TEXAS SNAPSHOT, FEBRUARY 2006

Odessa Office Market

Janice Havens, The Havens Group

New office development also continues in the downtown medical district, which is bordered by Second and Eighth streets and Golder and Pittsburgh avenues. The district contains three area hospitals, Texas Tech Health Sciences Center, and a variety of medical offices and clinics. “There also is a push toward the northeastern part of town for smaller office users who need high traffic and visibility,” Havens says.

The construction of Southwick Plaza, an 11,000-square-foot medical office building on East Second Street, has expanded the medical district to Business Interstate 20. The building will soon be 75 percent occupied. The lots north of this property are currently under contract and a second phase of this project will begin shortly. “This project has a distinctive urban/old-town style that is new to Odessa, and, besides being eye-catching, has helped to improve the surrounding light industrial neighborhood,” Havens says.

Also in the medical district, Medical Center Hospital has constructed the 80,000-square-foot Dr. Wheatley Stewart Medical Pavilion just north of its campus, half of which is devoted to medical office lease space. Soon after construction of the Pavilion was completed, the hospital vacated the 84,000-square-foot Professional Tower as the repair and maintenance costs had become too high. The 10-story Professional Tower is slated for demolition in the near future. The hospital also has purchased the property south of its campus from All-American Chevrolet and has plans for future development.

“Several physicians have chosen to build stand-alone office buildings in the 2,000- to 3,000-square-foot range, but this trend seems to be slowing significantly,” Havens says. “Office users also are opting for retail spaces in strip shopping centers instead of the traditional office building.” For example, a 4,200-square-foot remodel of a former nightclub at Lowe's Shopping Center on East Eighth Street has been leased to Joel Sellers State Farm Insurance, minus 1,000 square feet occupied by The Jewelry Store.

“Also of some importance is the redevelopment of the 3,800-square-foot Noel Building (previously owned by Odessa College and vacant for some time now) into lease space with the anchor tenant of Community National Bank,” Havens says. “The building is downtown on one of Odessa's main thoroughfares, Highway 385.”

The bulk of office development is occurring in the medical district, which is downtown Odessa. The remaining growth is occurring along the 42nd Street corridor from Grandview Avenue to Loop 338. “New retail developments by Leeco on each end of this corridor have helped spur the desirability of this location,” Havens says.

Some small growth has been seen in recent history in Permian Plaza, which is near 52nd Street north of Music City Mall, with the addition of a business college and a real estate office. “The west side of town, specifically County Road West, should be due soon for a renaissance, with some minor interest already being shown in this area,” Havens says. “As the residential market continues bringing new life into this area, commercial will follow shortly.”

The majority of the office space in Odessa has been locally owned, but there is an increase of outside investment and involvement in the market. For example, the State National Bank Building was purchased in 2004 by a Las Cruces, New Mexico-based invest-or/broker, and a California investor has bought one small office building and has one office complex currently under contract. “We are seeing interest from out-of-state investors as well as from other areas of Texas,” Havens says.

Class A office space in the Odessa area starts at $11.00 per square foot gross, and medical office space begins at $13.75, plus NNN and utilities. “Based on our best estimates, approximately 15 percent of all leaseable office space in the city is vacant,” Havens says.

In the near future, the area to keep an eye on is the medical district, according to Havens. “The medical district remains hot as older homes are purchased and demolished to make way for medical office space, and the northeast continues to be the destination for office users looking for traffic and visibility,” she says. Some interest has been shown in building a large medical building or buildings near Alliance and Odessa Regional Hospitals as space is becoming limited in newer facilities. Land also is available for development along the newly constructed extensions of 52nd Street and J.B.S. Parkway in the northeast. “We have already experienced a great deal of retail growth in this area,” Havens says.

As the oil and gas economy is experiencing a boom, Odessa's economy continues to grow. In addition, the city continues to diversify into other forms of energy production and entice businesses such as distribution centers and call centers to locate in the community. “One glance at the headlines of any local newspaper will confirm how well the local economy is doing and how prosperous of a time this is for West Texas,” Havens says.

— Janice Havens is president of Odessa, Texas-based The Havens Group.

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