Today The Woodlands office market has more office building landlords than at any time in its 34 year history. Now that some 15 different owners of office product exist in The Woodlands submarket, this ownership dilution has led to more competition for tenants. The majority of these new owners invested in The Woodlands area when The Woodlands Operating Co. and its related entities sold assets in a bid to redeploy capital. Now, commercial real estate advisors find themselves working with a multitude of landlords in their search for qualified space.

The Woodlands office market is currently experiencing a slight decline in occupancy levels and effective rental rates in the form of lease concessions. Despite this, The Woodlands area is currently slated to add an additional 860,000 square feet of new office space, with several of the projects viewed as “locationally challenged” and may never break ground. A sizable amount of sublease space, about 200,000 square feet, currently being offered by some of the area’s largest employers adds to the downward pressure on rental rates.

From 2004 until mid 2007, real estate markets were inundated with liberal capital. During the past year, the lending crisis not only brought certain sectors of the residential market to their knees, it delivered some very nice office space to Woodlands’ prospects when several companies defaulted on their leases or filed for bankruptcy protection (i.e., American Home Mortgage, Option One Mortgage and Decision One Mortgage). Further signs of weakness have surfaced in the local title and banking sectors as well. Although the impact to local market conditions has been minimal, the contraction of the residential finance and service sectors has given companies looking to relocate or expand within The Woodlands some relief in terms of space alternatives.

The Woodlands office submarket continues to evolve by capitalizing on opportunities created by excesses and by a less concentrated ownership that is responsive to a softening demand for space.