HOUSTON – An investment group led by Lincoln Property Company and H.I.G. Realty Partners has purchased Greenspoint Place, a six-building office complex located in the troubled Greenspoint submarket, which currently has the highest office vacancy rate in Houston.
The property, totaling roughly 2 million square feet and including three interconnected retail centers, was acquired from Northwestern Mutual Life Insurance Company.
Greenspoint, positioned near the interchange of Interstate 45 and Beltway 8 in north Houston, suffered a major blow when Exxon Mobil vacated about 2 million square feet to relocate to its new campus in Springwoods Village. Other energy firms such as Southwestern Energy and FMC Technologies also moved many employees out of the submarket.
Just five years ago, Greenspoint—home to approximately 12 million square feet of office space—reported Class A vacancy rates below 4 percent. Today the market has swung dramatically: there is now more vacant space than occupied space in the submarket.
According to CBRE’s second-quarter report, Class A availability in Greenspoint stands at 57.9 percent. CBRE also noted negative net absorption year-to-date, with more than 700,000 square feet of office space vacated so far this year.
Greenspoint’s vacancy situation is even worse than the Energy Corridor, another Houston submarket that was hit hard when crude oil prices plunged—causing widespread layoffs and downsizing across energy companies. The market shift began as West Texas Intermediate dropped from about $107 per barrel to under $30 per barrel, triggering a cascade of industry cutbacks.
The deterioration of the local office market led to the lender-initiated foreclosure of Greenspoint Place in July 2016. The complex had been owned since the 1990s by a partnership of Hines and the General Motors Pension Fund.
Last year Hines, which manages roughly $100 billion in assets, assessed Greenspoint’s market conditions and concluded foreclosure was the most prudent action. “Considering the average occupancy rate in this depressed submarket is only about 50 percent, due largely to the fact the energy market is hurting, ownership of the asset will be turned over to the lender. We believe that is the best course of action for the property at this juncture,” Hines said at the time the foreclosure was completed.
Dallas-based Lincoln Property Company, which controls close to 9 million square feet of space in Houston, is now investing in Greenspoint near the market’s low point. The purchase price for Greenspoint Place was not disclosed. Originally developed by Friendswood Development—the former real estate arm of Exxon—the complex is currently about 40 percent occupied.
Revitalizing Greenspoint will also depend on redeveloping major retail assets such as the 1.4 million-square-foot Greenspoint Mall along Interstate 45, which faces significant vacancy and has lost many of its anchor tenants.
Recently, a 22-acre parcel of the mall property, including the former Macy’s building, was sold for redevelopment. According to Houston broker Jim Mattox of Jim Mattox Properties, the buyer—Spring Real Estate Investments LLC, led by Zulfiqar Karedia—plans to build a truck stop with roughly 17,000 square feet of retail space. Mattox said the 314,000-square-foot Macy’s structure will be leased to new tenants as part of that effort.