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VACANCY AT 24.6%
The overall vacancy rate in the FM 1960/Highway 249 office market was up 60 basis points quarter-over-quarter, up 90 basis points year-over-year, and slightly above the metro average of 24.4%. The vacancy rate for Class A properties is at 19.1%, and Class B at 27.4%. In the second quarter, overall net absorption declined to negative 66,000 sq. ft. Class A registered positive 27,000 sq. ft. and Class B recorded negative 84,000 sq. ft.
DIVERSE GROUP OF TENANTS
Even though the FM 1960/Highway 249 submarket’s location near the Energy Corridor means that its tenant base is rooted in the energy sector, it is also home to a diverse group of tenants. With 11 million sq. ft. of inventory, the submarket is ranked 8th in the 23 Houston-area submarkets in terms of inventory. Large tenants such as Lone Star College (more than 600,000 sq. ft.), Noble Energy (500,000 sq. ft.), CHI St Luke’s Health (215,000 sq. ft.), and Emerson (175,000 sq. ft.) seem to be standing their ground. Yet, when Chevron completed its $13 billion acquisition of Noble Energy in October 2020, half of Noble’s 1-million-sq. ft. footprint in the FM 1960/Hwy 249 submarket—all of Noble Energy Center II—was placed on the sublease market – and that building was listed for sale in Q1 2021.
AVERAGE ASKING RATES
Overall full-service average asking rates in the FM 1960/Highway 249 submarket fell at $21.01 per sq. ft., which is below the metro-wide average of $29.16 per sq. ft. Rates decreased 2.3% or $0.50 per sq. ft. quarter-over-quarter and increased year-over-year by 2.2% or $0.45 per sq. ft. There is a correlation between the price of oil and asking rent prices for office space in Houston. As companies across industries feel the impact of the pandemic and the oil downturn, they may be looking for a good deal, and if rents decline in the FM 1960/Highway 249, it could become an affordable relocation option for office tenants in submarkets such as the Energy Corridor and Downtown Houston.
Director of Research
tel 713 275 9618