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  • Writer's pictureRealFacts Editorial Team

Here's Why Office Tenants in Downtown Houston Are Migrating West

Houston, Texas

Downtown Houston, once the bustling epicenter of the nation's fourth-largest city, is witnessing a notable migration of businesses to the western suburbs. This shift, viewed by some commercial real estate professionals as a "flight to quality" and by others as a chance to redefine the urban core, reflects broader trends reshaping cities across the country.

Suburban Expansion: Westward Bound

Multinational chemical giant LyondellBasell is among the latest major companies planning to leave downtown Houston. This departure follows a growing trend of businesses moving to areas surrounding Houston, rather than remaining in the central business district (CBD). Steve Triolet, senior vice president of research and market forecasting at Partners in Dallas, notes that even business boosters acknowledge downtown’s struggle as "a lot of people are moving west and north, away" from the central business district.

Adding to downtown’s challenges, a recent storm shattered windows across the area, closing streets and sidewalks for months. Combined with the growing preference for hybrid work policies and lingering post-pandemic sentiments about commutes, downtown Houston faces a daunting task in luring back businesses.

The Appeal of West Houston

A report by Savills, a real estate brokerage, underscores the trend: many companies are relocating to West Houston to be closer to their workforce. The largest lease transactions in 2023 and early 2024 occurred in West Houston, with Noble Corp., Fluor, and Bechtel Corp. all securing substantial office spaces in the area. The Energy Corridor and Memorial City in West Houston accounted for 50% of the leasing activity in the first quarter of 2024, while downtown managed only 13%, according to JLL’s office market report.

North Houston suburbs like The Woodlands, and southeastern areas near NASA, are also experiencing increased office leasing activity. This geographical shift reflects Houston’s expansion west and north, constrained by Louisiana to the east and the Gulf of Mexico to the south.

Downtown’s Resilience and Renovation Efforts

Despite the migration, there remains some demand for downtown real estate. Skanska's 1550 on the Green, an amenity-rich office tower, has attracted law firm Norton Rose Fulbright, though 65% of the building remains available for lease. The Texas Tower, another new addition to downtown, boasts higher occupancy rates and serves as a headquarters for global developer Hines.

Houston’s downtown, much like Dallas, grapples with an overabundance of older office buildings. Constructed largely in the 1980s, these buildings often lack modern amenities and face high vacancy rates. However, some properties, like the JPMorgan Chase Tower, have undergone successful renovations, demonstrating that with significant investment, older buildings can be revitalized.

Embracing Adaptive Reuse and Economic Diversity

Developers are also exploring adaptive reuse for older buildings. The former Barbara Jordan Post Office has been transformed into POST Houston, a vibrant food hall and event venue with sweeping views of the downtown skyline. Similarly, the 1920s State National Building is now a Moxy by Marriott hotel, and a 1972 office building has been converted into the Elev8 residential tower.

According to Cassie Hoeprich, director of planning and economic development for Downtown Houston, the future isn’t necessarily bleak. The diversity of industries setting up shop downtown provides a buffer against the exodus. Downtown continues to attract companies involved in energy transition, innovation, and law, leveraging its proximity to state, local, and federal courthouses and government buildings.

Redefining Downtown’s Future

For downtown Houston to thrive, it must continue to diversify and evolve into a dynamic, mixed-use neighborhood. This includes investing in a balance of office spaces, housing, and entertainment options. Hoeprich emphasizes the need for downtown to offer amenities and support a diverse economy, much like Los Angeles with its various hubs of commercial activity.

One of downtown’s biggest challenges remains its aging office buildings. With limited and expensive parking options, these structures struggle to attract tenants seeking modern, amenity-rich environments. However, companies already in the CBD often move to higher-quality spaces within downtown, as seen with law firms relocating to Texas Tower.


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