The Bellaire submarket is one of the smaller markets in Houston with just under 5 million SF. It is located close to the Uptown/Galleria market, Texas Medical Center, and is within the Houston-Sugar Land- Baytown metro area.
The vacancy rate for Bellaire as of fourth-quarter 2019 is 12.4%, with a twelve-month net absorption of 107,000 SF of space.
Bellaire Submarket Office and Medical Buildings
Bellaire has an aging office inventory with most properties built in the 1970’s and 80’s, with little development taking place this past cycle. A high number of medical tenants occupy space in this submarket due to its location near Texas Medical Center. Bellaire also has strong demographics with surrounding residential neighborhoods. Some of the larger tenants that lease office space in this submarket are AT&T, Well Care Health Plans, and Texas Children’s Hospital.
We see Bellaire as a good investment for tenants, especially those in the medical industry. Investors continue to remain positive about this submarket.
Leasing Opportunities in Bellaire Submarket, Houston
Bellaire’s vacancy rate of 12.4% has pushed this submarket into performing fairly well when compared to the rest of the Houston metro. Net absorption of 110,000 SF of space has certainly helped over the last twelve months and was an affirmative sign for this market. Dated office buildings and Chevron’s move out of 500,000 SF of space have played a role in unpredictable fundamentals for Bellaire, making this submarket quite favorable to tenants.
Let’s take a look at some of the more active buildings leasing office space in the last 12 months:
Four & Five Star Buildings:
- The Offices at Pin Oak Park-6750 West Loop South leased 19,000 SF
- West Loop I-6565 West Loop South leased 23,291 SF
- West Loop II-6575 West Loop South leased 25,071 SF
- 4800 Fournace Place leased 100,812 SF
- West Tower-4635 Southwest Freeway leased 8,438 SF
- The Offices at Pin Oak Park-6800 West Loop South leased 2,109 SF
Asking Rents in Bellaire
We see modest 1-2% rent growth for the Bellaire submarket in the next couple of years.
Bellaire is on the low side of asking rents in Houston averaging around $25.00/SF for office space. These rates are mostly due to aging office properties. Newer buildings tend to have more amenities and higher-end finishes, which drive up prices. However, in this submarket, the average age of a property is 45 years old. With Chevron moving out and vacating almost 500,0000 SF of office space in the fourth quarter 2018, rental rates have stayed subdued. Because of this, landlords will have a tough time raising rents.
We see modest 1-2% rent growth for the Bellaire submarket in the next couple of years. This submarket will continue to be a tenants’ market.
Development in Bellaire has been quiet with only one medical office building currently under construction. This submarket has a large amount of office space that is quite outdated and needs to be upgraded. So far, we’ve seen 5,000 SF delivered in the past eight quarters with 262,000 SF proposed.
Let’s take a look at what is in the pipeline for Bellaire going forward:
- 5125 Laurel Street- delivered 5,000 SF in July 2019.
- Bissonnet Medical Plaza-4460 Bissonnet Street- 52,825 SF building to be completed October 2020.
- West Loop Medical-6400 West Loop South-252,000 SF building to be completed January 2021.
- Bellaire Medical Plaza II-Mapleridge Street-10,000 SF building to be completed September 2020
Sales Activity in Bellaire Submarket
Sales in Bellaire have continued to stay strong with an average price per square foot of $357, average cap rate at 5.5%, and the average vacancy at time of sale of 10.6%. This has been a popular submarket for large sale transactions and portfolio sales with multiple properties.
This is definitely a tenants’ market and landlords will have to make some concessions when it comes to leasing space and attracting new tenants.
2018 was one of the best years in this cycle with Loop Central complex selling for $72.9 million($127/SF) to Griffin Partners and Wheelock Street Capital. Another significant sale took place in January of 2018. Offices at Pin Oak Park were purchased by Norvin Healthcare Properties for $110 million ($218/SF). This portfolio included five properties and totaled 505,000 SF.
We see the Bellaire submarket as a good value for office and medical tenants, especially when it comes to leasing commercial space. This is definitely a tenants’ market and landlords will have to make some concessions when it comes to leasing space and attracting new tenants.
Bellaire will also continue to do well on the investment side. Everyone from private investors to large REITs looking for portfolio sales with opportunities to update old buildings, bring in new companies, and raise rents will benefit in this submarket.
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