LOCATION OVERVIEW
Investment Sales
H. Dan Miller
Senior Managing Director
(713) 852-3576
dmiller@hfflp.com
Martin T. Hogan
Associate Director
(713) 852-3557
mhogan@hfflp.com
Debt Underwriting
Tucker Knight
Managing Director
(713) 852-3572
tknight@hfflp.com
The Energy Corridor is one of Houston’s most dynamic and high-growth office submarkets. With over 27.4 million square feet of office space, the Energy Corridor is Houston’s largest suburban office market and has been one of the city’s strongest performing over the last decade. Through the national recession, the Energy Corridor has provided a primary source of economic stability due to the strength of multi-national energy companies with presences within the submarket.
The Energy Corridor’s largest employers include BP, ConocoPhillips, ExxonChemical, Transocean, Shell Oil, Cabot Oil & Gas, Technip, and SYSCO Corporation, which have collectively formed a nucleus of commerce which continues to attract suppliers, service companies, and other businesses that benefit from these large corporate users. As these firms have expanded their respective employment bases, total employment within the Energy Corridor has grown to more than 50,000 employees.
Occupancy
The Energy Corridor was negatively impacted by the delivery of several new Class A buildings. Accordingly, the submarket ended the fourth quarter 2009 84.6% occupied overall. Class A space ended the quarter with occupancy of 81.3%, a 14.4% decrease over the prior year. However, the Class B market remained very resilient, ending the quarter averaging occupancy of 88.5% - only a 2.1% decrease over the same time period! The Class C market proved the best performing overall, ending the quarter with average occupancy of 90.8%.
Absorption
The aforementioned delivery of new buildings may have hurt occupancy rates, but the favorable level of pre-leasing of these buildings allowed the submarket to record 542,488 square feet of positive net absorption on the year. The Class A market recorded 773,509 square feet of positive net absorption in 2009. The Class B market, meanwhile, experienced negative net absorption of only 213,801 square feet in the same time period, but ended the year with on a positive note, reporting positive net absorption of 9,850 square feet.
Rental Rates
Asking rental rates for the entire submarket increased $0.28 per square foot in the fourth quarter, ending the year averaging $24.03 per square foot gross. Class A rents increased $0.75 per square foot in that time period to average $27.11 per square foot gross. Ad interim, Class B rents dropped $0.42 per square foot, finishing the year with an average of $18.26 per square foot gross.
Location Map
(Click To Enlarge)
