The city of Houston is spending millions to acquire a facility from Shell Oil Co. as part of an effort to mitigate flooding in the city’s Westbury neighborhood.
The coworking phenomenon has certainly disrupted the commercial real estate (CRE) market over the last few years, as well as changed the way we perceive office space. With a possible economic downturn looming around the corner, the question of how the coworking trend will be affected has become a common discussion among CRE professionals and office building landlords.
Over 70% of economists are predicting another recession by 2021
The coworking trend has been a quick solution for filling empty office spaces. Landlords have been satisfied with positive returns from long-term leases, especially after experiencing gaps in time without tenants. This sounds like a win-win situation until the coworking company can’t afford to maintain their business model. While they’ve grown at a rapid pace, various coworking companies are now facing financial problems that have been headlining in the media.
WeWork reported losses of over $1.6 billion last year
If economists are correct with their prediction of another recession, the CRE industry needs to be prepared to adapt to a new wave of coworking trends. This poses a big opportunity for landlords looking to take back their spaces from large, unstable, coworking companies and run a coworking facility of their own.
The future of coworking could consist of working directly with landlords instead of through subleases at premium rates
In order to successfully compete, landlords will need to offer more flexible terms for this type of space. They will need to hire the right leasing and management team to offer this service and present higher commissions to get their leasing team interested in handling smaller deals. Similarly, Regus has offered a 10% commission to brokers for years and at one point, WeWork offered the entire first year’s rent as a commission. It doesn’t need to be that drastic but 6 to 10% shouldn’t be out of the question.
The cost of space should be adjusted accordingly to be competitively priced against other coworking options. These spaces will also need a higher management fee, as small tenants tend to move in and out more frequently, which requires extra work and dedicated staff on-site. To save money on legal costs, they will also need a simple lease document that can be quickly edited.
Both landlords and tenants will benefit from this competitive edge
The rent on coworking spaces can be $100- $140 per square foot in buildings with third-party providers, compared to a direct lease in the very same buildings for $35 – $50 per square foot. The landlord can likely offer this same space for $50 – $70 per square foot, which would be essentially half the cost to the tenant, assuming a full occupancy, could achieve a higher return. This shift in the coworking business can be very lucrative. TRC Capital Partners is doing this in their 3773 Richmond Avenue building and it has been very successful.
Cost savings is the main advantage
Landlords could still market the coworking space as available and if they find a lucrative long-term tenant, they could exercise 30-90-day termination notices in their coworking leases to make the space available. There is virtually no risk just upside, aside from any build-out costs. This model works especially well where the floor is already built out for a single-tenant use, minimizing the capital outlay.
If landlords happen to have multiple buildings all across town, they can sell a “membership” where a tenant can drop in at any of their buildings, depending on where they are working that day. Each building could have a full floor of “flexible” space for “hoteling” their tenants. And with the steady rise of cloud storage and commuting, many tenants don’t need hard copy files or permanent storage space. Lee & Associates has offered this service to landlords with vacant floors when discussing the leasing of the building. This is a great “incubator” space for small startup companies who may eventually take a larger, more permanent space in the building.
:no_upscale()/cdn.vox-cdn.com/uploads/chorus_asset/file/19339594/shutterstock_1316774534__1_.jpg)
Developer Jacob Sudhoff remembers when Houston had a much different profile when the Texas metropolis was considered just a “cow and oil town” built around sprawl, suburbs, and anything-goes zoning.
But in the last few years, Houston has seen a boom in a high-rise, multifamily living that’s transforming neighborhoods around the famously decentralized city with numerous new 40-story towers taking root. Walkable neighborhoods and the condos and apartments drawing residents to these areas are revitalizing the Heights, Midtown, downtown, the Outer Loop, and the forthcoming McKenley Memorial City as well as the neighborhoods near the new Buffalo Bayou Park and the Allen Parkway.
Houston is projected to add roughly 16,000 units this year alone, according to a report from commercial real estate firm JLL, with another 23,000 in the pipeline. As prices have crept up to historic heights—$1,050 a month on average, making Houston one of the nation’s best rental bargains among big cities—occupancy remains at 90 percent, leading to strong rental demand and a positive outlook for the future. For the first time this year, according to the long-running Kinder Houston Area Survey administered by Rice University, a majority or near majority of local respondents wanted to live in denser, mixed-use neighborhoods.
“Houston now has an inward migration,” says Sudhoff. “A lot of people are moving to the urban core. We’ve never seen so many high-rises going up in the city, and every submarket has more going up.”
Vertical living taking root in Houston
While Houston isn’t changing overnight—the city’s expansive system of interstates and expanding rings of suburban development aren’t going anywhere, and more than 60 percent of the cities housing stock is single-family homes—there’s been a noteworthy shift toward apartments and condos, both as a lifestyle choice and an investment opportunity. In a metro were building out has been gospel—teachings challenged as the city’s highways become increasingly congested and Hurricane Harvey flooding brought issues with the city’s floodplain maps and development patterns to the fore—many Houstonians are looking for something different.
![a large brick building with grass and trees: American Cross-Dock & Storage leased 102,863 square feet of industrial space at 9701 New Decade Drive, Pasadena.]({"default":{"load":"default","w":"80","h":"45","src":"//img-s-msn-com.akamaized.net/tenant/amp/entityid/AAIYMQN.img?h=454&w=799&m=6&q=60&o=f&l=f"},"size3column":{"load":"default","w":"62","h":"36","src":"//img-s-msn-com.akamaized.net/tenant/amp/entityid/AAIYMQN.img?h=355&w=624&m=6&q=60&o=f&l=f"},"size2column":{"load":"default","w":"62","h":"36","src":"//img-s-msn-com.akamaized.net/tenant/amp/entityid/AAIYMQN.img?h=355&w=624&m=6&q=60&o=f&l=f"}})
Transwestern Commercial Services completed 187,054 square feet of office leases at Westchase Park I and II at 3700 and 3600 W. Sam Houston Parkway North. LJA Engineering, represented by Anthony Squillante and Dustin Devine of Stream Realty Partners, leased 90,989 square feet; Centurion Pipeline Co., represented by Lonna Dorman of Transwestern, leased 28,078 square feet; and ABB, represented by Beau Bellow and Josh Hirsch of JLL, renewed its lease for 67,987 square feet. The new tenants will take occupancy in the first half of 2020. Transwestern’s Eric Anderson, Parker Burkett, and Katy Gragg represented the owner, Clarion Partners. The 569,825-square-foot Westchase Park office complex has a freestanding amenity center with a Citrus Kitchen restaurant, fitness center with locker rooms and tenant conference center with seating for up to 100.
American Cross-Dock & Storage, a family-owned and operated logistics company led by president and CEO Deborah Bressie, signed two leases totaling 146,863 in Pasadena. The company leased 102,863 square feet of industrial space at 9701 New Decade Drive in the Bayport North Logistics Center I, from Triten Real Estate Partners, for storage and distribution, and subleased 44,000 square feet at 13225 Bay Park Road for drayage and cross-dock services. Bob Berry and Grant Hortenstine of Avison Young represented the tenant, while Jason Dillee and Andrew Jewett of CBRE represented the landlord. The company has more than doubled its space since being founded in March 2018. It provides warehousing, trans-loading, fulfillment and packaging services to the Greater Houston area.
Houston-based Hartman Income REIT purchased a three-property office portfolio totaling 254,225 square feet from New York-based HighBrook Investors. JLL Capital Markets, led by Martin Hogan, marketed the property on behalf of the seller and procured the buyer. The portfolio consists of 16420 Park Ten and 1400 Broadfield in the Energy Corridor’s Park 10 Business Park, as well as 7915 FM 1960 near Willowbrook Mall in northwest Harris County. The portfolio is 55 percent leased.
HOUSTON – Hines, in alliance with Cerberus Capital, has secured the 600 Travis building, a 75-story office property known as the tallest tower in Texas.
I.M. Pei & Partners designed the building, previously known as the JP Morgan Chase Tower and earlier as the Texas Commerce Tower.
The tall tower is across the street from a construction site where Hines is building a 47-story office project. The new building, located on Texas Avenue, is called the Texas Tower.
Hines is planning a thorough renovation to the tallest building in Texas. HOK architecture is working on the plan now.
Here’s a submission for the Suggestion Box. Rather than letting the 1982-vintage building exist with its Travis Street address as its name, why not connect it to its heritage? Just rename the building “Texas Commerce Tower” again.
The 1002-foot tall skyscraper has some history to it. While I worked across the street at the Houston Chronicle, I’d frequently see Texas Commerce Bank CEO Ben Love walking in the bank’s tunnel level. George Mitchell, too.
In those days, the Chronicle would hand you a paycheck on Friday morning and you would walk across the street to deposit it in Texas Commerce Bank. The whole system had a steady, solid and secure aura about it. No online transfers. No Bitcoin. No Blockchain. No Libra. Just real money.
Metro Houston added nearly 1.3 million residents between ’08 and ’18, a 22.3 percent increase. A little more than half the growth came from migration, a bit less than half from natural increase. Metro Houston created 81,900 jobs, a 2.7 percent increase, in the 12 months ending August ’19, according to the Texas Workforce Commission (TWC). Nonfarm payroll employment was 3,166,900 in August, flat from July, and down from 3,185,200 in June. The drop reflects the temporary loss of jobs associated with education.
Sectors adding the most jobs over the past 12 months were professional, scientific, and technical services (21,100); manufacturing (11,500); other services (9,700); transportation, warehousing, and utilities (8,600); and health care and social assistance (8,200). Employment in oil field services peaked in May and has declined steadily since. This is not surprising given the loss of more than 200 working rigs since the first of the year.
The jobs gained in manufacturing are likely an overestimate given that three-fourths of the gains have been in equipment manufacturing and fabricated metals, sectors closely tied to upstream energy. Houston’s unemployment rate was 3.9 percent in August, down from 4.0 percent in July and 4.4 percent in August of last year. The Texas rate in August was 3.6 percent; the U.S. rate, 3.8 percent. The rates are not seasonally adjusted.
City of Houston building permits totaled $7.2 billion for the 12 months ending August ’19, up 16.3 percent from $6.2 billion for the same period a year earlier. Commercial permit values rose 31.8 percent to $4.4 billion, while residential permit values decreased 1.8 percent to $2.8 billion. The closing spot price for a barrel of West Texas Intermediate (WTI), the U.S. benchmark for light, sweet crude, averaged $56.67 per barrel in September, down 18.7 percent from $70.15 for September last year.
JPMorgan Chase, who has invested in WeWork for several years, is leading the group and is likely to put up the most capital.
When the We Company was still gearing for an initial public offering, JPMorgan and Goldman Sachs were set to be its financial backers. The two banks had promised to lend $6 billion to WeWork contingent upon the firm raising $3 billion during its IPO.
Since the IPO failed and co-founder Adam Neumann was ousted as CEO, Bloomberg reported that the company had just enough capital to last through the winter.One factor that is potentially pushing WeWork closer to the brink of bankruptcy is a previous bond offering where it promised to keep $500 million in cash on its books. Those bonds have been downgraded to junk status by several credit agencies
The 48-story tower is expected to fetch about $700 million or $650 per SF, according to Real Estate Alert. That sales price would make the building one of the richest deals in Houston’s real estate history..
The building, which opened in 2017, is 94 percent occupied with Unired Airlines, Kirkland & Ellis and Goldman Sachs as tenants. Colvill Office Properties leases the 601 Main at Travis, which is catty-cornered from the historic Rice Hotel building which is now residential lofts.
NEW YORK, Sept. 17, 2019 (GLOBE NEWSWIRE) — Greystone, a leading national commercial real estate lending, investment, and advisory company, announced it has provided $27,000,000 in bridge financing to Iliad Realty Group (IRG) for the acquisition of Villa Nueva Apartments, a multifamily property in Houston, TX. The transaction was originated by Daniel Wolins of Greystone’s New York office. Sal Torre with Estreich & Company brokered the transaction.
Originally constructed in 1980, the garden-style Villa Nueva Apartments community features 542 one- and two-bedroom units across a gated 47-building campus that has full-time security on site. Residents have access to three outdoor pools, common laundry rooms, and central mailbox centers. The property offers easy access to all of the Houston metro area’s major thoroughfares.
The $27,000,000 interest-only bridge loan carries a two-year term with two six-month extension options so that the borrower can acquire and rehabilitate the property while Greystone works to secure a low, fixed-rate permanent loan. Planned improvements include extensive exterior renovations to building facades, landscaping, and recreational areas, as well as interior structural improvements and fixture upgrades to each of the property’s units.
“Our bridge lending platform gives us the flexibility to put the right financing together for clients with diverse options for permanent financing,” said Mr. Wolins. “We are pleased that IRG was able to close quickly and get started on making capital improvements to the property while we work to secure long-term agency financing with our seamless bridge-to-agency lending process.”
“We were delighted that the Greystone team was able to move us seamlessly and rapidly through the bridge loan process so that we could start realizing our vision for Villa Nueva Apartments,” said Mr. Elliott Aronson of IRG. “Having acquired and renovated thousands of apartment units across Texas over the past decade, we understand what it takes to bring a property back to life. We are thrilled to have a team that is committed to getting us competitive financing terms so that we can get to work doing what we do best.”
About Greystone
Greystone is a real estate lending, investment, and advisory company with an established reputation as a leader in multifamily and healthcare finance, having ranked as a top FHA, Fannie Mae, and Freddie Mac lender in these sectors. Our range of services includes commercial lending across a variety of platforms such as Fannie Mae, Freddie Mac, CMBS, FHA, USDA, bridge and proprietary loan products. Loans are offered through Greystone Servicing Company LLC, Greystone Funding Company LLC and/or other Greystone affiliates. For more information, visit www.greyco.com.
Ed Ayres of Houston Realty Advisors
James Fisher Excavation has leased 6421 Cunningham in a 12,000 square foot building. Ed Ayres of Houston Realty Advisors represented the tenant. Copeland Rhea of Clay-CMBS GP represented the landlord.
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.