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Office market showing gradual improvement. The Houston office market vacancy rate stood at 21.3% midway through the first quarter, with year-to-date net absorption at negative 1.4 million sq. ft. and 72,045 sq. ft. delivered to the market. The current level of construction remains at 1.57 million sq. ft., while 39.2% of that space is available for lease. Meanwhile, the quoted average gross rent is $28.03 per sq. ft.
Slab of sublease space hits Energy Corridor. TechnipFMC placed 375,937 sq. ft. of sublease space on the market in Energy Tower II at 11720 Katy Freeway, the total of its lease at the building. The addition of the TechnipFMC space is a setback, on the heels of available sublease space lessening in January, falling to 8.8 million sq. ft. All the while, the market has experienced a slow but steady decline since the third quarter of 2016, when available sublease space reached a peak of 12.0 million sq. ft.
Office sales volume up 71.8% year-over-year. Investment sales of office properties in the Houston area were up in 2017, according to Real Capital Analytics. Annual sales transaction volume totaled $5.442 billion, a 71.8% increase from one year ago, while quarter-to-date volume stands at $264 million.
Outlook for Houston remains positive. Houston employment grew, and leading indexes were suggestive of healthy future growth. Houston added more than 12,000 jobs from August to December, an annual growth rate of 1.3%. Financial activities and construction saw the fastest rates of growth. However, trade, transportation and utilities grew by the largest amount (8,100 jobs), followed by professional and business services (5,500) and financial activities (4,000).
Director of Research
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