Leases give of­fice mar­ket hope

En­ergy Cor­ri­dor trans­ac­tions could sig­nal turn­ing point for over­sup­plied sec­tor

Houston Chronicle - - BUSINESS - By Nancy Sarnoff and Kather­ine Feser

Two large of­fice leases an­nounced this week for build­ings in the En­ergy Cor­ri­dor could sig­nal a turn­ing point for the glut­ted west Hous­ton of­fice mar­ket.

BP Lower 48, one of the na­tion’s largest pro­duc­ers of nat­u­ral gas, has leased 91,000 square feet in West Memo­rial Place II for the re­lo­ca­tion of its Hous­ton of­fice, prop­erty owner Skan­ska an­nounced Fri­day. And off­shore drilling con­trac­tor Transocean has signed a lease to oc­cupy all of En­clave Place, ac­cord­ing to a source with knowl­edge of the deal. Transocean could not be reached Fri­day.

When En­clave Place broke ground in early 2014, it was one of more than a dozen of­fice build­ings un­der con­struc­tion in west Hous­ton’s En­ergy Cor­ri­dor. A few months later, the price of oil be­gan to freefall, and de-

mand for of­fice space quickly fol­lowed suit. The 11-story, 300,000-square-foot build­ing sat va­cant ever since.

David Hightower, pres­i­dent and chair­man of the En­ergy Cor­ri­dor Dis­trict, said re­cent of­fice trans­ac­tions un­der­score the area’s long-term health.

“It sends a sig­nal that the En­ergy Cor­ri­dor is still con­sid­ered a prom­i­nent and im­por­tant lo­ca­tion for en­ergy com­pa­nies,” said Hightower, who is also an ex­ec­u­tive vice pres­i­dent of Hous­ton-based Mid­way Cos.

Of­fice va­cancy in the western stretch of the En­ergy Cor­ri­dor along the Katy Free­way out­side Belt­way 8 fell to 33.6 per­cent in the third quar­ter, from 37.4 per­cent in the pre­vi­ous quar­ter, data from com­mer­cial real es­tate firm JLL show.

The BP divi­sion, which re­cently re­lo­cated its head­quar­ters from Hous­ton to Den­ver, will move into its new of­fice later this year. The com­pany will oc­cupy three floors that were for­merly leased by IHI E&C, ac­cord­ing to Skan­ska, which de­vel­oped and owns the two-build­ing West Memo­rial Place cam­pus.

The lease, which rep­re­sents nearly 25 per­cent of the build­ing at 15375 Memo­rial, in­cludes 5,500 square feet on the ground floor, which will be de­vel­oped with ameni­ties in­clud­ing pa­tio seat­ing over­look­ing Terry Her­shey Park.

“We are ex­cited about our new of­fice space in West Memo­rial Place and look for­ward to mov­ing in later this year,” Danny Fal­li­gan, di­rec­tor of Land & Real Es­tate for BP Lower 48, said in an an­nounce­ment. “The build­ing’s lo­ca­tion and ameni­ties are ter­rific, and the mod­ern, con­tem­po­rary fea­tures fit well with the cul­ture of our com­pany.”

West Memo­rial Place is south of Memo­rial Drive near BP’s West­lake cam­pus. BP Lower 48 will re­lo­cate from nearby Three Eldridge Place.

BP Lower 48, carved out as a sep­a­rate busi­ness to man­age BP’s U.S. on­shore oil and gas as­sets in 2015, op­er­ates in Colorado, Lou­i­si­ana, New Mex­ico, Ok­la­homa, Texas and Wy­oming.

Ge­or­gia-based Pied­mont Of­fice Realty Trust, owner En­clave Place, an­nounced this week that it had a tenant for its build­ing at 1414 En­clave Park­way, and that the lease would com­mence in July. David Bale and Louie Crapitto of JLL rep­re­sented the tenant, and Da­mon Thames and Con­nor Saxe of Colvill Of­fice Prop­er­ties and Pied­mont’s Damian Miller rep­re­sented the land­lord.

Over the sum­mer, Pied­mont CEO Don Miller said the com­pany had started see­ing in­creased in­ter­est in the build­ing from large prospec­tive ten­ants.

“With oil prices go­ing up, we’re see­ing a lot more big tenant ac­tiv­ity out in west Hous­ton,” Miller said dur­ing a sec­ond-quar­ter con­fer­ence call with in­vestors. “We’ve got a shot at get­ting some things done now for the first time in a while. And so we’re ex­cited about that.”

The com­pany had also just fi­nal­ized a lease re­newal and ex­pan­sion with Sch­lum­berger Tech­nol­ogy Corp. for 226,000 square feet at the nearby 1430 En­clave Park­way.

Transocean leases 255,413 square feet in 4 Green­way Plaza. The com­pany has oc­cu­pied the build­ing since 2001.

Skan­ska / Skan­ska

BP Lower 48 has leased 91,000 square feet in Skan­ska’s West Memo­rial Place cam­pus in the En­ergy Cor­ri­dor.

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