The FAA grants license to make Ellington Airport the 10th commercial spaceport in the U.S.
Boost for the NASA-Clear Lake office market?
The Houston office market has been one of the most robust in the country over the last several years coming out of the most recent recession, but the one office submarket in the Houston area that didn’t catch the economic wave driven primarily by the energy boom was the NASA-Clear Lake office market.
This isn’t to say the Clear Lake area hasn’t experienced economic growth over the last several years. As a long-time resident of the area, I have been one of only a handful of Houston commercial real estate professionals consistently active in the NASA-Clear Lake office market over the last 20 plus years. As a result, people are always asking me about the economy and the commercial real estate market in Bay Area Houston.
My response over the past couple of years has been: “It is very healthy — with the exception of the office market, which has been stagnant.” The housing, retail and healthcare sectors have expanded with significant new development. But with the area’s primary driver of office-using employment NASA/aerospace) in retrench mode, the office market, while stable, has not seen any significant improvement in market fundamentals.
It doesn’t take much for a small submarket
The NASA-Clear Lake office submarket is small in comparison to the major submarkets in Houston as an area with approximately 5.6 MSF of office space. This submarket, approximately 18 miles southeast of Houston’s central business district, is highly dependent on the Johnson Space Center. The petrochemical industry and the Port of Houston are other key economic drivers for the Bay Area Houston region. But in terms of office space users, workers in those industries pale in comparison to the NASA contractors. I have seen over the last 24 years NASA budget battles, which depended on which party was in control in Washington, and Space Shuttle tragedies send shock waves through the NASA-Clear Lake office market.
Conversely, if Houston truly becomes a major center of commercial space operations, it could be the boost the NASA-Clear Lake office market needs to spur office-using employment and new office development. NASA’s Johnson Space Center is expected to play a significant role in the future of commercial spaceflight. Given the concentration of aerospace engineering talent already in the area, there is no reason it shouldn’t.
A significant portion of the more than 1 MSF vacated by NASA Contractors such as United Space Alliance, Boeing and Lockheed Martin over the last several years has been absorbed by non-aerospace office tenants. Only a couple of significant large blocks of office space remain. At the end of the first quarter of 2015, there was approximately 1.1 MSF of available office space in the NASA-Clear Lake submarket with the bulk of the vacancy (944,580 SF) being Class B product. Class A office inventory is tight with a 2.3 percent vacancy rate.
Houston Spaceport and commercial space operations might be just the driver the Bay Area Houston office market needs to spur growth and signals the return of the office developer to the NASA-Clear Lake area.
Coy Davidson is Senior Vice President of Colliers International in Houston. He publishes The Tenant Advisor blog.