Energy Corridor leases offer hope for office market
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 demand for office space quickly followed suit. The 11-story, 300,000-square-foot building had sat vacant ever since.
David Hightower, president and chairman of the Energy Corridor District, said recent office transactions underscore there 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 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.