The Office Evolution: Where Texas Workspace Demand is Heading

The office market has undergone fundamental transformation since the pandemic, yet headlines often miss the nuanced reality of what's happening across Texas markets. While challenges remain in certain segments, we're seeing emerging opportunities and evolving demand patterns that savvy investors are capitalizing on.

Texas vs. National Trends

Texas office markets continue to outperform national averages, with several important distinctions:

• Faster return-to-office adoption than coastal markets
• Stronger leasing activity for quality spaces
• More stable occupancy in suburban submarkets
• Continued corporate relocations driving demand
• More favorable pricing for acquisition opportunities

These Texas-specific trends create investment opportunities that don't exist in more challenged office markets.

Flight to Quality Accelerates

Perhaps the most significant office trend is the dramatic bifurcation between asset classes. While Class A+ space continues to command premium rates and strong occupancy, commodity office faces unprecedented challenges.

This flight to quality has created two parallel investment opportunities:

1. Premium positioning: Strategic acquisitions of well-located Class A assets with modest repositioning needs ‍
2. Adaptive reuse: Conversion of obsolete office to alternative uses such as residential, medical, or educational

The middle ground between these extremes often presents the greatest risk in current market conditions.

Location Patterns Shifting

Office demand has shifted dramatically across Texas submarkets:

• Suburban strength: Locations closer to decision-maker homes showing resilience ‍
• Satellite offices: Hub-and-spoke models supporting multiple smaller locations ‍
• Mixed-use environments: Office within walkable, amenitized settings outperforming ‍
• Transportation nexus: Locations offering multiple transit options maintaining appeal ‍
• Amenity clusters: Proximity to dining, services and recreation driving preference

These patterns inform our acquisition and development strategy, focusing on locations aligned with evolving tenant preferences.

Space Design Evolution

Successful office properties are adapting to changing work patterns through:

• Flexibility: Modular spaces supporting varied team configurations ‍
• Technology integration: Seamless digital collaboration infrastructure ‍
• Health focus: Enhanced air quality, natural light, and wellness features ‍
• Experience emphasis: Amenity packages that can't be replicated at home ‍
• Hospitality approach: Service-oriented management enhancing tenant experience

Our office repositioning initiatives specifically address these evolving tenant priorities to drive leasing velocity and rental premiums.

Market-Specific Opportunities

Different Texas markets present distinct office opportunities:

Austin: Selective value-add plays in Northwest and East submarkets, with emphasis on tech-focused amenity packages and access to talent centers.

Dallas: Strategic suburban positions in North Dallas, Las Colinas and Frisco/Plano, particularly those supporting corporate campus environments.

San Antonio: Medical-adjacent office opportunities and spaces supporting government contractors and cybersecurity growth.

Houston: Energy corridor repositioning opportunities and targeted medical office investments.

The Flex/Industrial Office Hybrid

One of the most compelling emerging office opportunities lies in flex/industrial properties with significant office components. These hybrid spaces support:

• Combined corporate office and distribution functions
• Technology operations requiring both office and lab/support space
• Creative uses such as content production or product development
• Businesses seeking cost-effective alternatives to traditional office

We've successfully repositioned several industrial properties to capitalize on this evolving demand segment, creating distinctive office environments with industrial flexibility.

Looking Forward

While the office sector faces continued evolution, we believe in a strategic, selective approach to Texas office opportunities. By focusing on locations and property types aligned with emerging demand patterns, the office sector can still deliver compelling investment returns.

Rather than making broad proclamations about the future of office, we're focused on identifying specific opportunities where market fundamentals support strong performance. This nuanced approach has allowed us to maintain a successful office portfolio even as the broader market navigates significant transition.