NASA and The Clear Lake Office Market
Normally, if it is late Sunday night you wouldn’t find me tuned into to NASA TV on the web and excited to watch the coverage of the Curiosity rover landing on Mars. You see, I am not really a “Space Geek” or what we affectionately refer to as a “NASA-Nerd” in the part of the world where I reside.
However, I am a big advocate of the space program and having been involved in approximately two million square feet of lease and sales transactions in the NASA/Clear Lake submarket of Houston, I tend to pay attention to big events like this.
While the Houston office market has been among the strongest performers of any major market in the country over the last year or so, it is not without pockets of softness and one of those places is the NASA/Clear Lake submarket. The great recession, the end of the space shuttle program, budgetary constraints at NASA and many would say a presidential administration with no particular fondness for Texas, have taken it’s toll on the NASA/Clear Lake office market.
Labor force reductions at Johnson Space Center and among the various NASA-Aerospace contractors in the area have been estimated at approximately 3,500 jobs, and as a result NASA contractors vacated approximately one million square feet of office space.
Signs of Life on this Planet
Despite the softness in the NASA/Clear Lake office market we are beginning to see signs of life over the last quarter as office leasing activity has accelerated. The NASA/Clear Lake office market posted 17,072 square feet of positive net absorption in the second quarter of 2012, and while this is small number, it is significant because it is the first time the submarket has recorded positive absorption since the second quarter of 2010.
Much of the space that was returned to the marketplace by NASA contractors was done so in larger blocks of space or what were previously single tenant buildings, which did not result in much of an opportunity for smaller tenants in the marketplace. So if you were a tenant seeking 20,000 square feet or less, the downturn didn’t translate into quite the tenant’s market you expected, but if you were a larger tenant, you could name your price in a small submarket thin on large users outside the Aerospace sector.
However, the increased vacancy has served as a significant drag on the marketplace and effectively halted all investment activity in the submarket. Presently, we are beginning to see larger tenants particularly NASA contractors submit RFP’s for larger space requirements associated with new contracts and a non-aerospace company (Universal Weather & Aviation) has purchased the former United Space Alliance corporate headquarters (pictured above), effectively removing 160,000 square feet from the available office inventory.
Just this past week a significant investment sale was announced in the area as the Richland Companies acquired the 104,091-square-foot Bay Plaza Office Complex, located at 711 W. Bay Area Blvd. There may not be life on Mars, but it has returned to the Clear Lake office market.