The E Fort Bend CO/Sugar Land Office Market Overview for Q22019

Houston has a few live/work/play master-planned communities and the Fort Bend Sugar Land submarket is one of them. This has drawn a mixed tenant base with energy/engineering companies such as Fluor Enterprises, Fairfield Technologies and Nalco Champion. Other large office users in The Sugar Land market are Coca-Cola, United Way, and Kelsey-Seybold Clinic. With a low vacancy rate of 11% and an attractive mixed-use development, we see Sugar Land staying stable in the coming years with more tenants moving in.

Sugar Land office market

The Sugar Land Refinery in Sugar Land, TX

Lease Opportunities in E For Bend Co/Sugar Land

Sugar Land continues to be successful due to diverse tenants in healthcare, the financial industry, and smaller corporate tenants occupying anywhere from 10,000-20,000 SF or less. Aguirre Fields, ICON Clinical Research, Wholesome Sweeteners, Stewart Title and WorkSuites, all signed leases for office space which totaled about 79,000 SF as of 19Q2. Net absorption and low supply in Fort Bend Sugar Land Office Market office space should support a steady vacancy rate in the coming years. It currently sits at 11.1% with the lowest rate seen in 2017 at just under 9%. Below are a couple of notable four and five-star office buildings that have been most active in the past 12 months:

  • Sugar Land Medical Building II: 1 deal totaling 42,198 SF
  • The Plaza Building: 7 deals totaling 23,801 SF
  • Sugar Creek Place I: 3 deals totaling 22,322 SF
  • Sugar Creek on the Lake: 4 deals totaling 20,552 SF
  • The Minute Maid Building: 4 deals totaling 20,198 SF

Asking Rents and What to Expect

Rental rates in E. Fort Bend Co/Sugar Land remain flat for this submarket with average asking rents at $27.00 SF. This is slightly less than the Houston metro average, therefore making this market attractive for office tenants. Houston has felt some direct negative effects due to the oil downturn that has resulted in higher vacancy rates.

We see generous offers being made by landlords to tenants to keep them in their current space or attract new office space users.

Construction in the Sugar Land Office Market

With 10 million SF of office inventory and 1 million SF delivered since 2010, E Fort Bend Co/Sugar Land is one of Houston’s top 15 largest submarkets. There is 290,000 SF of space under construction, making it one of the highest among the Houston-area. Over the past four quarters, we’ve seen 129,918 SF of space delivered. The majority of space under construction is less than 30,000 SF but there are some larger developments being built. Let’s take a look at some of these:

  • 87,500 SF medical office condo building at 800 Bonaventure Way, planned delivery April 2020
  • 56,000 SF three-star office building at 13151 W Airport Blvd, planned delivery January 2020
  • 37,000 SF four-star medical office building at 6921 Brisbane Ct, planned delivery December 2019

In the last 12 months Imperial Business Park, a new development in this submarket has been attracting office and medical tenants and will likely continue this trend in the future.

With the current projects under construction healthcare companies are looking to serve this community and take advantage of the growing population and suburban live/work model.

Sales Activity

Transactions in this submarket tend to be between local investors and involve smaller properties, usually less than 15,000 SF. In May 2019 we saw one of the largest deals close with the sale of four-star, 194,000 SF Comercia Bank Building to Glazer Properties. Average Cap Rates the last 12 months in Sugar Land have been 7.2% with an Average Price/SF of $194.00. Below are the most recent significant sales:

  • Two Sugar Creek Center – Sold 6/20/2019 for $27,400,000 or $191/SF
  • 4677 Techniplex Drive – Sold 12/5/2018 for $1,300,000 or $174/SF
  • 12930 Dairy Ashford Road – Sold 3/29/2019 for $1,200,000 or $240/SF

We think the E For Bend Co/Sugar Land market will continue to be a great location for companies in Healthcare, Technology, Energy and also for smaller businesses looking to be in southwest Houston. With a focus on the live/work community, demand will stay strong and keep a healthy talent pool and workforce in this area. We have brokers that can advise you on the best real estate strategy for your business. We can help you find space in Fort Bend Sugar Land Office Market, so contact CXRE today!

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