Midtown is one of the most interesting sub markets to me in all of Houston. This beautiful landscape represents that future of what the City of Houston may become if trends continue.
Let me explain what I mean:
Just a few years ago, this market was known for it’s potential. Being so close to Downtown, the Medical Center, our colleges this area is the perfect place to live and work.
Houston believes in midtown. This area was touted to Amazon during our bid to have their headquarters here as a “taste” of what Houston will be in the future. Complete with a high density of young, tech savvy millennials and our new Ion Innovation HUB project which is driven by a 100 million dollar investment from Rice University. (This will be developed in 2020)
When you look at the numbers, Houston’s midtown market looks like the office market is performing reasonably well. Midtown has a low vacancy rate of 10.1 compared to over 16 city for Houston, double the annual rent growth for Houston at 2 % compared to just 1 % citywide. But that is not the whole story.
I said earlier that Midtown was a great place to work AND live... while the leasing market is doing ok, Houston’s multifamily is moving in heavily in this market competing for space. In this market, we are seeing a literal reduction in space being taken off the market. How much space? Well let’s put it this way, Midtown’s vacancy rate should be closer to 16% to 20% with losing over 116 thousand square feet of existing office users. But instead of absorbing the losses, this market just transforms more of the inventory to different uses like multifamily. Let me say this a different way, several office buildings in this market where just demolished, taking them out of the equation entirely.
Depending on who you ask, midtown is the future of Houston’s development. A small city on a hill that is inoculated from Houston’s energy sectors, insulated from the medical sector, and have a diverse array of businesses, mostly well to do local and regional businesses.
I have a different opinion of Midtown, yes it is a beautiful sub market, extremely accessible, but the fundamentals of this market for office leasing are not strong here. Don’t be fooled by the lower vacancy and higher rents. This market is an “aging” leasing market that is being wrapped in some bright and shiny paper. Surrounded by Houston’s efforts to change and adapt this city to what we believe it needs to be to continue to be competitive.
When we look deeper, were is Houston’s small business community. The d75% of the office leasing market? Are they growing here? Are they being priced out of the market? Where are they moving to? Which major developments are coming in the future to connect this modern tech hub to the rest of the Houston market? What happens to this beautiful hub if/when political pressures force us to react to huge policy changes?
www.WorkSpaceRealEstate.com
www.JamesRobertsonJr.com
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