For some business owners in the Cy-Fair area, owning office space makes more sense than leasing it. Developers behind a batch of new office condominium projects in the area said they are providing more business owners with that option.
At least seven office condo projects are under construction or opened within the past year in the Cy-Fair area. The projects span from Houston Office Condos near Willowbrook Mall to Cypress Crossing Office Condominiums, which is under construction at Fry and Longenbaugh roads in Cypress.
Darin Ward is a managing partner with HLBJ Development, the group behind an office condo called Offices on North Eldridge that broke ground in March. Ward said owning gives businesses more control over how their space is used. It also gives them a stake in the building, which gives them more of an incentive to help it appreciate in value.
Ward said many tenants that lease space from other HLBJ projects begin to express interest in office condos as they become more established.
“Many tenants and prospects along the way have expressed they would like to own rather than rent,” he said. “Most of the folks that are buying the buildings have leased for some time and have stabilized their business. They know what they need and might not plan to grow anymore.”
Offices on North Eldridge will ultimately be home to six office buildings ranging from 2,500-3,500 square feet and starting at $650,000—each built to suit the business that purchases, Ward said. He said the selling and build-out process would take one to three years.
Ward said office condos are ideal for smaller companies and can work for orthodontists, lawyers, oil and gas consultants, leasing firms, homebuilders, psychiatrists and insurance companies, among other types of businesses. They could also appeal to startup businesses or those who want to work in the same community where they live, he said.
“So many of our tenants don’t want to commute,” he said. “They want to own their own office in their own neighborhood—something a little newer, a little nicer and closer to home.”
The cost associated with purchasing an office building can be similar to that of leasing one, Ward said. Once a down payment is factored in—which typically ranges from 10-20 percent—the monthly cost should actually be lower, Ward said.
As of Feb. 18, the average rate to lease office space in the Cy-Fair area was about $18.79 per square foot per year, according to data provided by Caldwell Companies from the commercial real estate firm CoStar Group Inc. A business leasing 3,000 square feet of space at that rate would pay about $56,000 annually.
“They want to own their own office in their own neighborhood—something a little newer, a little nicer and closer to home.”
— Darin Ward, HLBJ development managing partner
To help offset the cost of purchasing a building, businesses can also operate out of a portion of the space and lease the rest, Ward said.
Philip Hale, a partner with the Cypress Crossing Office Condominiums off Fry Road, said for many businesses, buying an office building is worth it in the long run.
“It’s the opportunity to invest in commercial real estate, and the barrier of entry in most aspects of commercial real estate is high,” he said.
Ultimately, the Fry Road project will consist of 13 total buildings, each with four 1,225-square-foot units that can be combined depending on tenants’ needs, Hale said.
Units include four offices, reception area, kitchen, bathroom and closet, but Hale said plans could be modified to accommodate various needs. Similar to the Offices on North Eldridge concept, a property management company picks up trash and maintains landscaping.
Hale said the units are designed for smaller professional firms. The development will not house retail or medical businesses, but Hale believes the location will appeal to local businesses.
“Looking at the demographics of the entire area, there’s a lot of activity going on and a lot of higher-income houses being constructed,” Hale said. “Fry Road is just a good booming area where our target market lies.”