, though flat from space program growth, is making inroads into diversification, thanks to a growing number of small businesses related to the petrochemical industry and Houston Ship Channel. Engineering, shipping, logistics and transportation companies are now leasing space in the area. The move toward diversification is a good sign for the heavily dependent space submarket, but it’s not likely it will come about in time for those owners who are now looking to sell.

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