The Houston office market is in growth mode, with 3.4 million square feet of office space currently in construction, of which 63% is pre-leased. The Texas Real Estate Research Center at Texas A&M reports positive CRE statistics in Houston, especially in industrial and warehouse spaces. In addition, retail space has had increases for both occupancy (93.1% as of May 2021) and asking rents (increased 6% as of May 2021).
Large and small businesses are moving to Texas in record numbers, benefitting from a pro-business regulatory environment, a pool of highly qualified talent, and a healthy CRE market. Data from the Census Bureau and the Greater Houston Partnership paints this picture of small business growth in Houston:
- 82% of firms that operate within the Houston metro area have less than 20 employees.
- The Houston region is home to 663,800 “non-employee businesses,” which includes sole proprietorships like consultants, the self-employed, and freelancers.
- As many as 35% of Houston-area small businesses that have fewer than 50 employees are minority-owned.
Submarkets, or defined zones within larger markets, provide strategic opportunities for small businesses. In Houston, there are 26 submarkets. Numerous economic dynamics are at work in these different areas, which small business tenants should consider as they pursue occupancy to set up shop.
Submarkets in the Houston Office Market
With the continued expansion of the Houston office market, partly due to the influx of small businesses, submarkets are becoming a point of focus. Further defined, submarkets are distinct subsets of larger markets. In Houston, these may differ by property type and carry their own set of traffic patterns, economic norms, and amenities. Businesses navigating the Houston market benefit from an understanding of these submarkets, which have distinct components, while still being influenced by the larger markets they reside within.
What Makes a Good Submarket?
Before buying office space in Houston, or any location, small businesses should undertake analysis that evaluates a property’s location in a market, submarket, and property. What should small businesses look for in a submarket? Three key indicators of a strong submarket are:
- Relative stability
- A favorable business climate
- Strong dining, shopping, entertainment, and general amenities
The market itself should provide those three benefits, but analysis of the property itself cannot be overlooked. For small businesses, finding office space in Houston is as much about flexibility as it is about location and space allocation.
“Small businesses, particularly start-ups, may not need a dedicated front desk staff, a long-term lease, or a custom-designed office; they need convenience and flexibility.” – Al Hartman, President & CEO of Hartman Income REIT Management, Inc.
For growth-minded small business owners who require unique spaces with maximum flexibility, a submarket may be the best place to look.
Top 5 Houston Submarkets for Small Business
Small business owners may strike gold by locating in a submarket perfectly suited for their operations, or close to their ideal buyer or audience.
Five of the top Houston submarkets for small businesses are:
- North Belt — Off of the Sam Houston Tollway, the North Belt submarket in Houston offers premiere office space in the form of high-end buildings. Its proximity to restaurants, hotels, and banks make it an appealing location for small businesses. It is also easy to access from Hardy Toll Road, Sam Houston Toll Road, and I-45.
- FM 1960 — Farm to Market Road 1960 is an expansive area with large industrial buildings and newly constructed warehouses. Additionally, there are professional and office buildings, retail spaces, and commercial lots. Located to the north of metropolitan Houston, it is still accessible using major roads and is also easy to traverse from popular residential areas, including the master-planned community, The Woodlands.
- Energy Corridor — The Energy Corridor District is a premier area for commercial real estate investment. It is home to some of Houston’s largest employers, such as Citgo, Shell Oil Company, BP America, and ConocoPhillips. The Energy Corridor is well-established as a thriving Houston submarket and business district. West of the metropolitan area, the district covers seven miles of I-10 and can be approached from the Grand Parkway and Beltway 8.
- Park Ten — The Park Ten submarket in Houston has some commercial real estate properties in the Energy Corridor and is an appealing spot for small businesses who want a prestigious office space without being directly in the city. Park Ten is close to a number of desirable amenities, including shopping centers, entertainment, museums, parks, hotels, and dining. Park Ten offers quick travel into the city, or out to the suburbs via Grand Parkway, I-10, Highway 6, and Beltway 8.
- Greenway Plaza — East of Galleria/West Loop submarket, Greenway Plaza is a highly visible Houston submarket, especially for office spaces. Situated in the premier city center business district, Greenway Plaza offers plenty of leasing options for small businesses, and regularly outperforms metro Houston for both value per square foot and vacancy rates.
The most popular submarkets in Houston have a few common elements:
- Proximity to major roads and thoroughfares.
- Inhabited by both established and new, high-growth businesses.
- High-performing CRE markets, with occupant-friendly amenities and competitive rental rates.
Because the very nature of submarkets is niche, it is important for small business owners to perform some due diligence, preferably with the help of a professional, to assess each area for how well-suited it is to their business.
Houston office properties in these different submarkets may be in high demand, but if they meet the criteria of the business and represent opportunities for growth, they are worth pursuing.
The Texas economy offers an open door for real estate investors, with the state’s office markets providing ample room for growth. Leasing office space in Houston’s top submarkets can put a small business ahead of the competition and offer a professionally managed office building with great amenities, tenant services, and business support.
A commercial lease in a Houston submarket may be the strategic decision a small business makes that makes all the difference.