With Houston’s overall office vacancy rate expected to exceed 21 percent this year, pre-leasing space will be of increased importance to developers with office projects underway.
One Houston developer, Hines, appears to be in good shape. According to the Houston Business Journal, United Airlines has signed a lease for 225,000 square feet of space at the developer’s 48-story office tower, which is under construction in downtown and slated for 2017 completion. United is said to employee 1,600 people in the city and is among downtown’s largest employers.
Hines’ tower will feature a total of 1.05 million square feet., 62,000 of which will be occupied by international commercial law firm Kirkland & Ellis. The firm signed a lease last December. Combining United and Kirkland, Hines has already pre-leased at least 287,000 square feet.
News of United moving its headquarters to Hines’ building comes after several oil companies recently shed space in downtown. Shell Oil Co. put 350,000 square feet of office space onto the sublease market and Exxon Mobil vacated roughly 2 million square feet.
Hines is also actively pre-leasing a portion of its 75-acre, master-planned business park in southwest Houston. Dubbed Beltway Southwest, the development will feature more than 950,000 square feet of logistics space. The park is said to be 60 percent pre-leased (424,000 square feet) with 734,000 square feet under construction.
The first phase of Beltway Southwest will be delivered this June and comprises 350,000 square feet of space, spread between a rear-load building and a cross-dock building.
Hines and the rental market
Apart from office construction, Hines is also active within Houston multifamily sector. The developer has two high rises underway, one in the Montrose/Museum/Midtown market the other in downtown, with move in’s slated for May and December of this year.
The primary reasons for the projected, more than 4 percent increase in Houston’s overall office vacancy rate this year are energy companies vacating space and the volume of new office space slated to be delivered. According to a CBRE fourth quarter report, Houston leads the state in office construction, with 7.4 million square feet under construction.
