West Houston Dominates City’s Office Leasing in First Quarter

West Houston has emerged as a shining star amid broader challenges facing the office sector.

Roughly half of the city’s 2.2 million square feet of leasing activity in the first quarter was concentrated in West Houston, where new or renovated office buildings reign supreme in light of the remote-work era, Bisnow reported, citing Savills.

CityWestPlace, a four-building complex on a 39-acre campus in the Westchase District, saw three major leasing deals last quarter. The largest was a 110,000-square-foot lease from offshore drilling company Noble Corp. Construction company Bechtel and natural gas storage operator Enstor also leased 82,000 square feet and 43,000 square feet, respectively.

The CityWestPlace buildings underwent renovations in 2020 and offer 1.5 million square feet of rentable space.

Parkway, a venture formed last year through a partnership between Parkway Property Investments and Midway Holdings, purchased CityWestPlace last year from the Canada Pension Plan Investment Board. The complex was appraised at $119 million for tax purposes last year.

Another large lease from last quarter came from engineering and construction firm Fluor, which added about 104,700 square feet to its lease at Two Eldridge, a 14-story Class A office building in the Energy Corridor. Fluor will now occupy 413,000 square feet in Granite Properties’ Eldridge office complex when it relocates from its long-time home in Sugar Land later this year.

The Energy Corridor is perhaps the crown jewel of the West Houston submarket, accounting for 26 percent of all Houston office deals exceeding 10,000 square feet through October.

Houston office tenants showed an overwhelming preference for Class-A office space last quarter. This flight-to-quality trend has rendered some older office buildings functionally obsolete, the outlet reported.

Asking rents increased by 4 percent year-over-year to an average of $31.46 per square foot. Yet, landlords are offering concessions such as extended free-rent periods and tenant improvement allowances to attract tenants.

Overall, Houston saw a 16 percent uptick in leasing activity compared to the previous quarter, filling approximately 2.3 million square feet of office space. However, that marked a 5.7 percent decrease year-over-year

Moreover, the amount of sublease space in Houston dropped to 5.5 million square feet in the first quarter, compared to 7.5 million square feet one year prior.

—Quinn Donoghue