HOUSTON, Feb. 12, 2020,/PRNewswire/ — A joint venture of Patrinely Group, USAA Real Estate, and CDC Houston, today announced the start of construction on Hewlett Packard Enterprise’s (HPE) new campus. Located in Spring, Texas, this development will house the fourth major corporation to choose CityPlace at Springwoods Village, joining HP Inc. (HPI), Southwestern Energy (SWN) and the American Bureau of Shipping (ABS).
Scheduled for completion in spring 2022, the HPE development will consist of two buildings located at the southwest corner of East Mossy Oaks Road and Lake Plaza Drive and include approximately 440,000 square feet of rentable space. The two, 5-story buildings will have a bridge connector at each level for easy accessibility and structured parking for 2,055 cars.
“Breaking ground on HPE’s campus is another major milestone reinforcing CityPlace as the most important and vibrant, 18-hour mixed-use destination in north Houston,” said Robert Fields, President, and CEO of Patrinely Group, the managing partner of the joint venture. “2019 was a significant year with the opening of ABS headquarters, the HP Inc. campus, Star Cinema Grill, 24 Hour Fitness, and two Class A multi-tenant buildings, CityPlace 1 and 1401 Lake Plaza Drive.”
Within the HPE campus, amenities will include a fitness center, café, kitchen and pharmacy, laboratory and office space, and a large central courtyard with a multi-use basketball pavilion, fitness/yoga lawn, water feature, outdoor tables, seating and games, and a large green space lawn. Adjacent to HPE’s main conference center will be a green roof terrace. The development is planned to achieve LEED Silver certification.
A primary location for core research and development, the HPE Houston site will support customer engagement, sales operations, supply chain, and other global functions for the company including finance, HR, and marketing.
Antonio Neri, President, and CEO of Hewlett Packard Enterprise stated, “We are very excited to be breaking ground in CityPlace for our new Houston office. This bright and vibrant workspace we’re constructing will excite our team members with world-class amenities, and features design elements that bring our teams closer together to further inspire innovation and our culture.”
Pickard Chilton is the design architect; Kirksey is the executive architect; REES is the interior architect; D.E. Harvey Builders is the general contractor. Ronnie Deyo, John Roberts and Beau Bellow of JLL represented HPE. Dennis Tarro of Patrinely Group, and Chrissy Wilson and Russell Hodges of JLL represented the Landlord.
“With today’s announcement, it is clear that major employers are recognizing the benefits of Springwoods Village’s location and its high quality, walkable, mixed-use environment as we continue to create an unparalleled new employment hub,” said Warren Wilson, Executive Vice President of CDC Houston, the master developer of Springwoods Village.
CityPlace is a 60-acre, fully-integrated, mixed-use development providing the growing area along the Grand Parkway corridor near the ExxonMobil campus with a new destination of choice, integrating working, shopping and living. When fully developed, the project will include a full-service Houston CityPlace Marriott, 8 million square feet of Class A office space with 500,000 square feet of integrated retail space and additional luxury multifamily projects. The development’s five to 10-story Class A office buildings will offer parking at a ratio of up to 4.5 cars per 1,000 rentable square feet, with spaces located in all structured parking. CityPlace is the commercial center of Springwoods Village, a 2,000-acre master-planned community. For more information about CityPlace at Springwoods Village visit www.cityplacespringwoods.com
Springwoods Village is a 2,000-acre sustainable master-planned community coming to life in Spring, just south of the Woodlands and 20 miles north of downtown Houston. The community is a new model of sustainability and greener living for the Houston region, preserving its natural ecosystems, building energy smart homes, and reducing dependence on the car by providing a walkable mix of retail, dining, offices and public amenities. The community is home to ExxonMobil, HP Inc., ABS, and Southwestern Energy corporate campuses, several residential communities, a Kroger-anchored retail center, 290 acres of green spaces, including a 150-acre Nature Preserve, and more. When completed the sustainable residential and commercial community will provide diverse housing options, civic facilities, outdoor recreation and the 60-acre CityPlace with office space, shopping, dining and lodging in a walkable environment.
NEW YORK, Jan. 28, 2020 /PRNewswire/ — Hunt Real Estate Capital announced today that it has provided a Fannie Mae Multifamily Affordable Housing (MAH) Preservation loan in the amount of $18.1 million to refinance an affordable multifamily community located in Houston, Texas.
Copperwood Ranch Apartments is a 280-unit, garden-style multifamily community that was developed by the borrower in 2003 through the Low-Income Housing Tax Credit (LIHTC) program. Located at 6833 Lakeview Haven Drive, the property is situated on 12.1 acres of land and offers 48 one-bedroom, one-bathroom units; 168 two-bedroom, two-bathroom apartments; and 64 three-bedroom, two-bathroom units contained in 16 two- and three-story buildings. The community also features one single-story clubhouse building.
The 15-year loan features two years of interest-only payments followed by a 30-year amortization schedule. The property’s 15-year compliance period ended on December 31, 2019, through the borrower will ensure that 100% of units will be occupied by low-income households (household income not exceeding 60% of AMI) during a 15-year extended use period.
“This is the fourth Agency loan that we have closed for this experienced sponsor since 2016,” noted Paul Weissman, Senior Managing Director and Head of Affordable Housing Finance at Hunt Real Estate Capital. “The borrower currently maintains a Texas portfolio of 11 affordable housing communities with more than 2,300 units. Copperwood Ranch has been well maintained by the owner for the past 16 years, with more than $160,000 in capital expenditures invested since 2018.”
Property amenities include a swimming pool, recreation room, playground, laundry facilities, gated access, covered parking, fitness center, Wi-Fi in common areas, business center, and internet/computer library.
The property is located approximately 22 miles northwest of the Houston Central Business District.
About Hunt Real Estate Capital
Hunt Real Estate Capital (HREC), a subsidiary of ORIX Corporation USA, is a leader in financing, investing and managing multifamily housing and commercial real estate. HREC is a source of debt and equity capital for multifamily, affordable housing, manufactured housing, healthcare/senior living, retail, office, industrial, self-storage, and mixed-use assets through Fannie Mae, Freddie Mac, FHA, its own balance sheet and managed public and private investment vehicles.
HOUSTON—WeWork’s setback could lead to a number of landlords in various US markets wrestling with how to fill space, according to a new Transwestern research report.
There have been many measures of the impact coworking has had on the office sector; Transwestern offers a new one in its study: when comparing coworking expansion to the growth of top industries nationally since 2015, coworking ranks ninth. Just prior to WeWork’s IPO, momentum in the sector accelerated dramatically improving its ranking to sixth among all industries through the third quarter of 2019, and by itself accounts for nearly 8 million square feet of absorption.
Specifically, WeWork’s US portfolio currently comprises approximately 27 million square feet in 35 US metros, with New York accounting for 10.3 million square feet, followed by Los Angeles (2.2 million square feet), San Francisco (1.8 million square feet), Washington, DC (1.6 million square feet), and Boston (1.5 million square feet).
To state the obvious, the success or failure of these locations has the potential to affect availability, lease terms and other real estate fundamentals, impacting neighboring properties and entire submarkets, Transwestern says.
The math on that point is clear: WeWork committed to more than half the total space it has leased within the past two years at a time when rent was rising nationwide, according to Jimmy Hinton, senior managing director, investments and analytics. More than a quarter of that space remains ‘unsold,’ presenting a significant amount of financial liability for the company, he says in prepared comments. Now WeWork finds itself in the position of having to market more than 7 million square feet of space as the economy is beginning to slow and businesses are taking a cautious stance in an uncertain political environment, Hinton adds.
Hinton explains that WeWork’s business model, grounded in its strategy to build communities by saturating select markets, was predicated on positive leasing spreads between its own base rent and that of its sublessees, an increasingly difficult balance as prevailing market rents increased over time.
“As a result, risks inherent in WeWork’s business plan would most probably have played out in periods of adverse market conditions,” he says. “As we now know, such circumstances came in the form of restrictive capital supply to WeWork, not from a dearth of tenant demand.”
As the company explained in its IPO, WeWork’s workstation pipeline included five distinct phases—Find, Sign, Build, Fill and Run. The first three categories captured locations before opening, while the last two reflected open locations, Transwestern explains. As of November 2019, 66.6% of WeWork’s Build space, 20% of Fill space, and 6.5% of Run space were vacant nationwide, with Atlanta exhibiting the greatest percentage of availability, at 42.4%, compared to the total market portfolio.
The report concludes that the overwhelming majority (90.5%) of risk is related to lease commitments still in the Build and Fill phases—in other words, where WeWork is constructing space it intends to sublease or is currently subleasing, to corporations or individual memberships.
Of the top five metros, as measured by WeWork total square feet, New York, Washington, DC, and Los Angeles have the greatest percentage of available space classified in these phases.
Commercial property values in Houston should trend upward in 2020, as the region’s positive job growth will increase demand for development opportunities, according to Houston-based valuation firm Deal Sikes. Bisnow/Catie Dixon Matthew Deal and Mark Sikes DATACENTER INVESTMENT CONFERENCE & EXPO (DICE) SOUTH 2020 APRIL 9, 2020 | REGISTER NOW FEATURED SPEAKER ROMELIA FLORES Distinguished Engineer & Master Inventor, IBM “Houston’s commercial real estate values will be on a solid upswing in 2019,” Deal Sikes principal Matthew Deal said. “With Houston expected to gain population significantly in the next decade, the long-term forecast must include rising property prices that will be very impressive over the long haul.” The firm said rising land prices have pushed industrial development farther away from the center of the city, and outer suburban land prices have increased accordingly. But that hasn’t stopped development: More than 15M SF of warehouse and industrial space is under construction in the greater Houston area, the firm said. Meanwhile, property values in the urban core remain strong, as developers and builders locate buildings for redevelopment, or seek sites that are appropriate for new construction. “Multifamily construction is strong in Houston and researchers report more than 25,000 units are now under construction, although the pace is expected to be slightly more moderate in 2020 as the new inventory is absorbed,” principal Mark Sikes said. “Investor demand is good and multifamily valuations have not yet peaked in most submarkets.” Though newer office buildings and Class-A towers under construction are leasing briskly, Houston’s office market is its most sluggish sector, according to the firm. The energy industry — a juggernaut in Houston’s leasing arena — is in the midst of a downturn, which is hurting growth. The healthcare sector is faring better. The firm identified the Texas Medical Center as a source of growth for Houston, pointing to the expansion of several hospitals and research facilities. “Although there are a few exceptions, the real estate market in Houston is headed for another good year,” Sikes said. “The region’s economy is healthy and although the energy industry is in a lackluster period, the overall economic outlook is outstanding.”
Houston’s office market is bracing for another tough year as the energy industry shrinks in the face of lower oil prices, which dipped this week to their lowest level in more than a year.
“It remains a tenant’s market,” Lucian Bukowski, an executive vice president with CBRE, said. “I see that continuing.”
Oil companies, which have been steadily cutting costs and laying off workers, account for more than 30 percent of the local office market, said Bukowski, who represents companies looking for space. Demand is falling among other industries, as well. Leasing activity last year was down 17 percent from the previous year, CBRE data show.
That all amounts to a harsh reality for landlords carrying empty office space, and there are a lot of them. The vacancy rate for so-called Class A buildings — the newest properties with the most amenities — was 17 percent at the end of last year, the highest it’s been since at least 1992.
Large blocks of empty space fill skyscrapers from the city center to the suburbs. One of the former Anadarko towers in The Woodlands will be vacant by next month. The company was acquired by Occidental last year and employees are being consolidated.
Bob Parsley, co-chairman and principal in the Houston office of Colliers International, which is leasing the building for owner Howard Hughes Corp., said there’s been a strong interest in the tower.
“We were frankly very happy to get this building into the Howard Hughes portfolio because we didn’t have much space to lease,” Parsley said. “That market is tight up there.”
Jobs added – elsewhere
While certain submarkets have done better at controlling inventory, vacancy market-wide ended the year at 19 percent, well above the 10-year average of 15.3 percent, CBRE’s data show. Combined with sublease space, overall vacancy jumped to 22 percent across Houston.
Energy tenants are critical to the local office market. Yet employment in the industry is shrinking.
Houston is expected to gain 42,000 new jobs this year, but it will lose 4,000 in the energy sector, according to the Greater Houston Partnership.
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The energy sector won’t be a significant driver of demand for potentially years, said Patrick Duffy, president of Colliers International in Houston. Growth in 2020 is expected to come from health care, government, accommodation/food services, and construction, yet many of those companies are not big enough to lease the large blocks of space currently on the market.
“A huge medical deal is 100,000 square feet. A big law firm is 60,000, 70,000 square feet. And we need to take down millions of square feet,” Duffy said.
Houston is a roughly 213 million-square-foot office market. It could be a decade before the market returns to equilibrium, meaning anywhere from 11 to 13 percent occupancy, Duffy said.
“That’s assuming we don’t build a lot more and we don’t have a recession,” he said.
Powershift
Companies shopping for space today have leverage. Landlords are offering free rent, parking discounts, and generous tenant improvement allowances. Annual per-square-foot asking rents in Class A buildings range from $32.20 in the suburbs to $54.67, according to Colliers.
Bukowski, speaking at a commercial real estate market briefing last week, said landlords generally make money when their buildings are 85 percent to 90 percent leased.
Houston has 82 buildings with at least 100,000 square feet of space available. Twice as many buildings have at least 50,000 square feet up for grabs.
That’s why so many property owners are making improvements. Even Williams Tower, one of the city’s most prestigious office buildings, is undergoing a lobby facelift.
While the major energy players aren’t expanding — and are increasingly looking for ways be more efficient within their buildings — smaller, more entrepreneurial business is growing, said Griff Bandy, a partner with commercial real estate firm NAI Partners.
Bandy recently represented XCL Resources, a private oil, and gas firm, in a lease for 16,328 square feet at M-K-T, a new adaptive reuse project in the Heights. JLL is representing the landlord, a partnership of Radom Capital and Triten Real Estate Partners.
The development includes a collection of industrial buildings that are being repurposed to house offices, shops, restaurants and health, and fitness concepts.
Bandy and others said companies are looking for spaces that will wow potential employees and help retain the ones they have. To that end, new mixed-use developments and downtown towers with an abundance of amenities are winning out.
Colliers data show Houston office buildings constructed after 2005 have an 11 percent vacancy rate.
An interpretation of mixed-use development, The Center for Pursuit’s next-generation facility broke ground this week in Houston’s East End, where it will relocate in 2021 to serve, support and empower the city’s adults with intellectual and developmental disabilities (IDD).
From its new campus, which starts construction next month, the nonprofit organization will also reach out into its neighboring communities with programs, public spaces and some retail, including a café.
Sitting on 3.8 acres of previously paved property, the new facility will encompass four buildings totaling 129,000 square feet, a 7,000-square-foot park and a 257-car parking structure.
The new buildings include a residential tower of 41 units; a programs building for adult training, employment services, and adult activities; a health and wellness building with fitness, medical clinic, cafeteria and café; and an administration building housing a welcome center, conference space, incubator workspace for other non-profit startups and one of the vocational programs.
A United Way agency, the 60-year-old organization now serves 450 clients, has 40 residents and provides daycare to 300 severely disabled adults, many of which arrive by Metro van daily, according to organization sources at the groundbreaking event.
The pedestrian-friendly project’s new location on an infill parcel near downtown is served by Houston’s Metro Rail, something key to site selection, project leaders said at the event, attended by representatives of city, county and state government, related agencies, East End community leaders and current clients.
Including property acquisition and improvements, the project’s total cost has an estimated value of $71 million, said Charles C. Canton, the center’s president, and CEO. Construction is slated to begin in early February, with completion substantially completed in early 2021, he noted in a follow-up statement.
Funds raised to date have included the sale of the organization’s long-term facility on six acres overlooking Buffalo Bayou as well as a phased capital campaign. The most recent push, tagged “Strive,” closes the remaining $16.5 million sought, Canton said.
Part of the new project’s vision process (and fundraising) was a 4,000-mile bike ride to assess best practices at 30 facilities coast-to-coast, led by David C. Baldwin of SCFPartners, a board member and Pursuit Foundation trustee, and a series of charrettes. Integrating and providing choice to the spectrum of constituencies served by the facility was paramount to the planning, he said.
Historic Community, Industrial Neighborhood
Houston’s East End is a multi-ethnic community where many of the city’s early industrial properties are under redevelopment, re-purposing, and replacement by both commercial and residential uses, especially townhomes.
Meanwhile, Buffalo Bayou Partnership last fall revealed its park and recreation master plan for the five-mile stretch of the bayou winding through the East End.
With gentrification concerns, a neighborhood issue, having community input as part of the new center’s planning process so that there was a relationship of trust established, said Marilu Garza, chief development officer for the organization.
Gensler’s Houston office designed the campus, excluding the residential tower, designed by Tramonte Design Studio with contractor Arch-Con.
The larger project team also includes landscape architects TBG Partners and construction by Harvey-Cleary.
“The beauty of the design is that it supports The Center’s mission of everyone having value and purpose,” noted Kristopher Stuart, Gensler principal, and design director, in a follow-up inquiry. “The Center for Pursuit and its board are to be applauded for the bold initiative they are taking to imagine a facility that not only serves their clients differently but also helps the rest of the society imagine a different role for these unique individuals.”
Open and Activated for Opportunity and Outreach
The project required creating a collection of buildings that serve their unique purpose while embracing the unique East End community, Stuart said. The buildings incorporate warehouse-style brick and exposed, painted steel beams to “reflect the historically industrial yet emerging character” of Houston east of downtown. In addition, the “aspiration” was for the facility to be embedded in the life of the surrounding community as well as a participant in it.
Garza noted the new site and build-out has higher visibility for the organization. “We want to be seen,” she said. “It’s important that the community embrace us.”
Canton said, “We’re excited by the quality of the new buildings.” To have renovated the existing ’70s vintage existing facility was cost-prohibitive. Hanover Co. acquired the property last year as part of its plans for a mixed-use development.
Since then, The Center for Pursuit has moved its administrative functions, programming, and daycare for severely disabling clients to a temporary facility south of downtown. The organization’s residential building, however, remains in use until the completion of the new residential building on the new campus, so that residents need only be moved once, Garza said.
Margaret Wallace Brown, city planning director, said the center’s new campus is an example of transit-oriented development, a city initiative.
At the groundbreaking, Houston Mayor Sylvester Turner spoke of Houston’s notable diversity, adding “being diverse means little if you’re not inclusive,” which the new facility has as part of its mission. The beauty of the center’s build-out — for a population often overlooked, he said — “speaks to our city’s values.”
The Woodlands Towers at The Waterway The year for Houston’s commercial real estate sector ended with a bang as The Howard Hughes Corp. announced a $565M deal with Occidental Petroleum to purchase the company’s two Class-A office towers, warehouse space and land in The Woodlands and a 63-acre Energy Corridor campus. All told, the deal included 2.7M SF across three sites. What exactly Occidental Petroleum, commonly known as Oxy, would do regarding its real estate footprint in the wake of its $57B acquisition of Anadarko Petroleum in August has been the source of much speculation. Howard Hughes said Oxy will maintain occupancy at The Woodlands Towers, formerly Anadarko’s HQ. Oxy’s Century Park Campus in the Energy Corridor, a 17-building complex, will immediately be remarketed, in line with the firm’s recently announced commitment to sell noncore properties. The Howard Hughes Corp., which recently announced its HQ would be moving to The Woodlands, has settled on a new office and will be relocating its corporate headquarters into the approximately 595K SF tower at 9950 Woodloch Forest Drive. The company owns the master-planned community The Woodlands and nearby communities Bridgeland and The Woodlands Hills. The deal bolsters the firm’s office portfolio by 50%. Oxy was represented by CBRE’s Brandon Clarke, Jared Chua, and Steve Hesse.
Commercial Real Estate
By definition, commercial real estate pertains to various types of properties which are not used for residential purposes – this includes retail properties, office buildings, apartments, or even vacant land that can be developed for commercial purposes. Houston has several commercial real estate brokers, and CXRE Commercial Real Estate is one of the companies offering management and leasing services specifically for business properties. Even with top agencies such as CXRE, it is unfortunate that the commercial real estate industry still does not seem to witness its full potential. Hence, the commercial real estate industry in Houston aims to reinvent how they do business by enticing millennials who have the courage in starting up their own companies with a tenant-centric mindset.
Millennials and Start-up Companies
There are differences, but not opposing views, over the span of years that millennials are born. Nonetheless, millennials make up a quarter of the world’s population, making them a significant consumer group. They are also most passionate in what they believe in that the rise of social enterprises came hand in hand with the millennial generation. Alongside with the rise of social enterprises is the boom of start-up companies, powered by no one else but millennials themselves. These are the reasons why different industries attempt to lure millennials into their circle because millennials are considered the future of further economic growth.
Houston’s Commercial Real Estate and the Millennials
Houston’s commercial real estate industry is no different from other industries, attracting millennials to invest in their business. After all, the founder of the most popular start-up
companies born out of rented apartments are no other than millennials. Hence, most brokers now offer:
- Connectivity. Brokers are ensuring that the properties and locations they offer have internet availability because this is the main factor that is essential for a business typically founded by a millennial.
- Integrated Systems. Millennials prefer convenience, which is why walkability and systems integrated within the business location such as nearby hospitals, schools, parks, and grocery stores are being ticked as essentials in the property offer.
- Neighborhood. Even business areas are now made friendlier, in favor of the millennials, both in terms of the amenities offered and environment sustainability. Studies show that more and more millennials are now being aware of the environmental impact of their actions, hence their goal is to minimize their carbon footprint, which is why they prefer locations that are environmentally friendly, at the same time economical.
Final Word
It is true that the millennial generation has a great impact, not only in the commercial real estate industry but in different industries. With the millennials accounting for a quarter of the world’s population, it cannot be denied that this generation has the potential to reshape Houston’s commercial real estate industry, and in a bigger sense, the future.