HOUSTON-Folks outside of Texas looking toward the Lone Star State might be surprised at a number of things: The strong economy, number of jobs created and the health of the commercial real estate market. More specifically, the commercial real estate market in Houston, particularly west Houston, is booming, with a lot of office buildings going north.
What is even more surprising is that the construction underway in the Energy Corridor, as the submarket is named, is primarily speculative. "There's roughly around 3 million square feet under construction across the Energy Corridor," says Aaron Thielhorn, managing director of Trammell Crow Co.'s Houston business unit in a recent interview with GlobeSt.com. "That doesn't include user buildings. This is the speculative/leasing market."
But what about overbuilding? Not a chance. "About 85% of that space has been preleased already and the construction isn't even done," Thielhorn says. In other words, the existing class A office market is close to 99% occupied, with the Energy Corridor and The Woodlands submarket (to the far north) being the strongest markets.
Thielhorn says that, once the new product delivers in 2014-2015, it won't have an impact on the overall market. "The market is very healthy, when you take into account demand, what's been preleased and what's under construction," he adds.
Recent information distributed by CBREshows historically low vacancy rates among office product in submarkets including the Energy Corridor, The Woodlands and the West Loop. This has led to an increase in construction – with close to 71% preleased. Vacancy rates in the Energy Corridor and The Woodlands are below 2%; while the Katy Freeway submarket stands at just under 4% vacancy. Meanwhile, the West Loop submarket has a "high" vacancy rate at just about 8%.
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