A medical office building changed hands in Sugar Land.  An undisclosed buyer acquired Town Center Medical, a 30K SF medical office building at 16545 Southwest Freeway. The Class-A property is adjacent to Houston Methodist Sugar Land Hospital, a 319-bed general acute care hospital specializing in cardiology, oncology, sports medicine, and women’s care. Built-in 2008, Town Center Medical is fully leased. ENT and Allergy, an ear, nose and throat group, serves as the anchor tenant.  “The Town Center Medical disposition highlights the robust demand for stabilized, on-campus medical office buildings in the Houston Metro area,” Transwestern Commercial Services’ Robby Winston said. “Sophisticated healthcare real estate investors continue to be optimistic about long-term yields from core medical office assets.” Houston Specialists Alliance Ltd. purchased the land in 2006 from Town Center Lakeside Ltd. for $750K, according to Reonomy. The assessed land value now is $1.3M while the total assessed value of the property is $5.3M, according to Reonomy.  Winston, along with Eric Johnson, Lisa Bovermann and Brooks Creech, represented the seller. TCS Houston has executed 522 healthcare transactions during the last 24 months and manages a healthcare portfolio of 69 properties totaling more than 5M SF.

 

When Ryan Hoopes of Cushman & Wakefield helps companies choose new headquarters, he often asks landlords a question that, not too long ago, would have been unheard of: “How do you plan to accommodate flex-space in your building? Because our clients are demanding it.”

Flexible, shared office space — think coworking spaces, incubators, and accelerators — is on the rise in Houston. Over the past 10 years, flex office space has absorbed a greater share of Houston’s office market, growing at a compound annual rate of 17 percent, while the office market only increased at a 1.7 percent clip, according to commercial real estate firm CBRE.

Flexible, shared office space — think coworking spaces, incubators, and accelerators — is on the rise in Houston. Over the past 10 years, flex office space has absorbed a greater share of Houston’s office market, growing at a compound annual rate of 17 percent, while the office market only increased at a 1.7 percent clip, according to commercial real estate firm CBRE.

With flex office space, companies and individuals can rent by the month and by the number of offices and desks needed, which can be scaled as the user shrinks or grows. The arrangement originally solved a problem faced by many startups with too much uncertainty to sign long-term leases. Now the practice has spread to all segments of the office market.

Houston’s office market is improving and the industrial and retail sectors continue to charge forward, according to a quarterly update from commercial real estate services firm NAI Partners.

Brokers at the company’s Galleria area office shared insights on the market at a quarterly press update Wednesday. Some takeaways:

OFFICE

The office market is still in a slump — roughly 60 million square feet of office space throughout the metro area lies fallow.

And while some statistics suggest rents have risen, Dan Boyles, an NAI tenant representative, said those numbers are deceptive.

“The rents that are going up are really gross rents, they’re not net effective rents, which are still under significant pressure,” he explained. In other words, landlords are offering such large concessions that the actual rent received over the term of the lease remains low. Boyles said he is seeing significant concessions in both new buildings and older, lower-quality buildings.

While it’s still a tenant’s market, Boyles said leasing activity has taken more space off the market over the past few quarters, referred to as positive absorption. For the first time in a long time, some NAI clients are discussing expanding their office space requirements. In the first quarter of 2019, the Houston market absorbed half a million square feet.

“Which is marginal,” Boyles said. “But better than the other way around.”

INDUSTRIAL

Houston has historically been more of a manufacturing-based industrial market, but it’s shifting to a distribution market.

Million-square-foot spec warehouses are coming, said Clay Pritchett, a partner in the industrial and land brokerage services practice at NAI.

Spec warehouses used to be 200,000 to 300,000 square feet. Now they’re 600,000 to 800,000 square feet. Breaking the 1 million-square-foot mark would put Houston in the league of distribution markets such as Dallas-Fort Worth, Chicago and the Inland Empire in Southern California.

RETAIL

Mixed-use is becoming a bigger component of retail.

“There’s a big flight to urbanization,” said Jason Gaines, senior vice president, retail services at NAI Partners.

Investors are interested in re-purposing empty big-box stores into last-mile distribution centers. In a 350-foot depth building, a developer might put anchor tenants in the front 250 feet and transform the back into a logistics point.

That type of use hasn’t yet arrived in Houston, but these types of creative conversions are happening in places with more inventory of space such as the Midwest, Gaines said.

Houston’s retail has remained fairly full, with occupancy at or above 94 percent during the last five years.

“The developers have learned to self-police this industry,” Gaines said. “They’re not building a lot of specs anymore.”

For more information on Houston office space, Houston retail space or Houston warehouse space and Houston industrial space, please call 713 782-0260 or see my web site at : www.houstonrealtyadvisors.com  Thank you for your interest.