Office Market; Energy Company Mergers to Empty Office Space: Invesco: M&A is the Biggest Threat to Houston

The 1000 Main building in downtown Houston was sold March 31 for $440 Million.

In Houston, Mergers and acquisitions are the most threatening cloud on the horizon for the Houston office market, says an executive with one of the biggest investors in Texas.

“In the short term, we think the greatest risk is the M&A activity that is going to occur,” says Ron Miller, director of acquisitions for Invesco Real Estate of Dallas.

Miller was speaking at the RealShare conference in Houston on March 31, which was before last week’s news that Royal Dutch Shell is going to buy BG Group for $70 billion.

More corporate acquisitions are expected in the coming months as this new era of lower oil prices puts extended pressure on the energy industry. The M&A activity will generate vacancy in Houston office buildings as companies consolidate in the merger aftermath. The Halliburton purchase of Baker Hughes is slated to spin off a lot of excess office space in Houston, the Energy Capital of the World.

The target of Shell’s buyout, BG Group, leased 164,000 sq ft and received naming rights in BG Group Place, a 46-story, 973,000-square-foot tower developed by Hines in downtown Houston. The building opened in February 2011.

Invesco owns the BG Group Place building and the Williams Tower in the Galleria. A few days ago, Invesco sold the 1000 Main Building for $440 million.

Miller said the Houston market has no great oversupply of office space, even though about 17 million sq ft of space is under construction.

Cutbacks in the energy industry have prompted companies to put excess office space on the sublease market. Over 3 million sq ft of sublease space has hit the Houston market in the last six months, says PM Realty Group.