At 19.5 percent, downtown Houston's vacancy rate is still well-above the national average of around 14 percent. But since 2016, downtown Houston's trophy towers have been home to 64 percent of signed leases in downtown greater than 20,000 square feet, per the report. This is despite those towers comprising 36 percent of downtown's office inventory.
Among those deals is Targa Resources Corp. (NYSE: TRGP), a Houston-based energy company, signing a 127,734-square-foot lease in 811 Louisiana in March.
And though this tower is still under construction, Charlotte, North Carolina-based Bank of America Corp.(NYSE: BAC) preleased 210,000 square feet in Capitol Tower in the second quarter. The building's underway at 800 Capitol St.
The healthy activity in downtown Houston signals an ongoing flight to quality, per the report. Among the submarket's top Class A towers, which includes Hines' new tower 609 Main, rent rates are 28.8 percent higher on-average than other Class A buildings in downtown.
The average asking rent in top-tier Class A buildings in downtown is $46.46 per square foot gross, per the report. Throughout Houston, the average Class A asking rent is $33.04 per square foot gross.
“Despite ongoing headwinds in Houston’s office market, many tenants in the market are still seeking trophy and Class A+ space,” said JLL's executive vice president John Pruitt in a statement.
The steady rent and healthy leasing activity among downtown's top-tier buildings is attracting investors, too, per the report. Discrepancies in seller expectations versus the realities of what buyers were willing to spend hindered investment activity in 2016.
But things are starting to pick up in that sphere. In 2017, Houston's seen roughly 1.3 million in total investment volume, a stark increase from the $330 million in investments that closed throughout all of 2016, according to the report.
“Cautious optimism and the belief that the worst may be behind us has investors feeling more positively about Houston," said Rudy Hubbard, managing director of JLL's capital markets group, in a statement. "Many groups who have been on the sidelines waiting for the right opportunity and the right time are beginning to look again.”
Several new investors have entered the Houston market this year. Earlier this month, Lingerfelt Commonwealth Partners made its first Houston purchase by acquiring the property 1700 West Loop South. It won't be the last Houston acquisition from Lingerfelt, a company executive told the Houston Business Journal.
San Francisco-based Spear Street Capital purchased three Houston properties– 5 Houston Center, Energy Center I and 515 Post Oak Boulevard – in a 1.2 million-square-foot deal valued at $272 million. That deal closed in January.
Shortly after, Spear Street acquired Exxon's former 16.88-acre campus in the Greenway Plaza area.