HOUSTON-Strong construction activity, especially in West Houston, highlights an overall positive first-quarter office market report.

The Grubb & Ellis Co.’s quarterly analysis indicates that 965,564 sf of the 1.3 million sf that’s under way is rising in the Katy Freeway/Energy Corridor, Sugar Land and Westchase submarkets. The Energy Corridor is leading the way with more than 500,000 sf being added to its 15.7-million-sf inventory.

According to Ariel Guerrero, the brokerage house’s client services manager in Houston, the flurry of construction is attributed to huge growth and falling vacancies in the Energy Corridor. During the first quarter, the vacancy in that submarket was less than 5%.

“There’s been a lot of growth overall in the west part of town during the past two years,” Guerrero tells GlobeSt.com. “The Energy Corridor submarket last year had close to 700,000 sf overall in absorption. That’s the reason why there’s construction and anticipation. The developers feel the growth will continue on and they wanted to take advantage of it.”

One such developer, the Phoenix-based Opus West Corp., broke ground in January on its 250,000 sf Ten West Corporate Center II at Barker Cypress Road and Interstate 10. “We acquired the property there in the late 1990s because we wanted to be in the vicinity of the major oil companies,” explains Robert Wheless, real estate director of Opus’ Houston office. “We wanted to handle those energy companies’ growth and expansion.”

Wheless says the investment was worth it, especially since 80% of 10 West Corporate Center has been preleased to Mustang Engineering. “The projection and philosophy we had is becoming a reality,” he adds.

Other developments under way in the Energy Corridor submarket include the 155,000-sf Offices at Park 10, a second phase of development at Interstate 10 and Park 10 Boulevard by Yancey-Hausman Development Co., and the 45,000-sf 2930 Beltway 8 Center, rising under MetroNational’s auspices. The locally based developers have the projects scheduled to deliver later this year.

The 156.1-million-sf office market is 82.7% occupied. In the past quarter, class A, full-service rent increased 42 cents per sf to $21.56 per sf annually. In the past year, the class A rent rose 64 cents per sf or 3.1%. The class B, full-service average jumped 11 cents per sf to $16.70 per sf on an annual basis. The region’s average is $18.74 per sf while the Energy Corridor hotspot is $18.36 per sf. “Once those new buildings come on line, we’ll see more of an increase,” Guerrero predicts.

Overall, Houston has benefited from new job growth, which has driven the demand for more class A properties. Guerrero points out the Texas Work Commission reported 70,000 jobs were created last year. “Obviously, that’s helping the Houston real estate market, especially in the energy sector,” he says.


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