Avison Young releases Fourth Quarter 2025 Office Market Report for Houston

Positive absorption, limited new supply and resurging investment activity signal a market turning point

Houston, TX – Avison Young, a global real estate advisory firm, today released its Fourth Quarter 2025 Office Market Report for Houston. Houston’s office market reached a significant milestone in 2025, recording its first year of positive net absorption since 2015. The market posted 625,082 square feet (sf) of positive absorption for the year, marking a decisive reversal after nine consecutive years of tenant space reductions.

Total office leasing volume reached 12.9 million sf in 2025, a 26.1% decline from the 10-year annual average. This slowdown was driven by a limited number of large leases over 50,000 sf, which made up just 24% of total leasing activity. At the same time, transaction velocity was supported by small tenant demand, with deals under 10,000 sf accounting for 39% of all leases signed—well above pre-pandemic norms. This trend reflects a market increasingly focused on right-sized, efficient office footprints.

Anthony Squillante, Principal and office tenant representation specialist at Avison Young stated, “We’re seeing occupiers move decisively toward higher-quality space; however, as trophy and modern Class A availability continues to tighten, tenants who want options are realizing the importance of evaluating market availabilities earlier than what is perceived to be necessary and tenants are starting to become more flexible on building vintage."

Market-wide total vacancy declined 70 basis points year-over-year to 26.5%, though elevated vacancy remains concentrated in older, lower-quality buildings. Trophy properties stood out in 2025, with direct vacancy dropping below 10% for the first time in a decade, underscoring a continued flight to quality.

Assets delivered after 2010 reported direct availability of just 12.7%, significantly outperforming the broader market. As premier space becomes increasingly scarce, recently renovated Class A properties in Tier 2 locations are positioned to capture the next wave of tenant demand.

On an asset-class basis, Trophy and Class A+ buildings recorded 527,000 sf of positive absorption in 2025, while Class B properties absorbed 231,000 sf, benefitting from a growing “flight to value” among cost-conscious occupiers.

Houston’s office investment market rebounded strongly in 2025, with transaction volume exceeding $2.6 billion, the highest level since 2019. Average sale prices rose 84.3% year-over-year, driven largely by private investors and owner-users acquiring assets at substantial discounts to replacement cost.

While pricing has recovered, values remain approximately 50% below their 2015 peak, creating opportunities for buyers positioning ahead of a longer-term recovery. Moderating interest rates are expected to further support deal activity in 2026.

Houston’s return-to-office momentum also strengthened in 2025. As of November, office visitation reached 65% of pre-pandemic levels, surpassing the national average of 62%. Houston now ranks third nationally among Tier 1 office markets, trailing only Manhattan and Washington, D.C.