Top quality assets drive office market recovery

Houston, TX – Avison Young today released its First Quarter 2024 Office Market Report for Houston. Office market fundamentals are gradually improving as the top end of the market continues to lead in the recovery. Over 479,000 square feet (sf) of trophy space was absorbed in the first quarter, while the overall market saw a modest net absorption gain of 66,000 sf.

“While vacancy remains elevated for Houston’s MSA, amenity rich, higher-end assets that are in desirable locations continue to dominate leasing activity,” said Principal and office tenant representation specialist Anthony Squillante.

Leasing activity in the first quarter of 2024 reached 2.4 million sf, which remains 36.5% below the 5-year pre-pandemic average. Despite the moderate pace of leasing activity, tenants are still showing a strong preference for high-quality spaces. A significant 67.1% of all leases signed in Q1 2024 were concentrated in trophy and Class A assets.

 “With a tightening market for high-quality office space, tenants will soon need to consider the next tier of quality space options, causing a trickle-down effect,” said Wade Bowlin, Principal and Managing Director of the firm’s Houston office.

Houston’s employment base expanded by nearly 87,000 jobs over the past 12 months and unemployment remains relatively low at 4.4%. While these are favorable figures, there continues to be a disconnect between office job growth and office demand.

Finally, the report shows that energy-related firms continue to dominate leasing activity, accounting for 38.8% of the leasing activity to date.