THE LEGENDS OF REAL ESTATE AWARDS 2016 – Ralph Bivins, editor of Realty News Report, has highlighted the most important people, projects, deals and ideas shaping Houston’s real estate market in 2016. These selections are not always the biggest or the first, but they illustrate emerging trends, potential opportunities, visionary efforts and notable achievements.
LEGEND: DEAL OF THE YEAR – Parkway Inc., James R. Heistand, President and CEO. Faced with rising vacancies and a surge in subleased office space as oil prices plunged, major owners of Houston offices sought a strategic response. Two prominent publicly traded firms, Cousins Properties and Parkway Properties, agreed on a roughly $2 billion combination. Cousins acquired Parkway Properties and the merged portfolio of Houston office buildings was reorganized as Parkway Inc., a company listed on the New York Stock Exchange.
Parkway Inc. is focused exclusively on Houston. Every property in its portfolio is located in the city. With about 8.7 million square feet of office space, Parkway positions itself as the largest owner of Houston office product, outpacing other large landlords such as Brookfield, which controls roughly 6 million square feet. The combined company’s holdings include notable Houston office complexes: Greenway Plaza, Post Oak Central, San Felipe Plaza, Phoenix Tower and CityWest Place.
Initially, many investors were skeptical of a REIT concentrated solely in Houston office buildings. The local office sector had been hit hard as energy employers reduced footprints, cut jobs and turned to sublease space. While other segments of the Houston market remained resilient, downtown and suburban Class A offices faced significant pressure. After the merger closed in October, Parkway’s share price fell, reaching a low near $16.39 in early November.
More recently, market conditions began to improve. Oil climbed back above $50 a barrel and policy signals from the incoming federal administration suggested a friendlier environment for the energy industry—factors that typically support demand for Houston office space. By early 2017, Parkway’s stock had recovered to above $22 per share, a gain of about 35 percent from its November low.
Looking ahead, Parkway’s portfolio could be monetized as market values recover, or the company could evolve into a strong local office-focused real estate enterprise. Either way, a Houston-only office REIT provides a clear barometer for the city’s Class A office market and highlights both the risks and potential rewards of concentration in a single market.
Coming tomorrow: Realty News Report’s Legends of Real Estate Award for Redevelopment of the Year.
Jan. 3, 2017 Realty News Report Copyright 2017