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Texas Office Sales Market Ends Q1 on Positive Note

Executive summary

The financial and technology sectors are two of the main drivers fueling one of the strongest economies in the country. This has made the Texas commercial real estate market an attractive target for investors and appealing destination for young professionals in the growing employment sectors. The Texas markets also exhibit a significantly reduced cost of living when compared to the New York City or San Francisco markets.

Through the access of in-depth Yardi Matrix data, we analyzed the state of the Texas office real estate market in Q1, 2017 (see ‘Methodology’ section). We narrowed our focus to office sales closed in the state’s top-tier markets: Austin, Dallas – Fort Worth, Houston and San Antonio, to try to create a composite of how the Texas markets performed in the first months of 2017 and possible future trends. Our analysis shows that the Texas office sector continues to show improving fundamentals in Q1 2017.

Office Sales Volume Trending Upwards in Q1

Though the number of first quarter office transactions in the combined Texas markets was the lowest of the last five years (only 20 major deals closed in Q1 2017), in terms of sales volume, it was one of the market’s best Q1 performances. A total of 20 office transactions closed in the first three months of 2017 for $1.19 billion in sales volume (not taking into account undisclosed sales), marking an 89% increase year-over-year. The first quarter of the year was also the second-best Q1 in terms of sales volume since 2013, when 30 sales closed for $1.22 billion. Nevertheless, when measured against overall quarterly sales, the volume recorded in Q1 2017 landed below the 2013-2016 average. The best-performing quarter of the past five years proved to be Q4 2015, when 50 sales closed for a total of $2.5 billion in sales volume.

Average Price per Square Foot Reaches 5-Year Peak

The average price per square foot presents a comprehensive picture of the state of the Texas markets. In excluding portfolio transactions and partial stake deals, the average price per square foot appears headed for a five-year high in Q1 2017. Moreover, not only is the average price of $294 per square foot the best Q1 number we have on record, it is also the highest quarterly average recorded in the last five years in Texas. The average price per square foot rose 85% year-over-year and was 15% higher than the market’s previous peak, in Q3 2016. The market saw an overall boost in average price per square foot over the last year, surpassing the $200 mark for four consecutive quarters (Q2 2016 to Q1 2017), signaling increased buyer interest and the growing appeal of the Texas office market.

$512M Houston Sale Tops List of Largest Q1 Office Deals

Phoenix Tower, Houston

Phoenix Tower, Houston

Houston was the Texas destination of choice for office buyers in Q1 2017, with 21 buildings changing hands in eight major transactions. Though five of them closed for an unknown price, Space City was the setting for the two largest office sales of the quarter. Coming in second was the Dallas office market, which saw six transactions close in Q1, two of them at an undisclosed price.

The largest office transaction to close in Q1 in the Lone Star State was Parkway Properties’ sale of a 49% interest in its ‘Greenway Portfolio’ in Houston‘s Greenway submarket. A joint venture between the Canada Pension Plan Investment Board (CPPIB), Silverpeak Real Estate Partners and affiliates of TH Real Estate paid $512 million to acquire a stake in the 11-building, roughly 5 million-square-foot office portfolio. Approximately $315.8 million of expected net proceeds will go to Parkway, with TH Real Estate and Silverpeak together retaining a 24.5% interest, and CPPIB retaining another 24.5% interest in the portfolio. Parkway will retain a 51% interest in the assets and provide property management and leasing services for the joint venture. The Greenway Portfolio consists of Phoenix Tower at 3200 Southwest Fwy, 3800 Buffalo Speedway, and nine buildings part of the Greenway Plaza office campus.

See below the top 10 office sales to close in Texas in Q1:

What’s Next? Projects Completed & Under Construction

Twelve large projects totaling 2.7 million square feet of space came online on the Texas office market in Q1, with more to come over the following months. The first quarter completions were a mixed bag: Dallas – Fort Worth and Houston each saw four office developments delivered, while three projects were completed in Austin and only one in San Antonio. The largest office delivery of Q1 was the 350,000-square-foot Amegy Bank Tower in Houston’s Galleria area. Amegy Bank N.A.’s new 24-story headquarters at 1717 W. Loop South broke ground in November 2014 and also counts Charter Title Co. as a tenant.

Yet the second quarter of 2017 has more office development in store for the DallasFort Worth market. A total of 31 office projects with Q2 delivery dates were under construction at the close of Q1, 16 of them located in Dallas – Fort Worth. The largest project currently underway also lies within the DFW area–the $3 billion, 2.1 million-square-foot Toyota Headquarters at Legacy West in Plano, Texas. Once completed, Toyota North America’s new home base will have enough room to house 6,500 employees, which began moving to the new location in May 2017, per the Dallas Business Journal.


  • Data source: Yardi Matrix;
  • Markets – Austin, Dallas – Fort Worth, Houston, San Antonio;
  • Square footage parameters – over 50,000 sq. ft.;
  • Minimum amount per transaction – $5,000,000;
  • Transactions recorded until April 12th, 2017;
  • Distressed sales were excluded from the data set;
  • We excluded ‘ownership stake,’ ‘ground lease,’ ‘controlling interest,’ ‘portfolio,’ and ‘undisclosed’ transactions from our calculation of the average price per square foot.

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