Trophy Assets Prop Up Houston Office Market As Williams Tower Snags Significant HQ
Trophy assets continue to outperform the broader Houston office market, absorbing 778K SF in the first half of the year, according to Avison Young.
That trend is rolling into the second half of the year, with Williams Tower securing a 104K SF lease in Camden Property Trust’s new headquarters.
The multifamily REIT will relocate from 11 Greenway Plaza, where it leases 86K SF, by September 2025, the Houston Chronicle reported.
The size of the new lease will accommodate Camden’s planned growth. Camden was attracted to Williams Tower’s location and amenities, Avison Young principal Anthony Squillante told Bisnow in a statement.
“Camden’s relocation to Williams Tower reinforces the paradigm that we’ve been seeing from office tenants in Houston post-COVID which is a flight to quality or a desire to remain in higher quality assets,” Squillante said in an email. “Employers are focused on providing the best experience possible for their employees within the office buildings that they reside.”
Invesco owns Williams Tower, a 64-story skyscraper developed by Hines that neighbors The Galleria. The building also secured a 319K SF lease to house LyondellBasell's U.S. headquarters last year.
Though it is on the older side, finished in 1984, the highly amenitized trophy asset is the type of office that is performing well in Houston’s market, according to Avison Young’s second-quarter office report.
The overall office market saw an occupancy loss of 237K SF in Q2, which would have been worse if not for an occupancy gain of 385K SF in trophy assets in the quarter, the report shows.
Some of the negative absorption is explained by large tenants, including Norton Rose Fulbright and Apache Corp., following the flight-to-quality trend by relocating to higher-quality offices and leasing less space.
Apache Corp. nearly halved its office footprint in a move to Westchase. Norton Rose Fulbright is moving to anchor 1550 on the Green, the new Downtown office building that Skanska developed.
Trophy assets’ vacancy rate is 14.2%, well below the overall market’s 26.6% rate, the Avison Young report states.
Overall, 5.2M SF of office leasing activity occurred in the first half of 2024, which is a 34% drop from the same period in 2023, according to the report.
But there were some bright spots, including energy and commodities company Vitol pre-leasing 150K SF at The RO, a 17-acre mixed-use project that Transwestern is developing at West Alabama Street and Buffalo Speedway.
Vitol’s lease will accommodate its planned expansion in 2026, the Avison Young report states.
Office development remains subdued with about 400K SF under construction in Houston. The square feet delivered in 2022, 2023 and so far in 2024 are individually lower than each year in the previous decade, the report shows.
As flight-to-quality persists and the construction pipeline remains limited, there is a tighter market for high-quality office space in Houston, the report states. This could force some tenants into the next tier of quality space, causing a trickle-down effect, according to Avison Young.
Camden’s move to Williams Tower is another financial blow to the 11-building Greenway Plaza campus. The joint venture owners of Greenway Plaza, CPP Investments, Nuveen Real Estate and Silverpeak Real Estate Partners, defaulted when their $465M CMBS loan issued by Goldman Sachs matured in 2022.
The owners last summer could no longer perform under the forbearance agreement it reached upon that default, leaving the loan “nowhere close to being resolved,” Bisnow previously reported. Late last year, a court-appointed receiver picked Cushman & Wakefield to lease and Lincoln Property Co. to manage the property in an apparent effort to market it for sale.
While Camden plans to move out, Greenway Plaza is also considered a trophy asset, Squillante said.
Squillante and Avison Young’s Dustin Devine represented Camden. CBRE’s Warren Savery and Nina Seyyedin represented the landlord.
