Houston office market reports
Q1 2022
The Houston office market remains challenged due to high vacancy. Despite Houston’s economy reporting an upswing with unemployment dropping to 5.3% from 7.6% just a year ago, work-from-home policies have the potential to impact the amount of space leased and energy issues contribute to decreased leasing activity. Concessions continue to remain strong while quoted rates are declining. Flight-to-quality is a key trend, with the few new amenity-rich towers enjoying success, especially with competing international law firms who are leasing up the space. New construction is limited except in the medical office sector.
Inventory
Flight-to-quality is the key trend among Houston’s office market. Limited development due to the large overhang of available space has older properties renovating and newer projects leasing up with a few firms developing their own new build-to-suit headquarters.
Net absorption
After suffering through eight quarters of negative absorption, the Houston market reverted back to positive absorption. This is primarily due to Hewlett Packard moving into its two new buildings and two other tenants moving into just opened space in Texas Tower, the newest multi-tenant skyscraper in downtown.
Direct asking rent
The direct asking rates have declined the last four quarters, even as landlords continue to offer strong concessions to attract tenants.
Availabilities
Slowly increasing available direct space has been the norm the last two years, although sublease decreased during 2020 and just recently started reporting an upswing.
Vacancy
This quarter saw the first minimal decline in the vacancy rate since the first quarter of 2020, when the overall vacancy was 19.8%.
Investment sales
Sales volume has slowed since the last half of 2021, but pricing has improved to $152 psf, up from $116 psf a year ago.
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