Houston’s Latest Construction Projects

HOUSTON (Bisnow Houston) – January 4th, 2018 – From skyscrapers to water parks and everything in between, development is alive and well across Houston. Here are the latest projects under construction Houstonians are most excited about.

Capitol Tower

Skanska kicked off its 754K SF Downtown 35 story tower amid millions of square feet of office vacancy in Houston’s central business district with new tenant Bank of America that is leaving its namesake current Location after 35 years. Skanska expects to deliver the tower in Q2 2019.

Caydon Midtown

Australia-based developer Caydon Property Group is building Midtown’s first high-rise in decades. The Midtown will eventually rise 29 stories over Houston’s hottest millennial neighborhood, offering 342K SF of residential space across 357 apartment units. Prospective residents can expect to move in in early 2019.

Texas Medical Center McNair Campus

The future of the Texas Medical Center is tied to The Baylor College of Medicine and CHI St. Luke’s Health’s $1.1B McNair campus. While JE Dunn is building out the interior of Tower 1, Tellepsen Hunt, a joint venture between Tellepsen and Hunt Construction Group, has started construction on the second tower. Once completed, the McNair campus will occupy 1.2M SF with 650 hospital beds across two towers. Completion of the entire McNair campus is slated for 2019.

Latitude Med Center

The Texas Medical Center’s latest tower has officially topped out. Once complete late this year, the 22-story InterContinental Houston Medical Center will feature 353 guest rooms with 8K SF of meeting space alongside Greystar’s apartment development named Latitude Med Center. The project is the first full-service luxury hotel in the Texas Medical Center in decades.

Valley Ranch

On the doorstep of the 1,400-acre master planned community Valley Ranch sits Valley Ranch Town Center, a sprawling 240-acre mixed-use project with over 1M SF of retail and entertainment space. Stores are opening and leases are rolling in. Academy Sports was the inaugural store, but soon major tenants like Kroger, Hobby Lobby and Sam’s Club followed. The project’s developer, The Signorelli Co., expects roughly 85 stores and six multifamily communities when all phases of construction are complete.

Big Rivers Water Park

Big Rivers Waterpark and Gator Bayou Adventure Park is officially underway along I-69 north of New Caney. It will open in Grand Texas by summer, a little over six months after breaking ground. The park will sit on roughly 80 acres offering both a water park and adventure area with attractions for all ages. The move is spurring development around the park, with a Best Western Premier hotel set to deliver alongside the park’s opening. A 24-hour urgent care and a casual dining restaurant are also in the works close by.

BLVD Place Expansion

Phase 2 of BLVD Place’s construction is underway. The asset’s new owner, Whitestone REIT, will be adding a six-story, 137K SF building with 46K SF of retail below 91K SF of office space. The Hanover Co. also broke ground on its latest Houston asset last year there. The 32-story, 281-unit tower will sit just south of Hanover Post Oak as part of the BLVD Place mixed-use development.

Museum of Fine Aarts Expansion

The Museum of Fine Arts Houston’s $450M expansion broke ground last year. The 165K SF Nancy and Rich Kinder building will house 54K SF of gallery space, a 200-seat theater, a restaurant with views of the museum’s sculpture garden and an underground parking garage. The project is set to deliver in late 2019.

Houston Independent School District’s new arts-oriented high school is on track for a late 2018 completion. The High School for the Performing and Visual Arts is preparing for its move from Montrose to Downtown, which will increase the school’s capacity to a total of 750 students.

HISD Performing and Visual Arts High School

Houston Independent School District’s new arts-oriented high school is on track for a late 2018 completion. The High School for the Performing and Visual Arts is preparing for its move from Montrose to Downtown, which will increase the school’s capacity to a total of 750 students.

Buffalo Heights

H-E-B has been busy in Houston. In the Washington Corridor, H-E-B has teamed up with Midway Cos. for a mixed-use development at Heights and Washington. The 96K SF grocery store with a walk-up coffee bar and café concept will not open until spring 2019. The store is another sign of H-E-B’s increasing commitment to community-oriented stores within Houston’s inner loop.

The Post Oak

Houston Rockets’ owner Tilman Fertitta is behind The Post Oak, the Galleria area’s latest ultra luxe development. The 38-floor, 680K SF mixed-use development will feature 150K SF of Class-A office space, a 250-room hotel tower, 20 luxury residential units, a two-story Rolls-Royce showroom, a spa, a salon and several high-end restaurants. Mastro’s Steakhouse, a 10K SF establishment constructed by O’Donnell/Snider Construction and Abel Design Group, is already open on the site. The rest of The Post Oak is expected to open later this year.

Arabella

Just east of 610 in Uptown, Arabella, a 33-story, 100-unit condo tower, is going up on the site of the former Westcreek apartment complex. The luxurious condo tower is borrowing from Miami’s playbook by offering 10 terrace-top pools with some of the best views in the city. These pools are costing between $150K and $175K apiece, but have helped sell units. Ten out of the 14 penthouse condos within Arabella have been sold.

East Village

EaDo’s rapid conversion from a post-industrial neighborhood to a thriving arts and entertainment district is continuing at Ancorian’s latest redevelopment project, East Village. The project is already home to  Our/Houston vodka distillery, Chapman & Kirby, a hybrid nightclub and restaurant, and SeaSide Poke. Soon, Truck Yard and Rodeo Goat will join the mix. Agricole Hospitality is working on opening three separate concepts in more than 10K SF of converted warehouse space. Phases 2 and 3 of the project are set to deliver this summer.

 

Houston Industrial Sales & Leasing Strong

​​​​​​​​​​​​HOUSTON (Realty News Report) –​​ December 1st, 2017 – Industrial sales are up 127 percent since last year, according to a November report by NAI Partners.

So far this year, $984 million in industrial sales have been recorded. ​Institutional investors have accounted for 38 percent of the deals. Twelve percent of the buyers were REITs, and 10 percent were foreign investors.

NAI reports the​ largest transaction of the year was Pure Industrial REIT’s $63.5 million purchase of the one million-sf IKEA Distribution Center in Baytown.

Around 6.4 million sf has been absorbed year-to-date, and the current vacancy rate is 5.5 percent.

Texas Unemployment At Record Low

TEXAS (Dallas Federal Reserve) November 29, 2017 –  The Texas Economic Indicators report for October 2017 from the Federal Reserve Bank of Dallas saw Texas unemployment falling to a record low of 3.9%. The metric is at its lowest point in the series’ history, which dates back to 1976.

The low unemployment figure, combined with other fundamentals such as annual job growth (currently at 2.7%) and broad-based payroll expansion, led the Texas Business-Cycle Index to increase by an annualized 5.8% in October. The long-run average of the index is 3.9%.

The three-month moving averages of the Dallas Fed’s Texas Business Outlook Surveys reported accelerating growth in factory production, service-sector revenue and retail sales. The three-month moving average of the manufacturing production index rose to its highest level in more than 10 years.

How Much SQFT Does $5k p/mo Get One in Class A Office Across the USA

AUSTIN (Austin Business Journal) – October 31, 2017 – Office rents in Austin have topped Seattle and the Silicon Valley, according to CommercialCafe’s latest report.

A tenant spending $5,000 per month for Class A office space can get 1,087 sf in the Capital City. That trails only Boston, where you could afford 1,006 sf; Washington, D.C. (849 sf); San Francisco ​(803 sf); and New York City (703 sf).

In Houston, $5,000 could get you 1,337 sf, and in Dallas 2,012 sf. For that same amount, you can rent 2,226 sf in San Antonio.

Office vacancies were at 10.5 percent across the Austin metro in the third quarter, according to Cushman & Wakefield. The asking rate for Class A space is at an all-time high of $55.77 per sf.

Texas Adds 12,000+ Apartments In 3rd Qtr

CARROLLTON (ALN Apartment Data)  – October 20, 2017 – ​Texas apartment markets a​dded more than 12,000 units over the 3rd quarter, according to the latest report from ALN Apartment Data​​​​.

“Even with all the new units added, the only Texas markets to have noteworthy negative occupancy growth were College Station and Lubbock,” the report said.

“Competition in Austin is heating up and average rents fell 0.7 percent to $1,210 per unit. Laredo and Texarkana saw modest decreases of a few dollars per unit over the summer.

“Hurricane Harvey took its toll and damaged almost 15,000 units, but that managed to push average occupancy up 1.8 percent to 89.1 percent as the displaced tenants were absorbed elsewhere in the market. Rents in Houston also spiked up more than 2.4 percent to an average of $1,​042 per unit.”

OVERALL TEXAS APT MARKET

Worlds Largest Ethane Cracker Plant South of Houston

FREEPORT, BRAZORIA COUNTY – (Houston Chronicle) October 3, 2017 – DowDuPont will open a new ethylene and plastics plants, the first major ethylene complex along the Texas Gulf Coast.

The $4 billion complex is the crown jewel of the old Dow Chemical’s recent $6 billion expansion along the Gulf Coast.
The project includes a massive ethane cracker which will provide the feedstock for some 1.5 million metric tons a year of ethylene.
A large portion of the expansion will go toward expanding the plant to 2 million metric tons a year, making it the world’s largest ethylene production plant.
The ethane facility is near DowDuPont’s new polyethylene plastics plant.

Q3 Office: Leasing Sluggish, Investments Not So Much

The not-so-good news? Leasing continues to be sluggish.

Though Hurricane Harvey had little, if any, impact on office inventory, “leasing activity remained muted during the third quarter, and failed to surpass its 10-year quarter for the seventh consecutive quarter,” according to JLL’s Office Insight. This led vacancy to increase – again – taping out at 22.8%, while absorption clocked in at -2.4 million.

On the bright side, the market favors tenants. Yet even here, JLL was somewhat pessimistic, pointing out that the majority of tenants in the market are okay with their current space footprints. “This is best evidenced by the market’s paltry average deal size of 4,700 square feet during the quarter,” the report noted.

Harvey is Houston’s 1000 Year Flood

HOUSTON (Washington Post-Jason Samenow) August 31, 2017 – As Harvey’s rains unfolded, the intensity and scope of the disaster were so enormous that weather forecasters, first responders, the victims, everyone really, couldn’t believe their eyes. Now the data are bearing out what everyone suspected: This flood event is on an entirely different scale than what we’ve seen before in the United States.

A new analysis from the University of Wisconsin’s Space Science and Engineering Center has determined that Harvey is a 1-in-1,000-year flood event that has overwhelmed an enormous section of  Southeast Texas equivalent in size to New Jersey.

There is nothing in the historical record that rivals this, according to Shane Hubbard, the Wisconsin researcher who made and mapped this calculation. “In looking at many of these events [in the United States], I’ve never seen anything of this magnitude or size,” he said. “This is something that hasn’t happened in our modern era of observations.”

Hubbard made additional calculations that accentuate the massive scale of the disaster:

  • At least 20 inches of rain fell over an area (nearly 29,000 square miles) larger than 10 states, including West Virginia and Maryland (by a factor of more than two).
  • At least 30 inches of rain fell over an area (more than 11,000 square miles) equivalent to Maryland’s size.

A 1,000-year flood event, as its name implies, is exceptionally rare. It signifies just a 0.1 percent chance of such an event happening in any given year. “Or, a better way to think about it is that 99.9 percent of the time, such an event will never happen,” Hubbard said.

While no one questions the exceptional nature of Harvey’s rainfall, the concept of a 1,000-year flood event has been criticized by some academics and flood planners. For one, rainfall and flood data generally go back only 100 years or so, so statistical tricks must be applied to determine what 500-year and 1,000-year events actually represent. Furthermore, the climate is changing and precipitation events have become more intense in recent decades, so what constitutes different return frequencies (100-year, 500-year, 1,000-year and so forth) is probably changing.

Climate change studies have found that what’s considered a 500-year flood today may become much more frequent in coming decades.

But Hubbard, who analyzes geographic information to help decision-makers plan for floods, stands by the use of these return interval metrics despite their shortcomings. “For a community, they help put these events into perspective and understand the impact of a flood,” he said.

He added that they have “tremendous” value for flood planning and designing infrastructure to be able to withstand events up to a certain intensity. “Decision-makers have to be able to pick a number and say this is the number we need to be prepared for,” he said. “If we debate and belabor the accuracy of these estimates, the community will not have a value to plan for.”

Hubbard agrees that the climate is changing and precipitation is becoming more intense in some areas, but he said it would be complicated to adapt the flood return frequencies. “The challenge is trying to separate when you have these 500-year events happening all the time, what part is a changing climate, what part is changes in urbanization and agriculture and what part is the lack of understanding of what’s happened in the past,” he said.

In any event, Harvey puts an exclamation mark on the pattern of disastrous rain events in recent years and may be a harbinger of more such events in the coming decades.

“Expect #HarveyFlood record will be broken in 5, 15, 25 years from now — sooner rather than later,” tweeted David Titley, professor of meteorology at Penn State.

 

H-Town’s 7 Largest Real Estate Assets for Sale

HOUSTON (Bisnow) – July 31, 2017

Houston Center — 4.2M SF

The four-building, 4.2M SF Downtown Houston office complex Houston Center just hit the selling block, making it the largest office asset for sale in the entire Houston MSA. With the help of JLL and Avison Young,  BISNOW rounded up the biggest.

Greenspoint Place — 2M SF

Greenspoint Place is a 36-acre mixed-use development in North Houston that consists of six office buildings and three connecting retail centers. It is known for being the former home of a large portion of Exxon’s Houston operations. When Exxon left to consolidate in Springwoods, Greenspoint Place took a major hit and has yet to recover. Sitting at 40% occupancy, the asset is owned by the lender, Northwestern Mutual.

Esperson — 599K SF

Investors looking to enter the Houston office market could own a piece of history. Esperson consists of the 32-story Niels Esperson building, completed in 1927, and the adjacent 19-story Mellie Esperson building, completed in 1941. Five years after purchasing the building, Cameron Management is looking to sell the renovated Downtown icon.

Halliburton Oak Park Campus — 568K SF

Halliburton’s 48-acre former home is just west of the intersection of the Sam Houston Tollway and Bellaire Boulevard. The site includes a 568K SF office building, an 18K SF fitness center, a daycare center, a central plant and a five-level parking garage. Halliburton took good care of the structure built in 1979, making many cosmetic, mechanical and electric upgrades. The asset’s location makes it prime for a redevelopment play.

5959 Corporate — 567K SF

Prescott Group has developed 5959 Corporate into a premier Class-A telecommunications asset in terms of power, fiber and power systems. Features include a generator farm, two separate utility feeders providing 10,000 KVA of electricity power, multiple fiber optic entries, four 500-ton chillers backed up by two 1,400 KW generators and a 2,600-ton cooling tower. In addition, the property has a 20,000-gallon fiberglass tank for diesel fuel and a 20,000-gallon reserve water tank.

Sugar Creek On The Lake – 515K SF

Sugar Creek On The Lake is an 88.9% leased headquarters-quality office building just south of 59 between Sugar Creek Boulevard and Williams Trace Boulevard. Built in 2008, the asset is one of the newest assets on the list. The building was 100% leased by Chevron until 2010. Since then, it has had ups and downs. PMRG purchased the asset in 2012, and together with PCCP and Fuller Realty put $13M into capital improvements.

Pin Oak Park — 504K SF

The Offices at Pin Oak Park is a 504K SF office complex consisting of five buildings in a 12-acre campus that fronts Houston’s West Loop in Bellaire. The project is close to the Galleria and the Texas Med Center. Pin Oak Park is the only Class-B asset on the list.

Westway Plaza — 313K SF – Triple NNN Deal

Open in 2015, Westway Plaza is the newest building on the list. On nine acres just northwest of the Energy Corridor, Westway Plaza is leased primarily (70%) by General Electric. The asset was developed by Transwestern and is 100% leased to three tenants with long-term triple-net leases.

Bird’s Eys View of Houston Commercial RE

HOUSTON (Bisnow) – July 20, 2017 -Those waiting for Houston to bounce back will have to wait a while longer. Houston has made plenty of gains this year, signing 3.2M SF of office leases in Q2 alone, but with 11M SF of sublease space still on the market and more multifamily units opening every month, Houston’s rebound is hard to see.

Office

Houston’s office market has borne the brunt of the market’s downturn. Vacancy increased 60 basis points to 17.4% in Q2 as several large sublease terms expired, adding more than 600K SF of direct available space, according to CBRE data. Even with the removal of expired listings and increased sublease transactions, available sublease rose to 11.1M SF as more than 1M SF of new sublease listings were added this quarter. The combined result is Houston’s sixth consecutive quarter of negative absorption. Flight to quality is expected to continue as tenants benefit from lower rates and increased concessions. Long-term leases in prime locations are offering an average of 12 months free rent and $100/SF in tenant improvement allotments. Industrial

Industrial

Houston’s industrial sector has been keeping the area afloat. Nearly every metro in the country would love to have Houston’s vacancy rate at 5.5%. Q2 marks 24 consecutive quarters below the 6% vacancy mark. More than 60% of the 5.5M SF under construction can be attributed to four large projects, with an average building size of 850K SF. These major build-to-suits have dwarfed spec development recently: Only one spec project greater than 100K SF broke ground in the second quarter out of 1.4M SF of total starts.

Retail

This year leasing activity is struggling to keep up with the blistering pace set last year. A deficit of quality space has slowed leasing, CBRE research shows, causing Houston retailers to take down only 808K SF so far in 2017 (which is still double the 10-year average). In Q2 2017, approximately 774K SF was occupied in new projects. As the development pipeline slows, Houston’s net absorption continues to taper. Grocery expansion has slowed. The pipeline is mostly speculative strip centers and mixed-use developments. Only 1.2M SF of retail is under construction, a third of which is grocery-anchored. Development activity is concentrated in the Far North and Far West submarkets.

Multi-Family

So far this year, Houston has delivered just over 10,000 units and absorbed just over 11,000, causing occupancy to increase. There are still roughly 7,800 units under construction across the city, for a total of nearly 18,000 units to deliver in 2017, ranking third in the nation. The building boom is pushing rents lower, down 1.9% from this time last year, according to Axiometrics.  By 2019, Houston’s pipeline will be down to only about 2,000 units.