Houston office market report

Q2 2026

Houston’s office market continued to demonstrate a highly bifurcated recovery in the second quarter as demand remained concentrated in the market’s highest-quality assets. While overall vacancy remained elevated at 27.0%, performance among premier buildings strengthened further, driven by ongoing flight-to-quality trends and limited new supply. As availability tightens in trophy and class A+ properties, demand is increasingly spilling over into renovated and well-positioned class A assets, further widening the divide between competitive and non-competitive inventory.

Leasing activity remained resilient despite a slowdown in large-block transactions. Occupiers continue to prioritize workplace quality, flexibility, and efficiency, resulting in sustained demand from smaller and mid-sized tenants. At the same time, Houston’s investment sales market maintained momentum through the first half of 2026 as private investors and owner-users capitalized on attractive pricing opportunities. Market fundamentals increasingly reflect a selective recovery defined by asset quality, pricing discipline, and targeted tenant demand rather than broad-based expansion.

4.8 msf

Flight-to-quality continues to reshape market demand

Houston’s office market remains defined by a widening performance gap between premier assets and the broader inventory base. Since 2020, trophy and class A+ buildings have recorded 4.8 msf of positive absorption, while lower-quality assets have experienced 13.0 msf of occupancy losses. The trend strengthened in Q2 with trophy and class A+ properties generating 500k sf of positive absorption and pushing year-to-date gains to 897k sf. With availability tightening in the trophy segment and direct vacancy falling to a decade low of 9.1%, demand is increasingly expected to spill over into recently renovated class A assets that offer similar quality with greater availability.

6.0 msf

Leasing activity remains active despite fewer larger deals

Houston recorded 6.0 msf of leasing activity during the first half of 2026, supported by a growing pool of small- and mid-sized tenant requirements. While overall volume trailed historical averages, the slowdown was largely attributable to fewer transactions exceeding 50,000 sf rather than weakening occupier demand. Leases under 10,000 sf accounted for 41% of total activity, significantly above pre-pandemic norms, reflecting continued rightsizing and flexible workplace strategies. Demand also broadened across industries, with law firms and banking/FIRE tenants accounting for nearly 39% of first-half leasing activity as firms compete for a shrinking supply of top-tier space.

$1.1B

Investment market momentum remains strong

Houston’s office investment market surpassed $1.1 billion in sales volume during the first half of 2026, extending the recovery that began in 2025. Private investors and owner-users continue to drive acquisition activity, attracted by pricing that remains well below replacement cost and prior market peaks. The acquisition of Greenway Plaza illustrates the scale of the market reset, with the asset trading at approximately $92.50 per sf despite replacement costs estimated at more than $400 per sf. As debt markets stabilize and pricing resets appear increasingly realized, institutional capital has begun to re-emerge, adding further support to investment activity.

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