Everything is bigger in Texas. The city of Houston encompasses more than 600 square miles, is one of the largest cities in the United States by land area, serves as one of the busiest sea ports in the country, and ranks among the top five cities in the country by population. Houston office space houses the headquarters of many Fortune 500 firms, ranking second in the country only behind New York City. The city was also recently rated amongst the best places for college graduates as well as the best city for shopping in 2010.
Houston and the surrounding region are great for business due to lenient regulations and favorable tax rates. The area is also home to some of the country’s most reputed universities such as Rice and the University of Texas. A low cost of doing business, low cost-of-living, central location, and access to a talented workforce all aid Houston’s private sector economy, leading companies from around the world to choose the city as a location for their central headquarters. Due to Houston’s vast size, office space is also quite affordable and the area has become a hub for some of the world’s largest oil and gas companies.
Although the Houston real estate market underwent a downturn after the 2008 global financial meltdown, the economy has since recovered and has undergone blistering growth in recent years. The market is based heavily on the city’s energy and health care industries. Favorable business conditions and a steady influx of graduates from local universities have ensured steady growth over the last few years. Because of this growing economy, negotiating power has favored landlords in recent years and is expected to do so through 2015.
In addition to the influx of tenants, there have been quite a few new office developments and projects being planned for the Galleria, Greenway Plaza, and CBD submarkets that will become available for lease in the next two years. The influx of new space should offset the currently increasing negotiating power of landlords and force them to become more aggressive in securing high-quality tenants. In addition, there is about 4.5 million square feet of speculative construction in the entire Houston market.
Major market drivers for the Houston commercial real estate market include natural gas spot prices, Port of Houston growth, Increasing trade and O&G operations, tighter vacancy rates, reduced land inventory for new constructions, and an increasing population. It is important to note, however, that although Houston’s economy and commercial real estate market has been growing for some time, the growth should shrink to normal rates in the next few years.
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