Sugar Land office building hits market after property tax surge

One of Southwest Freeway’s most recognizable office buildings is looking for a new owner. 

A venture of Madison Marquette, PCCP and Fuller Realty Partners has listed Sugar Creek on the Lake, an office complex at 14141 Southwest Freeway in Sugar Land. JLL Capital Markets’ Martin Hogan and Rick Goings are marketing it. The asking price wasn’t disclosed.

The Fort Bend Appraisal District recently assessed the 516,000-square-foot property’s value at $80 million, nearly tripling its 2023 appraisal of $27.8 million. The taxable value comes to $155 per square foot.

The owners have invested nearly $30 million in renovations to the 11-story, Class A building, with more than half of those improvements happening between 2018 and 2022, to keep up with the flight-to-quality trend in the office market. Amenities include a fitness center, sports courts and an auditorium. 

However, the property has not found its footing, and its occupancy is about 47 percent. That is well below Sugar Land’s average occupancy rate of 80 percent, according to Avison Young.

Constructed in 1982 for Kaneb Services, it later housed significant tenants such as Fluor Corporation, Chevron and the regional headquarters of Unocal Corporation. The building had gone back to its lender in 2010 before now-defunct firm PM Realty Group bought it with PCCP and Fuller Realty in 2012. PM Realty Group was acquired by Madison Marquette in 2018.  

The building was on the market in 2017 but didn’t find a buyer. 

Owners of aging office properties have found it difficult to compete with newer products as tenants move out to occupy more modern spaces. 

The vacancy rate for office buildings constructed in the 1980s exceeds 30 percent — triple that of offices built in the 2010s, according to Avison Young. 

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However, Sugar Land’s office market has almost no new construction set to be delivered this year, due to high construction costs. The only office project in its pipeline this year is a 40,000-square-foot headquarters for Modisoft, at 6932 Brisbane Court, which Snider Construction is set to deliver in October. 

The Sugar Land Economic Development Corporation offers financial incentives to entice companies to remain in the city. It grants up to $6,000 per full-time employee for businesses that agree to renew their leases for five to 10 years and maintain a minimum of 50 primary jobs on a yearly average. Additionally, the incentive requires a minimum capital expenditure of $1 million on office renovations or enhancements, a stipulation aimed at addressing the aging infrastructure of the city’s office spaces.