HOUSTON—Given the healthy Texas and US economies as well as the equilibrium levels of energy employment following a broad sector restructuring, Houston's office market seemed to begin 2018 on relatively solid footing. The final 90 days of 2017 marked the first quarter of positive net absorption in the Houston office market in 18 months. The overall net absorption quietly trended positive in fourth quarter 2017 as 325,000 square feet was absorbed, according to the Office MarketView Q4 2017 report by CBRE.
Overall vacancy fell by 30 basis points as direct available space decreased by 655,000 square feet and sublease listings decreased by 1.3 million square feet. The central business district had a modest 100,000-square-foot increase in vacant space, while Energy Corridor had a 180,000-square-foot decrease. Decreasing levels of availability indicate that modest occupancy gains may continue to materialize in the near term.
Office development remains subdued, as no new office projects broke ground in fourth quarter 2017. However, currently under development is Spring Crossing, a three-phase class-A development with 850,000 square feet of office space near The Woodlands, providing an alternative for tenants seeking space in the emerging North Houston submarket.
Amid a $48.5 million renovation and reimagining of Allen Center, Brookfield Property Partners LP says Talos Energy LLC will expand its headquarters and relocate from One Allen Center to Three Allen Center, the class-A office tower that is part of the 7-acre Allen Center complex. With the move, Talos Energy will occupy approximately 98,000 square feet of space, increasing occupancy of Three Allen Center to 94%.
“Talos Energy's core founders have started and operated successful exploration and production companies out of the Allen Center Complex for more than 17 years,” said Michael Harding, senior vice president and chief financial officer of Talos Energy. “It feels good to know that we have secured space with room to grow.”
Allen Center is located at the southwest corner of Smith and Dallas streets in the CBD and is comprised of three office buildings. Brookfield's recent reimagining of Allen Center involves a renovation of One, Two and Three Allen Center. The signature piece of the initial phase of the renovation, which was completed in October 2017, included the transformation of the courtyard housed between the three buildings into a one-acre green space appropriately named “The ACRE.” In late 2016, Brookfield also purchased the DoubleTree Hotel adjacent to Allen Center, with plans for a full renovation and rebrand.
“Brookfield is pleased to continue our partnership with Talos Energy,” said Travis Overall, executive vice president and head of the Texas region for Brookfield. “The recent completion of the initial phase of the reimagining of Allen Center is attracting some of Houston's top companies and their employees to relocate to our property or expand their current footprint.”
Talos Energy was represented in lease negotiations by Brett Blanchard and David Anderson of Fritsche Anderson Realty Partners. Brookfield was represented by Bubba Harkins, John Pruitt and Jessica Ochoa of JLL, along with Clint Bawcom of Brookfield.
“This lease represents a continuation of the immense momentum of Allen Center,” said Harkins. “Brookfield's commitment to downtown Houston and the extraordinary renovations underway have created an exciting office destination that continues to attract and retain outstanding companies like Talos Energy.”
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
