PROJECT PENDING
Developer starts construction on second office building in Katy area.
Freeway Properties has started construction on phase II of Katy Ranch Offices on Interstate 10 near the Grand Parkway in the Katy area.
The six-story building, at 24279 Katy Freeway, will connect by skybridge to an expanded five-story parking garage, which will double the existing parking to nearly 1,200 spaces to accommodate additional tenants.
The Houston-based company established a new frontier for midrise office buildings five years ago with phase I of the 151,000-square-foot Katy Ranch Offices. The building added another component to the apartments and retail offerings in the Katy Ranch Crossing mixed-use development. The first building is fully leased with U.S. Silica, Price Gregory International and Waste Management among its tenants.
No leases have been signed in the new building, but companies have expressed serious interest, according to Mike Baker, Freeway Properties’ chief executive. Many employees in the initial building live in the Fulshear or Katy area and prefer to avoid traffic in the Energy Corridor, he said.
“Some of our existing tenants are telling us they need more space, which is how our first building filled up,” Baker said.
While many parts of Houston, including the nearby Energy Corridor, have a surplus of empty office space, the new Katy Ranch Offices building is in a pocket where there’s a shortage, Baker said.
The far west Houston submarket, which contains just over 666,000 square feet of Class A space, is 11.7 percent vacant, according to CBRE. A few miles closer in, the Energy Corridor, which covers a smaller geographic area and has 18.1 million square feet of Class A space, is 21.4 percent vacant. The vacancy rates do not factor in sublease space.
Marilyn Guion, a senior vice president at CBRE, said a large residential population and Katy Independent School District’s strong school system will drive demand for office space in the region. Even in markets with greater vacancies, such as the Katy Freeway and Texas 6 area, small-business owners who want to be near where employees live are driving leasing deals. Also, the Katy project’s location near the Grand Parkway makes getting to other parts of town easier, she said.
Wells Fargo provided financing for the new building.
The pipeline of office buildings in development in the Houston area shrank to 1.7 million square feet across a handful of projects in the second quarter, according to CBRE. The latest to be open, downtown’s Bank of America Tower, with 754,000 square feet of office space, was 88 percent leased upon completion. Skanska USA did not proceed with vertical construction until securing Bank of America as an anchor tenant in 2017.
Powers Brown Architecture designed the Katy Ranch Offices building, while LSI General Contractors and Construction Managers is handling construction. The tilt-wall construction design eliminates the need for columns inside the building.
“You can see all the way from one side of the building to the other without the columns impeding your vision,” Baker said.
Sam Hanson and Doug Pack of Avison Young are handling office leasing.
Freeway Properties owns about 3 million square feet of retail and office properties in the Houston area.