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Vacancies starting to tick up
The Galleria/West Loop submarket is second in total office market inventory only to the Central Business District. Large tenants like Bechtel, Stewart Title, alliantgroup, Hines, CBRE, and Landry’s help represent a diverse roster, while energy-related firms including Marathon Oil, BHP Billiton, Enbridge, Apache, and Weatherford are also in the mix. The high-profile submarket’s vacancy rate of 19.7% has ticked up 80 basis points from 18.9% last quarter, following a series of move-outs. And an availability rate of 27.3% currently ranks the submarket in the top third Houston-area submarkets for space marketed as available for lease or sublease as of Q3 2019.
Strong leasing activity
The Galleria/West Loop submarket has recently recorded several significant leases, including Engie for 110,000 sq. ft. of BHP sublease space at 1360 Post Oak and Sumitomo for nearly 70,000 sq. ft. of BHP sublease space at 1500 Post Oak in Four Oaks Place. The Galleria area submarket recorded 424,000 sq. ft. of leasing activity during Q3 2019—the second highest out of the top five submarkets in leasing activity in the Houston metro. In addition, the five-story mixed-use project underway at 1801 Post Oak Boulevard has signed its first office tenant. Northern Trust signed a lease for 39,000 sq. ft. in the 122,000-sq.-ft. building that will house a two-story, 26,000-sq.-ft. showroom for Zadok Jewelers as well as 68,000 sq. ft. of boutique office space and 11,000 sq. ft. of restaurant space. The project is scheduled to deliver in Q4 2020.
Average asking rates
The Galleria/West Loop submarket saw overall full-service average rates increase $0.77 per sq. ft. year-over-year to close Q3 2019 at $34.51 per sq. ft. Class A rates increased to $37.58 per sq. ft., up from Q3 2018’s $36.54, and Class B rates softened from last year, down $0.45 to $25.88.
Director of Research
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