HOUSTON-Depending on with whom you speak, Houston's Energy Corridor submarket commences at around Dairy Ashford Road, located just west of Beltway 8 and moves along Interstate 10 to SH 6. And, according to Stream Realty Partners' managing director Adam Jackson, most Houstonians view the actual submarket as bordered by Kirkwood Road on the east side and Barker Cypress Road on the west.
There are two things that are in agreement when it comes to the Energy Corridor, however. First, it's that office development is moving west quickly, well beyond SH 6. And second, the currently under-construction Grand Parkway, set up to intersect Interstate 10 from the north at the end of 2013, will likely spur future office development. It was one factor that led to Stream Realty's recent announcement that it is going north on Offices at Greenhouse, a 405,000-square-foot office development at Interstate 10 (also known as Katy Freeway) and Greenhouse Road. Greenhouse Road is approximately four miles east of Grand Parkway, and eight miles west of Beltway 8, Houston's current "outer loop."
A great deal has been written about the Energy Corridor's extraordinarily tight, single-digit vacancy. And there are certainly other submarkets in the Houston area that have plenty of office space for lease. So why the attraction to this particular slice of the metro area?
"At the end of the day, that location involves proximity to employees," Jackson tells GlobeSt.com. "That's where the core of Houston's demand base is." He adds that west Houston is home to many decision-makers and executives. "Executives are concentrated in and around I-10 somewhere, near Westview or Riveroaks," Jackson points out. "The outer loops, whether (Interstate) 610, the Beltway (8) or Grand Parkway, provide convenient access for residents to the Energy Corridor."
And finally, most of the major energy companies – specifically, Shell, Conoco and BP – are located in that submarket. "They're what's driving, for the most part, where engineering companies are located," Jacson says. "The drillers and other suppliers that are working with the energy companies typically either office together or are in close proximity together." As such, he continues, it doesn't make sense for a company like Foster Wheeler, that works closely with Shell or Conoco, to be in the Greenspoint submarket. Though that submarket has plenty of vacant class A space, it's also a good 25 miles away from the Energy Corridor.
Jackson goes on to say, in fact, that Offices at Greenhouse will be targeted to energy industry suppliers; he anticipates the tenant base to include engineering and oil-field service companies as well as oil and gas tenants along with exploration and pipeline companies.
The project's 203,000-square-foot phase one is already 65% pre-leased to an unnamed tenant. "Tenants won't typically lease part of a building unless they have confidence in the ability to grow," Jackson comments. As such, the tenant signed to Offices at Greenhouse can expand into the remaining 75,000 square feet. Or if the growth is even larger, "they can go into the 200,000-square-foot building planned for next door," Jackson says.
Construction is already underway on a 14,500-square-foot retail component of the Offices at Greenhouse that will house tenants including Starbucks and Potbelly. The project is being developed in partnership with Wile Interests, which owns the 12 acres on which the buildings will be situated. JPMorgan Asset Management is also a partner.
Jackson and Stream Realty's Paul Coonrod are overseeing all aspects of the development with Brad Fricks and Stewart Lyman leading the leasing efforts. Kyle Roberson and Scott Thetford will handle construction of the project. Matt Kafka and Colby Mueck from HFF arranged the joint venture and procured construction financing on behalf of Stream Realty and JP Morgan.
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