Middle Market Digest: This Week in the South and Mountain Regions

Continued job creation bolsters household formations and supports space demand for commercial real estate, according to a recent report by Marcus & Millichap. Moreover, year-to-date employment growth signals economic acceleration as employment additions in the first four months of 2018 outpaced the previous two years over the same time frame, with 799,000 jobs added. The quickened pace of job growth should accelerate commercial real estate demand across all sectors, as companies expand payrolls and operations. The industry as a whole has been robust in recent years and this news bodes well for continued positive activity.—Lisa Brown

BY THE NUMBERS                                                                                                              

HOUSTON—The NAI Partners sublease index—measured by the amount of sublease space as a percentage of total available space—increased 30 basis points to 14.3% in May. Space being marketed for sublease represents 8.7 million square feet of the 61 million-square-foot total availability figure. The increase was due in part to a significant block of office space in the West Belt area placed on the sublease market by GE Oil & Gas, totaling 182,000 square feet located in the Westway III building at 4425 Westway Park Blvd., 102,647 square feet of sublease space made available at 601 Travis St. in the CBD by Dynegy Inc. and 75,954 square feet of sublease space being offered at Beltway 8 Corporate Centre by National Oilwell Varco, also in the West Belt submarket.

HOUSTON—Midway through the second quarter, the vacancy rate edged up slightly 10 basis points to 5.5%, compared to this time last month at 5.4%. Occupancy of the 3.3 million square feet delivered to the market year-to-date stands at 74.8%, and of the 85 properties with 9.9 million square feet currently under construction, 59.8% is available for lease, according to NAI Partners Houston industrial monthly market snapshot for May 2018.

HOUSTON—The Houston office vacancy rate edged up by 20 basis points to 21.6%, from 21.4% this time last month. Year-to-date net absorption stands at negative 1.9 million square feet as companies such as Technip, which announced its merger with FMC Technologies in 2017, vacated 376,000 square feet of c class-A space in the Energy Corridor in first quarter 2018, according to NAI Partners Houston office monthly market snapshot for May 2018.

NEWS AND NOTABLES

AUSTIN, TX—Pump Studios, previously neighbors with Hops & Grain at 507 Calles St., is proud to call Springdale General (1023 Springdale Rd.) its new home, keeping its eastside Austin roots intact. With the help of Jason Steinberg, brokerage principal at ECR, Pump was able to secure a suitable space for its engineering operations, complete with a collaborative open concept and creative eastside vibe. With space design by S. Tipton Studio and project architecture by Michael Hsu, the property aligns perfectly with Pump’s culture and mission–to make ideas into real products.

DALLAS— CBRE announces that Chris Bone has been appointed to lead project management as senior managing director for the Texas-Oklahoma region. A seasoned industry veteran with 25 years of corporate real estate experience, Bone will oversee all project management activities in the region, including the growth of CBRE’s third-party opportunities while continuing to work with both occupier and investor clients.

DENVER—Motili, a property management technology solutions company, now integrates with technology from Coupa Software, a business spend management company. This integration agreement will provide Motili clients with streamlined operations processing and automation for systems currently in use.

HOUSTON—Lee & Associates-Houston announces C.E. “Trey” Erwin III as a senior director of the industrial team. Erwin specializes in tenant and acquisition representation, contract negotiation and landlord and disposition representation, specifically in Houston’s South, Southwest and East submarkets.

DEAL TRACKER

AURORA, CO—Transwestern’s Denver office announces the sale of the final property in the Southlands High Visibility District portfolio, a 9,420-square-foot retail center at 24272 E. Prospect Ave. Brad Cohen and Larry Thiel represented the seller, BLC-II LLC, in the disposition.

BUDA, TX—NAI Partners recently arranged a 10,200-square-foot industrial renewal lease for Corix Water Products Inc. at 222 Park 35 Cove N. NAI Partners’ Joshua Swank represented the landlord in the transaction at 222 Park 35 Cove N.

DENVER—The Bascom Group LLC has acquired Modera at Observatory Park Apartments, a 275-unit class-A newly constructed infill apartment community. The $92.5 million acquisition ($336,364/unit) closed late last month.

DENVER—CBRE announces the $74 million sale of Hub 25, a recently completed class-A multi-tenant industrial campus located at 601 East 64th Ave., developed by Westfield Company. Institutional investors advised by J.P. Morgan Asset Management purchased Hub 25, marking the first new construction industrial campus sale in Central Denver this cycle. This property was the site of the former Mapleton High School, which sat vacant for 20 years before Westfield purchased it in 2016. In slightly more than two years, Westfield took the property from demolition to development to disposition. CBRE’s Tyler Carner and Jeremy Ballenger represented Westfield in the sale and leasing of Hub 25. It was 70% pre-leased prior to construction completion and 95% leased at the time of sale. The development includes four buildings totaling 421,499 square feet.

DALLAS—PCore Exploration & Production II LLC expanded 8,254 square feet at Chase Tower, 2200 Ross Ave. J.J. Leonard, Matt Wieser and Jackie Smith with Stream Realty Partners represented the landlord, FPG CT Owner LP. Cushman & Wakefield of Texas Inc. represented the tenant.

FRISCO, TX—Halff Associates Inc. renewed its 5,875-square-foot lease at Parkwood Office Center, 3803 Parkwood Blvd., Suite 800. Chase Lopez and Ryan Evanich with Stream Realty Partners represented the landlord, SDI-Parkwood LLC.

GRAHAM, TX—Lee & Associates–Houston represented American Protech Chemical Inc. in the lease of an off-market 80,000-square-foot industrial building at 338 North Cliff Dr. Justin Cole and Clint Hankla of Lee & Associates–Houston represented the tenant, and the landlord was Traylor Investments Cliff LLC.

GRAND PRAIRIE, TX—PGM of Texas LLC leased 24,450 square feet 630 Avenue K. Luke Davis and Sarah Ozanne with Stream Realty Partners represented the landlord, DRA Advisors.

GRAPEVINE, TX—Westwood Group Development No. II LP sold its 7,800-square-foot building at Grapevine Station, 1058 Texan Trail to JPA Capital LLC. Kenneth Wimberly with KW Net Lease Advisors represented the seller, Westwood Group Development No. II LP. Hanes Chatham and Tyler Maner with Stream Realty Partners represented the buyer.

HOUSTON—Lee & Associates–Houston represented Griffin Partners 675 Bering LP in the lease extension of a 17,900-square-foot office space at 675 Bering Dr. Chris Lewis and Jill Nesloney of Lee & Associates–Houston represented the landlord, and Anya Marmuscak with JLL represented the tenant, Comfort Systems USA Inc.

HOUSTON—Lee & Associates–Houston represented Titan Gas LLC in the lease expansion and extension of a 14,667-square-foot office space at 3355 West Alabama St. Chris Nash and Rob Johnson of Lee & Associates–Houston represented the tenant, and Steve West represented the landlord, Granite Properties.

HOUSTON—NAI Partners recently arranged a 5,000-square-foot office/warehouse renewal lease for tenant JV Industrial Companies at 4848 E Napoleon. NAI Partners’ Jason Whittington represented the tenant JV Industrial Companies in the transaction at 4848 E Napoleon.

HOUSTON—The Rice Village retail and restaurant scene continues to flourish with the announcement that three renowned brands will debut in the iconic Houston neighborhood. Drybar, Steel City Pops and Sixty Vines are set to open at Rice Village in 2018 and 2019. Steel City Pops will be the first of the new stores to open. Anticipated to open late summer 2018, the gourmet popsicle shop, offering a wide variety of gluten-free fruit and cream-based pops, will occupy the 923-square-foot space located at 2565 Amherst St. Drybar, the wildly popular national chain offering an extensive menu of signature blowout services, will occupy 1,800 square feet at 2521 Amherst St. Sixty Vines, a unique restaurant and wine bar, will occupy a total of 8,703 square feet, taking up the former Gymboree space and a vacant upper level space that will offer a view of the Medical Center skyline. The multi-level restaurant will be located at 2540 University Blvd and will be the first Sixty Vines location in Houston.

HOUSTON—Lee & Associates–Houston represented Pure Beauty Farms Inc. in the lease of a 15,844-square-foot industrial building at 421 Blueberry St. The tenant intends to use the property as a distribution hub for its products, which made the location appealing because of its proximity to Interstate 10 and Interstate 610 for ease of delivery. Nick Bergmann of Lee & Associates–Houston represented the tenant, and Steven Hazel with InSite Commercial Real Estate represented the landlord, Houston-Pine Forest M LLC.

HOUSTON—Meridian Capital Group arranged $7.5 million in acquisition financing for an office building on behalf of Windmill Investments. The 10-year loan features a floating rate and was negotiated by Meridian managing director, Shaya Ackerman, and senior vice president, Shaya Sonnenschein, who are both based in the company’s New York City headquarters.

LONGMONT, CO—Mass Equities Inc., a private equity real estate investment firm, together with The Ezralow Company, has announced the acquisition of 150 Main St., a 6.8 acre parcel in downtown. The property is the subject of a $70-million-dollar mixed-use development comprising four buildings. Phase one of the project is slated to begin immediately. Longmont, a community located 13 miles from downtown Boulder and 35 miles from Denver, is undergoing a revitalization of its historic old town area and river corridor. “We’re excited that South Main Station will play an important role in meeting the growing demand for new apartments and retail amenities in downtown,” said Brian Bair, MEQ principal and senior VP, acquisitions and development for Colorado. One of the largest developments underway in Longmont, South Main Station is designed as a “slice of Americana” that echoes Longmont’s historic old-town charm, but with an updated, urban feel. Composed of diverse rustic, modern and industrial elements, it will comprise attractive communal spaces and exterior courtyards as well as 253 residential units and 10,000 square feet of retail space in Phase one. Amenities will include an expansive club, fitness and yoga facility designed to occupy an unusually large space, which will accommodate multiple users with no crowding or wait times. The similarly spacious rooftop area and large pool deck offers plenty of room for outdoor enjoyment with a hot tub, grilling areas, fire pits and shade structures, a café area, an indoor/outdoor bar area, a wall of TVs for watching sports and other events, storage units, a pet grooming facility and DIY work area for bike and ski/snowboard repairs and storage. “As Mass Equities continues to pursue smart growth in the Colorado market, we are excited to work with strategic partners like the Ezralow Company,” said MEQ founder and CEO Andrew (Drew) Sobel. “MEQ’s relationships with its partners are key to maximizing our targeted expansion in Colorado though well located and forward-thinking mixed-use developments like South Main Station.”

PEARLAND, TX—Lee & Associates–Houston represented Koza’s Inc. in the sale of a 24,880-square-foot industrial building at 2814 South Main St. Thomas Leger and Justin Cole of Lee & Associates–Houston represented the buyer, and Scott Gardner and Ryan Sweeney with Streetwise Land represented the seller, McCoy Real Estate Solutions LLC.

SOUTHLAKE, TX—Lennox Industries Inc. leased 11,180 square feet at Heritage Business Park 8, 1080 S. Kimball Ave. Blake Kendrick, Ryan Boozer and Sarah Ozanne with Stream Realty Partners represented the landlord Prologis. Andy Anderson with Anderson Commercial Real Estate Services Inc. represented the tenant.

RICHARDSON, TX—CIP II Renner LLC sold a 122,300-square-foot, two-story office building at 1410 E. Renner Rd. to B.H. Management Inc. Stream’s investment sales team of Jamie Jennings, James Mantzuranis and Andrew Rabinovich as well as Tim Terrell with Stream represented the seller, an entity affiliated with Champion Partners in Dallas.

SAN ANTONIO—NAI Partners recently arranged a 9,613-square-foot office renewal lease for the tenant South Texas Community Living Inc. at Marymont Office Park at 2391 NE Loop 410. NAI Partners’ Mitchell Lyons of the company’s office tenant rep team represented the landlord in the transaction.

WHEAT RIDGE, CO—Hunt Mortgage Group provided an FHA mortgage in the amount of $36.55 million to finance the construction of West End 38 Apartments, a mixed-use property.

BUILDING BLOCKS

DALLAS—A new entertainment venue called Nowhere, TX is opening this summer in West Dallas. Located on a former industrial site at the intersection of Commerce Street and Edgefield Streets (1216 W. Commerce), Nowhere, TX will feature pop-up events and a biergarten-style dining concept with rotating chefs/menus.

SAN MARCOS, TX—Transwestern’s San Antonio office announces Kogut Commercial Real Estate and Mittman Real Estate have broken ground on Hunter Medical Plaza with an estimated completion in fourth quarter 2018. Transwestern senior vice president Ken Adams and senior associate Licia Shreves are providing leasing services for the 26,000-square-foot medical office building at 2202 Hunter Rd.