Why Texas leads Nation in Office Occupancy

From “Interra Capital Acquires Houston Portfolio” – Commercial Property Executive

Flight-to-quality trend drives investment
“While quality alone is no longer a guarantee of property value, retention and appreciation of performance due to shifting office sector dynamics, it remains the best hedge in an office market that is finding its new equilibrium inventory size given the quasi-permanent downward change in office space demand due to flexibility in work locations,” Ermengarde Jabir, Moody’s director of Economic Research, told CPE.

In the context of the flight-to-quality trend, the adage of ‘location, location, location’ rings truer than ever, Jabir observed.

“Firstly, a quality office building in a metro where the general work culture is to go into the office more often than not is a prime property,” Jadir continued. “Then, beyond that, the location within a metro that provides easy access to commuters, whether via public transport or car, is also highly sought after. The obvious physical characteristics of a building are primary in determining quality, including age/newness, architecture, amenities, etc.”

Tenant quality also factors in as part of quality, with investors seeking office buildings of the highest physical quality along with stabilized properties with high occupancy rates and strong projected NOI growth, Jabir explained. Mixed-use properties and neighborhoods also play a key role in the flight to quality, as cohesive communities offering a live-work-play model tend to foster stronger demand resilience.

Carrie Szarzynski, senior managing director & head of management services at Oakbrook Terrace, Ill.-based Hiffman National, said that Houston and other Texas cities continue to lead the nation in office occupancy, and tenants are gravitating to buildings that check all the boxes for finishes, amenities and concierge-level management services.

“We’re increasingly finding that on-site conveniences such as food and beverage offerings, fitness centers and social lounges are must-haves for companies in search of buildings whose common areas can serve as an extension of their own private offices,” Szarzynski said.

“This flight to quality has made it essential for landlords to offer a high-touch, high-tech workplace experience that’s differentiated from home and other remote work environments.”

Earlier this month, a Class A office building in Houston, Twentyfour25 Galleria, sold in a bankruptcy deal for $27 million.

About Hiffman National: 

Based in the Chicago area, with an additional five regional hubs and 30 satellite offices, Hiffman National provides superior property management, project services and accounting services to a diverse portfolio including office, medical office, retail and industrial properties nationally. The firm’s comprehensive property management platform and attentive approach to service contributes to client NOI and has helped the firm to more than double in size in five years. Hiffman National is an award-winning company with more than 250 employees strategically located throughout North America.

About NAI Hiffman:  

NAI Hiffman is one of the largest independent commercial real estate services firms in the US, with a primary focus on metropolitan Chicago, and part of the NAI Global network. We provide institutional and private leasing, property management, tenant representation, capital markets, project services, research, and marketing services for owners and occupiers of commercial real estate. To meet our clients’ growing needs outside of our exclusive NAI Hiffman territory, we launched Hiffman National, our dedicated property solutions division, which provides property management, project services, and property accounting services across the country. NAI Hiffman | Hiffman National is and award winning company headquartered in suburban Chicago, with more than 250 employees strategically located throughout North America.