Trophy Assets Support Houston Office Market as Williams Tower Gains Major Headquarters

Trophy assets continue to outperform the broader Houston office market, absorbing 778,000 square feet during the first half of the year, according to Avison Young.

This trend continued into the second half of the year, with Williams Tower securing a lease for 104,000 sq ft in Camden Property Trust’s new headquarters.

Williams Tower in Houston

The multifamily REIT will move out of 11 Greenway Plaza, where it leases 86,000 square feet, by September 2025, the Houston Chronicle reported.

The size of the new lease will accommodate Camden’s anticipated growth. Camden was attracted to Williams Tower’s location and amenities, said Anthony Squillante, principal at Avison Young Bisnow in a report.

“Camden’s move to Williams Tower reinforces the paradigm we’ve seen among Houston office tenants post-Covid, which is a flight to quality or a desire to stay in higher-quality assets,” Squillante said. “Employers are focused on providing the best possible experience for their employees in the office buildings they reside in.”

Invesco owns Williams Tower, a 64-story skyscraper developed by Hines that neighbors The Galleria. The building also secured a 319,000-square-foot lease to house LyondellBasell’s U.S. headquarters last year.

Although it’s older, completed in 1984, this well-appointed office building is the type of office that’s performing well in the Houston market, according to Avison Young’s second-quarter office report.

The overall office market saw an occupancy loss of 237,000 square feet in the second quarter, which would have been worse without an occupancy gain of 385,000 square feet in trophy assets during the quarter, the report said.

Part of the negative absorption is explained by the fact that large tenants, including Norton Rose Fulbright and Apache Corp., followed the flight to quality trend by moving to higher-quality offices and leasing less space.

Apache Corp. nearly halved its office space by moving to Westchase. Norton Rose Fulbright is moving to anchor 1550 on the Green, the new downtown office building developed by Skanska.

The vacancy rate for Trophy assets is 14.2%, well below the overall market rate of 26.6%, the Avison Young report said.

In total, 5.2 million square feet of office leasing activity took place during the first half of 2024, representing a 34% decrease from the same period in 2023, according to the report.

But there were some bright spots, including energy and commodities company Vitol’s pre-leasing of 150,000 square feet at The RO, a 17-acre mixed-use project Transwestern is developing at West Alabama Street and Buffalo Speedway.

Vitol’s lease will enable its planned expansion in 2026, the Avison Young report said.

Office development remains subdued with about 400,000 square feet under construction in Houston. Space delivered in 2022, 2023 and so far in 2024 are individually lower than in each year of the previous decade, the report said.

The report says the flight to prime office space continues and the number of construction projects remains limited, tightening the market for prime office space in Houston. Avison Young says this could force some tenants to move to higher-quality space, leading to a trickle-down effect.

Camden’s move to Williams Tower is another blow to the 11-building Greenway Plaza campus. Greenway Plaza’s co-owners, CPP Investments, Nuveen Real Estate and Silverpeak Real Estate Partners, defaulted when their $465 million CMBS loan from Goldman Sachs matured in 2022.

Last summer, the owners were unable to honor the forbearance agreement they had entered into following the default, leaving the loan “far from resolved.” Bisnow Late last year, a court-appointed trustee selected Cushman & Wakefield to lease and Lincoln Property Co. to manage the property in an apparent effort to market it for sale.

As Camden considers relocation, Greenway Plaza is also seen as a major asset, Squillante said.

Dustin Devine of Avison Young and Squillante represented Camden. Warren Savery and Nina Seyyedin of CBRE represented the landlord.