{"id":267929,"date":"2025-10-01T01:25:12","date_gmt":"2025-10-01T01:25:12","guid":{"rendered":"https:\/\/www.europesays.com\/us\/267929\/"},"modified":"2025-10-01T01:25:12","modified_gmt":"2025-10-01T01:25:12","slug":"how-to-pull-high-office-rents-even-when-it-sucks-to-be-a-developer","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/267929\/","title":{"rendered":"How To Pull High Office Rents, Even When ‘It Sucks To Be A Developer’"},"content":{"rendered":"

A job candidate has never asked MetroNational<\/a> President Scooter Hicks whether there is a coffee bar in the office lobby. That\u00a0isn’t what matters.\u00a0<\/p>\n

\"Placeholder\"\/<\/p>\n

\n Bisnow\/Maddy McCarty\n <\/p>\n

\n Boldyn Networks\u2019 Rick Reed, Partners Real Estate\u2019s Vince Strake, HOK\u2019s Linnea Wingo, Sugar Land Office of Economic Development\u2019s Alba Penate-Johnson, O’Donnell\/Snider Construction\u2019s Marc Perilloux and MetroNational\u2019s Scooter Hicks.\n <\/p>\n

Tenants also don\u2019t really care about\u00a0beanbags in the lobby, events or even free rent, Hicks said at\u00a0Bisnow\u2019s\u00a0Houston Office<\/a>\u00a0Update event on Tuesday morning.<\/p>\n

MetroNational\u2019s Memorial City<\/a> offices have thrived in recent years because they are close to many employees\u2019 homes, making it easier for them to duck out at 5 p.m. and spend time with their families.<\/p>\n

\u201cWe’ve done some incredible events in our common spaces at 4 o’clock on a Thursday, and you know, I’d be damned,\u201d Hicks said. \u201cWe could put the Rolling Stones out there, but families are going to want to go see their daughters\u2019 dance recitals.\u201d\u00a0<\/p>\n

Flight to high-quality office buildings has become the norm, and some amenities are a basic expectation. But Houston developers and landlords are now taking a deeper look at what tenants want in order to generate higher rents that keep up with inflation and increasing development costs, panelists said at the event at\u00a0GreenStreet<\/a>.<\/p>\n

Although landlords have heavily focused on reinvention and activation of office spaces, MetroNational has office buildings that haven\u2019t been renovated and are pulling rents of $35 per SF, above the average Class-A rental rate of $33 per SF in the second quarter, according to Partners Real Estate<\/a>.<\/p>\n

This revenue is imperative when development costs have surged since\u00a0the pandemic. MetroNational is developing a mixed-use project<\/a> and one of the buildings is office, Hicks said. Altogether, it will be about $750 per SF to build, he said. Prepandemic, those costs would have been closer to $400 or $450 per SF.\u00a0<\/p>\n

\u201cIt sucks to be a developer right now,\u201d he said.\u00a0<\/p>\n

Newly developed office buildings will need rents in the mid-$60s per SF to pencil, Hicks said.\u00a0<\/p>\n

\u201cAnd that’s taking a lower return on cost, at that, to take development risk,\u201d he said. \u201cSo congratulations, you can go spend a boatload of money, get top-of-market rents and earn a lower yield for like triple the risk. Inflation has been pretty gnarly on everybody.\u201d\u00a0<\/p>\n

Even office buildings that came at a relative deal will need above-average rents. MetroNational bought the former Marathon Oil headquarters<\/a> at 990 Town and Country Blvd. for less than half of the $300M that Marathon spent on it, Hicks said. Still, the investment will need to generate rents in the high $40s or low $50s, he said.\u00a0<\/p>\n

\"Placeholder\"\/<\/p>\n

\n Bisnow\/Maddy McCarty\n <\/p>\n

\n Transwestern\u2019s Katy Gragg, Impex Capital Group\u2019s David Flores, Reebes’ Tom Paterson, Dominus Commercial\u2019s Stephen LaMure and Scarlet Capital\u2019s Daniel Ron.\n <\/p>\n

JLL<\/a> is leading leasing efforts at 990, which Hicks said is on par with Texas Tower<\/a> as the highest-quality office buildings in Houston and has already secured a couple of leases.\u00a0<\/p>\n

While West Houston<\/a> is one of the most in-demand office markets in the country<\/a>, tenants are also interested in office space in the Galleria area and Downtown, said Vince Strake, senior vice president of office agency leasing at\u00a0Partners Real Estate<\/a>.<\/p>\n

\u201cThere are deals getting done,\u201d Strake said.<\/p>\n

His team\u00a0has inked 120K SF in the last 12 months at Jones on Main<\/a>\u00a0and 200K SF at San Felipe Plaza<\/a>.<\/p>\n

Leasing activity depends on the quality and location of the building, but a Class-B-plus to Class-A building in a good location will eventually get leased up, he said.<\/p>\n

\u201cWith the supply spigot being turned off, you are going to see some really large mark-to-market opportunities,\u00a05-to-10-year-old buildings getting in the $40s net outside of Downtown,\u201d Hicks said. \u00a0<\/p>\n

With a lack of new supply and more older, Class-C office stock being taken out of the inventory, Houston could run into a problem that would have been unfathomable five years ago, Dominus Commercial<\/a> CEO Stephen LaMure<\/a> said.<\/p>\n

\u201cI think that we’re going to run out of office space in Texas,\u201d LaMure said, adding that\u2019s not necessarily a popular view.\u00a0<\/p>\n

But continued population inflow and tenant demand\u00a0could push up rental rates in the Class-B and even Class-C markets, he said.<\/p>\n

\u201cNew construction will come along,\u201d LaMure said. \u201cBut when you can buy a building for 70 bucks a foot, and somebody is going to build one next door for $550, you’re in a pretty good spot.\u201d\u00a0<\/p>\n

Even with preleasing commitments, development isn’t for the faint of heart, Hicks said.<\/p>\n

\u201cIf you have patient capital or a high tolerance for pain, congratulations, you can do a build-to-suit,\u201d he said. \u201cOtherwise, continue to buy buildings [and] enjoy the mark to market.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"A job candidate has never asked MetroNational President Scooter Hicks whether there is a coffee bar in the…\n","protected":false},"author":3,"featured_media":267930,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5130],"tags":[139588,139586,4345,139591,139590,88742,139592,139589,88745,139587,358,3187,139593,37455],"class_list":{"0":"post-267929","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-houston","8":"tag-dominus-commercial","9":"tag-greenstreet","10":"tag-houston","11":"tag-houston-office","12":"tag-memorial-city","13":"tag-metronational","14":"tag-partners-real-estate","15":"tag-san-felipe-plaza","16":"tag-scooter-hicks","17":"tag-stephen-lamure","18":"tag-texas","19":"tag-tx","20":"tag-vince-strake","21":"tag-west-houston"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115296306794818052","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/267929","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=267929"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/267929\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/267930"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=267929"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=267929"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=267929"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}