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Office market vacancy at 21.7%. Nearing the end of the third quarter, the vacancy rate dropped by 40 basis points to 21.7%, from 22.1% this time last month. Year-to-date there has been 374,204 sq. ft. delivered to the Houston market, with 29.4% of that space available for lease. Meanwhile, 2.7 million sq. ft. is currently under construction—a total that now includes Hines’ 47-story; 1 million-sq.-ft. skyscraper at 801 Texas Ave. Law firm Vinson & Elkins has inked a 16-year lease for 212,000 sq. ft. on the top seven floors and will serve as an anchor tenant. In addition, Hines will relocate its global headquarters, having signed a 15-year lease of nearly 155,000 sq. ft. on five floors. The building is projected to open in late 2021.
Investment sales down year-to-date through August. According to Real Capital Analytics, investment sales of office properties in the Houston area totaled $1.9 billion, a -25.7% change from one year ago. Institutional capital has been the most active buyer type for 2018, comprising 51.0% of Houston’s total sales volume, followed by private buyers at 34.0%, and cross-border at 9.0%.
Tight vacancy in The Woodlands drives growth. Despite overall vacancy remaining elevated, there are several submarkets where space is harder to come by. Notably, The Woodlands, with a vacancy rate of 14.8% is among the tightest in the city. In light of the relative lack of available space, The Howard Hughes Corp. purchased two vacant Class A buildings at 2103 Research Forest Drive for a reported $53 million, with plans to redevelop the properties plus the land into a 16-acre office campus. The two buildings total 257,025 sq. ft. and were the former headquarters of Chicago Bridge & Iron Co., which relocated to west Houston after being acquired last year by McDermott International.
Director of Research
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