Houston’s wildcatter mentality is emerging again. After years of a conservative dry spell, “spec” office buildings are under construction in H-Town.
Spec (short for speculative) buildings are familiar to Houstonians who remember the boom of the 1980s. In recent years, most developers and the lenders who backed them, would break ground on a new project only when a tenant was signed, or at least close at hand.
But demand for office space is high in Houston right now. Some developers are starting new buildings without a tenant in sight.
Office vacancy rates are exceptionally low in the Energy Corridor, which has less than 10 percent overall vacancy.
Skanska is putting up a 19-story “spec” office project on Loop 610 frontage at Hidalgo, near the Waterwall. Granite Properties will break ground this summer on a 300,000-square-foot spec office building at 3141 Briarpark in Houston’s Westchase District. And Core Real Estate recently announced plans for a four-story building at 3505 W. Sam Houston Parkway North.
Another addition to the spec office parade was announced Monday by Myers Crow & Saviers, Ltd., which will begin construction on the 135,000-square-foot Mason Creek Office Center near Interstate 10 west of Houston in the red-hot Energy Corridor office market.
“Large companies seeking cost-efficient, Class A space are moving westward along I-10 to find it and to be closer to where their employees live. The strength of this market is demonstrated by the fact that Mason Creek Office Center is a speculative development,” says Mark Saviers, principal at Myers Crow & Saviers.
“Construction is proceeding without the requirement of tenant pre-leasing.”
The office market is exceptionally strong in West Houston, along Interstate 10. The area is known as the Energy Corridor because scores of energy related companies and engineering firms involved in drilling are located there.
Office vacancy rates are exceptionally low in the Energy Corridor, which has less than 10 percent overall vacancy, according to the CBRE real estate firm. By comparison, three years ago, Energy Corridor office vacancy was around 16 percent. For the prime “Class A” buildings in the Energy Corridor the vacancy rates is less than five percent. This means vacant office space can be very hard to find.
Dozens of proposed new office projects are on the drawing boards in West Houston. But for now, most of the developers are waiting for a signed tenant before starting construction.
Houston is a long way from the early 1980s when scads of major towers were being built on a spec basis while the spigot was wide open on construction lending. But seeing the specs underway in 2012 indicates that the Houston office market has some true momentum or at least some strong pockets of power.