Avison Young releases Fourth Quarter 2023 Office Market Report for Houston
January 8, 2024
Vacancy in product built since 2010 continues to outperform
Houston, TX – Avison Young today released its Fourth Quarter 2023 Office Market Report for Houston. The office sector continues to grapple with ongoing challenges characterized by elevated vacancy rates but is showing signs of edging closer to recovery. Nearly 79% of the city-wide vacancy is concentrated in buildings constructed 20 to 50 years ago, while office product built since 2010 is only 12.2% vacant.
“Falling interest rates and tamed inflation could entice owners to convert outdated or aging office buildings into a variety of other uses, especially if there are government incentives,” said Wade Bowlin, Principal and Managing Director of the firm’s Houston office.
Leasing velocity, which started off strong in the first half of 2023, has cooled significantly due to the tightening financial conditions and economic slowdown. This has led to a 28.9% decline in annual leasing volume compared to the prior year, and a 38% decline compared to the five-year pre-pandemic average.
“While vacancy remains high for Houston’s MSA, class A assets that are well-located and amenity rich continue to outperform the broader market, and in some submarkets, are supply constrained,” said Principal and office tenant representation specialist Anthony Squillante.
Houston’s employment base expanded by nearly 78,000 jobs over the past 12 months and unemployment remains low at 4.1%. While these are favorable figures, there continues to be a disparity between office job growth and office demand.
Finally, the report shows that engineering and energy-related sectors have remained active in West Houston with numerous large leases signed over the past two years.
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