Gaze into our steel-and-concrete ball
Houston’s improved 2018 jobs forecast signals transitioning office market
On the heels of the Greater Houston Partnership’s recent report that it expects job growth to pick up in 2018, speculation is mounting that the Houston office market is finally on the cusp of transitioning toward a positive course. The Houston metro area added 46,000 jobs in the 12 months ending in December, according to preliminary payroll jobs numbers by the Texas Workforce Commission, while the Partnership’s 2018 forecast is calling for the creation of another 45,500 jobs, due in part to active global trade and a strong national economy, compensating for weakness in the energy sector.
While the Houston office market still has a long way to go, there are some events that occurred as 2017 came to a close that portended a more active office leasing year in 2018. Following a third quarter that totaled 576,000 sq. ft. of negative absorption, the fourth quarter did a complete one-eighty, posting positive absorption of 750,000 sq. ft.—the first quarter of positive total net absorption in Houston since Q2 2016. Additionally, sublease inventory dipped below 9 million sq. ft. for the first time in two years.
Other notable factors that may boost 2018 office leasing numbers include:
- Commodity oil pricing exceeding $60/barrel of WTI;
- Comprehensive tax reform recently pass by Congress; and
- A strong national economy.
These non-real estate events are positive factors that encourage companies to hire more, spend more, and often results in the absorption of more office space.
That said, there is still a long way to go before the market gets back to equilibrium, and we anticipate the current tenant-friendly market to continue for some time. But the signs that indicate the recovery is beginning are becoming too significant to ignore.