The downtown Houston office market is a hot topic these days.

Recent months have seen a flurry of activity, whether it be

leases, move-outs, or acquisitions. It’s no secret that the

downtown market continues to be plagued by average

vacancies painfully close to 20% and stagnant rents. With the

thought that things will improve in the near future, investors

have been purchasing properties in earnest. The fourth quarter

news was encouraging, notably EPCO, Inc.’s acquisition of

1100 Louisiana, a building in which they have subsequently

occupied 300,000 square feet. Also, Wells Real Estate Funds

paid the highest per-square-foot price in the Houston office

market’s history ($286 psf) for 5 Houston Center. Rumor has it

that ChevronTexaco is interested in purchasing the remaining

vacant former Enron building, while other energy companies

have begun to reclaim shadow space downtown.

Unfortunately, the Central Business District’s recovery is

anything but a slam dunk. Two major tenants, Burlington

Resources and Bank One, are expected to vacate CBD space

in 2006 after acquisitions by ConocoPhillips and Chase,

respectively. In the same building Burlington is expected to

vacate, Calpine Corp. reduced the amount of space they lease

and subsequently lost naming rights to the former Calpine

Center, now known by its address, 717 Texas.

Questions still remain about when the downtown office market

will see a substantial improvement. It did not happen with the

recent influx of New Orleans office tenants, as some thought it

would. However, strong job growth has many experts predicting

a healthy 2006 for the Houston office market overall, and with

the positive fourth quarter numbers, it appears the market is

moving in the right direction.