Post Oak Park is one of the smaller submarkets in Houston with around 5 million SF of commercial space and located by one of Houston’s high-end residential neighborhoods, River Oaks. Most of Post Oak Parks’ office space was built in the 1970s. Since then, there has been very little new delivery. Post Oak Park has more diverse companies and professional business compared to other submarkets in the area.
Some key tenants in this market are Amegy Bank, UBS, and Heritage Texas Properties. Developers have focused mainly on multi-family and retail. However, this could be changing in the near future. Firstly, new office developments are under construction and set for delivery in 2020. Secondly, rent growth has almost doubled since 2010, outperforming the metro average.
Leasing Opportunities in Post Oak Park Houston
As of 4th Quarter 2019, Post Oak Park has a 25.2% vacancy rate which puts it quite high compared to other Houston metro submarkets. Slow leasing, consolidations of commercial space by tenants, and move-outs have contributed to the high vacancy rate especially in four and five-star properties.
Since the submarket is forecasted to compress, it’s unlikely we’ll see the vacancy rate go below 22% in the coming years. We also see a quality issue with older generation space which pushes tenants to seek out new high-end office space with more amenities. Let’s take a look at some of the more active buildings leasing office space in the last 12 months.
Four- & Five-Star Buildings:
- Five Post Oak Park, 4400 Post Oak Parkway – leased 54,036 SF
- Amegy Tower, 1717 West Loop Freeway South – leased 33,000 SF
- Park Towers North, 1233 West Loop South – leased 20,778 SF
- 520 Post Oak Boulevard – leased 21,568 SF
- 1001 West Loop South – leased 13,516 SF
- 4545 Post Oak Place – leased 11,633 SF
Asking Rents in Post Oak Park
Average rental rates for office space in Post Oak Park are $32.00.SF making this market fairly expensive for tenants to lease office space. Even with a high vacancy rate landlords can command these prices due to Post Oak Park’s central location. Over the next couple of years, we see rent growth in this submarket staying flat with very little gains thanks to tenants continuing to move out or downsize.
Construction in Post Oak Park has been very slim this cycle with developers setting their sights on building multifamily properties rather than office space. Currently, developers propose 95,985 SF of commercial office space for the next eight quarters. In addition, a four-star 207,200 SF office building is being delivered next year. Since 90% of the submarket’s inventory was built before 2000 we could see more growth in Post Oak Park in the coming years. Specifically, as it relates to renovating and upgrading older office buildings to attract new tenants. Let’s take a look at the pipeline for Post Oak Park.
- 200 Park Place 4200 Westheimer Road – scheduled to deliver 207,202 SF with completion in March 2020.
- 4411 San Felipe Street – 95,985 SF building scheduled for completion in March 2021.
Sales Activity in Post Oak Park Houston
Sales in Post Oak Park have been slow this past year with only about six deals traded. The average price per square foot is $155 with an average vacancy rate at the time of sale sitting at 36.2% We see some slight growth in this area with investors and developers seeking value-add properties to entice new tenants into the submarket. Below are the details of the two largest transactions that happened in 2019.
- Regent Properties purchased Park Towers North & South for $89.5 Million/$164/SF and Cap Rate of 7.2%.
- Taconic Capital Advisors & Hicks Ventures purchased 1177 West Loop South for $53 Million/$155/SF and Cap Rate of 8.5%.
Post Oak Park has a lot of catching up to do regarding upgrades to office space and new construction. We see this submarket as a great option for tenants to lease office space due to rental rates staying steady for the next couple of years and its central location in Houston. There are also opportunities for investors to come into Post Oak Park and build new office space or expand and update older properties to attract new companies and professional services.
Our team of experienced brokers can guide and represent you through the entire leasing process. Contact CXRE today and let us help you decide the best real estate strategy for your business!