According to Houston Real Estate Observer: Houston’s office market could receive a boost from the recent civil unrest in the Middle East, which has prompted energy companies to relocate employees to Houston for safety reasons.
“With the unrest in the Middle East, we’ve had some clients pulling their people out of Oman, Yemen and Libya. It’s just a dangerous world right now,” said Charles Gordon, executive vice president of the CB Richard Ellis real estate company in Houston.
Gordon said he could not provide specifics due to client confidentially concerns, but he said hundreds of employees are being relocated to the United States. Gordon, who has leased more than 35 million square feet of office space, is an authority on office facilities for energy firms.”What we are finding is there is some real concern on the part of (energy company) management about the safety of their employees in areas that were pretty safe until just recently,” Gordon said. “We’ll probably see it continue to be a factor.” It is too early to determine if the relocation trend will become a significant long-term pattern.
Gordon said the Houston office market has experienced a number of positive developments in recent months.
The moratorium on drilling wells in the Gulf of Mexico hurt the Houston office market last year, but the recent resumption of Gulf drilling will be a plus. High oil prices will also provide a lift.
“There is a lot going on the world that is good for Houston,” Gordon said at a CB Richard Ellis press luncheon.
”What we are seeing right now is a tremendous amount of increased activity,” Gordon said. Many companies are seeking to lock in today’s lower rental rates, before increases come.
Last year, CB Richard Ellis was projecting that downtown office vacancy could go as high as 16 percent, but the real estate company is reworking its forecast.
“We’re optimistic that things won’t get as bad as we predicted,” Gordon said. “We are revising those numbers based on a lot of deals that are happening right now.”
The Houston office market had citywide Class A vacancy rate of 16 percent in the first quarter, an improvement over 16.3 percent vacancy at the end of 2010, CB Richard Ellis reported.
Across the city, some 357,911 square feet of empty office space was filled in the first quarter. Downtown was the biggest contributor to the positive absorption with major leases including NRG’s lease in Houston Pavilions.
Leasing activity was strongest in downtown Houston, the West Loop market and in the Energy Corridor on the Katy Freeway.
Hines recently opened the BG Group Place, a 972,474-square-foot tower on Main Street, putting a significant amount of new office space into downtown Houston. The building, with the BG Group energy firm leasing over 350,000 square feet, is over 60 percent leased.
Another major building, the 844,000-square-foot Hess Tower, is nearing completion near the Discover Green park in downtown. The building is fully leased to the Hess energy firm, but Hess will leave behind vacant space in Allen Center. Devon Energy is also expected to vacate space.
But overall the Houston office market appears to be on an upward cycle again, CB Richard said. The overall rental rate for Houston office space increased to an average of $23.17 per square foot in the first quarter, up from $22.82 per square foot in the fourth quarter of 2010.
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