HOUSTON – Bank of America appears poised to become the anchor tenant for Skanska’s proposed Capitol Tower in downtown Houston, a market that has seen rising vacancy amid a downturn in the energy industry and the arrival of new large-scale projects such as Hines’ 1 million-square-foot tower scheduled for delivery in the first quarter. The Skanska site is bounded by Capitol, Rusk, Milam and Travis streets. Skanska poured the foundation for the tower in August 2015, but uncertainty in the energy sector slowed the market and caused the project — a planned 750,000-square-foot, 35-story office building known as Capitol Tower — to be delayed.
Last fall Skanska engaged CBRE to begin marketing the project, and recent negotiations indicate Bank of America is discussing a lease for more than 200,000 square feet. That level of commitment should allow Skanska to move forward and build atop the foundation already in place. Both Skanska and Bank of America, which would relocate from the Bank of America Center at 700 Louisiana if the deal is completed, have declined to comment on the pending lease. Skanska recently named Matt Damborsky executive vice president to lead its USA Commercial Development team in Houston. Below is a Q&A with Damborsky conducted by Realty News Report.
REALTY NEWS REPORT: What is the current status of Capitol Tower and when might construction begin?
Matt Damborsky: Capitol Tower remains in development and we are proceeding with the planned phasing. We are focused on capturing the momentum of downtown Houston as it continues to evolve. Despite market headwinds over the past year, we remain optimistic about leasing prospects and look forward to transitioning from “in development” to “under construction”.
REALTY NEWS REPORT: When and why did Skanska enter the Houston market?
Matt Damborsky: Skanska launched formal real estate development operations in Houston in 2009, though our presence dates back to 2000 when we participated in the joint venture that built NRG Stadium. Houston’s position as a global energy center made it an attractive market. Submarkets such as downtown, the Galleria and the Energy Corridor offer strong potential for innovative, Class A office and mixed-use developments.
REALTY NEWS REPORT: Can you share anything about potential tenants?
Matt Damborsky: We have seen tenant interest in Capitol Tower, but a challenging market climate has tempered leasing activity. We continue to explore opportunities and expect market conditions to improve as the year progresses.
REALTY NEWS REPORT: What are the plans for Spring Crossing near the ExxonMobil campus?
Matt Damborsky: We continue to advance Spring Crossing as planned. Despite current market pressures, the submarket remains promising given its proximity to The Woodlands and Springwoods Village. When the right tenant opportunities emerge, we will begin construction. Spring Crossing is positioned as an attractive option for tenants looking to serve a growing regional customer base and nearby businesses.
REALTY NEWS REPORT: With the Houston office market still recovering, what will Skanska prioritize in 2017?
Matt Damborsky: Leasing our current developments will be a primary focus. We are also tracking the multifamily sector closely. While Skanska has not developed multifamily projects in Houston, we have national experience in that asset class, which opens the door to mixed-use opportunities. As downtown development continues, we expect retail to rebound and to see innovative tenant mixes emerge.
REALTY NEWS REPORT: Are there other new Skanska projects in Houston?
Matt Damborsky: We are always seeking new opportunities, but our immediate efforts are concentrated on completing West Memorial Place and advancing Capitol Tower and Spring Crossing.
REALTY NEWS REPORT: How are West Memorial Place I and II performing in the current Energy Corridor market?
Matt Damborsky: West Memorial Place I is approximately 55 percent leased, while Phase II — completed in mid-2016 — is roughly 45 percent leased. Phase II will welcome its first major tenant, IHI E&C, this quarter. Although leasing has been slower than anticipated due to market conditions, we believe West Memorial Place is well-positioned to compete when the market turns. Its location with easy access to Terry Hershey Park, the overall quality of the development and its LEED Platinum certification are important advantages.
Jan. 9, 2017 Realty News Report Copyright 2017