Houston office market reports
Q2 2022
Houston’s employment sector has fully recovered from the pandemic-created job losses. While the metro’s unemployment rate nudged up to 4.3% in May from 4.1% in April, the rate has declined steadily from the peak of 13.3% just two years ago. After adding 185,000 jobs in the last 12 months, the area’s civilian workforce is now larger than it was prior to the pandemic.
The Houston office market remains challenged due to the significant amount of availability, with both direct and sublease space climbing. Despite Houston’s economy reporting an upswing, employers are not forcing workers back to the office and continue to assess current needs. With little construction and flight-to-quality a key trend, leasing activity remains in a downward trend although a small resurgence occurred in the Central Business District this quarter.
Inventory
Limited office development other than build-to-suits or medical projects is stabilizing the inventory, with no new buildings completed during the second quarter.
Net Absorption
Positive absorption could not be sustained during the second quarter after a positive first quarter following two years of negative numbers. The mid-year total is a positive 641,693 sf based on several large tenants moving into newly completed buildings.
Direct Asking Rent
The direct asking rates have fluctuated during the last 12 months but are currently up 1.8% year-over-year, even as landlords stretch concessions to attract tenants.
Availabilities
Slowly increasing available direct space has been the norm the last two years, although sublease decreased during 2020 and currently represents a 68% jump from two years ago.
Vacancy
This quarter remained stable at the previous quarter’s overall vacancy rate, which was a slight decrease from year-end’s 23.6%.
Investment Sales
Sale volumes are holding their own during 2022 with improved pricing of $156 psf, up from $116 psf a year ago.
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