Energy Corridor Pumps Space Back into Service

HOUSTON—Although the Energy Corridor submarket was impacted by Hurricane Harvey, Skanska announced in November that both buildings at West Memorial Place had come back into service and were fully functional, making them the first office buildings in the area to recover after the storm. Nearly a year later, Skanska has reached a lease agreement with BP Lower 48 for approximately 91,000 square feet at West Memorial Place, the first speculative LEED Platinum campus in the Energy Corridor and metro.

BP Lower 48 plans to relocate its Houston office to West Memorial Place II later this year and will occupy three full floors of office space formerly leased by IHI E&C. Included in the lease is 5,500 square feet on the ground floor, where BP Lower 48 plans to develop a multi-use space for employees that includes a patio with seating overlooking Terry Hershey Park.

“BP Lower 48’s expertise in the energy sector and history in the Houston market make them an ideal addition to our Energy Corridor campus,” said Matt Damborsky, executive vice president for Skanska USA Commercial Development. “West Memorial Place is a blend of thoughtful first-class amenities, natural surroundings and sustainable forward-thinking design.”

Located at 15375 Memorial Dr., the development now includes two class-A office buildings. West Memorial Place I measures 331,000 square feet and West Memorial Place II measures 385,000 square feet.

“We are excited about our new office space in West Memorial Place and look forward to moving in later this year. The building’s location and amenities are terrific, and the modern contemporary features fit well with the culture of our company,” said Danny Falligant, director of land and real estate for BP Lower 48.

The West Memorial Place buildings consume 30% less energy than typical baseline buildings. Constructed around a number of sustainable features, including waste diversion and energy recovery, the offices feature a mixture of stone and floor-to-ceiling glass walls, as well as thermal insulation to help reduce heat gain while still providing natural light. The buildings also use an energy recovery wheel, which pre-cools fresh air before it is transferred through the mechanical system, which requires less energy to cool and condition the building.

“One of the most appealing things about West Memorial Place is its connection to the natural world. The campus is adjacent to Terry Hershey Park, a lush and vibrant greenspace that provides a wide range of amenities,” Damborsky tells GlobeSt.com. “This connection to the natural environment was a key draw for BP Lower 48. BP was also drawn to the campus’ upscale amenities and modern design, which fit well with the culture of the company.”

Located directly adjacent to Terry Hershey Park and its many miles of hike and bike trails, West Memorial Place’s amenities include a fitness center fitted with locker rooms and showers, as well as an on-site café, car wash services and a bike share program. In 2017, the campus also became the fifth Enterprise CarShare location in the Energy Corridor.

“Our long-standing commitment to building healthy, sustainable work environments has helped to create a forward-thinking professional destination that features amenities that enable tenants to succeed and thrive,” Damborsky tells GlobeSt.com.

JLL’s Louis Rosenthal and Anya Marmuscak represented BP Lower 48 in the transaction.

Wholly owned by BP and headquartered in Denver, BP Lower 48 is one of the country’s largest natural gas producers, operating nearly 10,000 wells and with interests in 13,000 others.

“Houston’s Energy Corridor is one of the pre-eminent locations for national and international companies in the energy sector,” Damborsky tells GlobeSt.com. “Although market conditions have been a challenge in recent years, this area is still ripe with opportunity for companies seeking to compete in West Houston and beyond. Oil prices have continued to rebound and we have seen–as we have in other submarkets around the city–a flight to quality as companies seek class-A office space to recruit and retain the top talent in the energy sector. We are confident that we will continue to see strong interest and activity in the Energy Corridor as companies seek the best and most sustainable developments.”

Skanska’s other Houston-area projects include the Capitol Tower development, a 35-story 754,000-square-foot office tower currently under construction in Houston’s Central Business District. Reflecting Skanska’s commitment to sustainability, Capitol Tower is the only office development in Houston and Texas to achieve LEEDv4 Platinum pre-certification.

Nearing the end of the third quarter, the vacancy rate dropped by 40 basis points to 21.7%, from 22.1% this time last month, according to a report by NAI Partners. Year-to-date, 374,204 square feet has been delivered to the Houston market, with 29.4% of that space available for lease.

Meanwhile, 2.7 million square feet is currently under construction—a total that now includes Hines’ 47-story 1 million-square-foot skyscraper at 801 Texas Ave. Hines will relocate its global headquarters there, having signed a 15-year lease of nearly 155,000 square feet on five floors. Also, Law firm Vinson & Elkins inked a 16-year lease for 212,000 square feet on the top seven floors and will serve as an anchor tenant. The building is projected to open in late 2021.

According to Real Capital Analytics, investment sales of office properties in the Houston area totaled $1.9 billion, a -25.7% change from one year ago. Institutional capital has been the most active buyer type for 2018, comprising 51% of Houston’s total sales volume, followed by private buyers at 34% and cross border at 9%.

Despite overall vacancy remaining elevated, there are several submarkets where space is harder to come by. Notably, The Woodlands with a vacancy rate of 14.8% is among the tightest in the city. In light of the relative lack of available space, The Howard Hughes Corp. purchased two vacant class-A buildings at 2103 Research Forest Dr. for a reported $53 million, with plans to redevelop the properties plus the land into a 16-acre office campus. The two buildings total 257,025 square feet and were the former headquarters of Chicago Bridge & Iron Co., which relocated to west Houston after being acquired last year by McDermott International, says the NAI report.