February 24, 2012
By Barbra Murray, Contributing Editor
Midway Cos. and its joint venture partner, a pension fund client advised by L&B Realty Advisors L.L.P., have sold part of the office segment of their 1.8 million-square-foot City Centre mixed-use development in Houston. With the assistance of commercial real estate services firm Jones Lang LaSalle, the partners sold One City Centre, a 119,000-square-foot office building within the 37-acre complex. Real estate investment management firm Stockbridge Capital Group is the proud new owner.
One City Centre made its debut in 2008 as the first of what will ultimately be four office towers totaling 425,000 square feet at City Centre. The five-story structure’s tenant roster will be at maximum capacity once again come June.
With demand for Class A accommodations growing stronger and stronger, Houston is presently an office owner’s dream. “The increased competition for space (especially among energy firms) has enabled landlords to quote higher-than-average rental rates for space,” noted a fourth-quarter report by JLL. “And, since there is a scarcity of available quality space in the market, tenants have and will reluctantly agree to high prices as there are no other viable options in some instances.”
The players in the One City Centre transaction have not disclosed the financial terms of the deal. However, with investors clamoring for premier assets in the city, price tags are on the rise. In late December of last year, H&R Real Estate Investment Trust snapped up the 845,000-square-foot Hess Tower, not yet one year old and fully occupied by energy firm Hess Corp., from Trammell Crow Co. and Principal Real Estate Investors at a cost of $524 per square-foot. Also during the fourth quarter, the 242,000-square-foot Westway II, developed in 2009 and fully occupied by four tenants, changed hands, with Wells Core Office Income REIT picking up the property from Dienna Nelson Augustine Co. for $290 per square-foot.