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Overall office space demand increased dramatically year-over-year, although leasing volume remains below pre-pandemic levels.

AN ANALYSIS OF ACTIVITY DURING THE FIRST FOUR MONTHS OF THE YEAR—MAY 2022 COMPARED TO MAY 2021.

HOUSTON OFFICE VACANCY AT 25.1%

Almost halfway through 2022, overall vacancy is at 25.1%, up 100 basis points from this time last year at 24.1%. Availability is at 29.0%, up 20 basis points from May 2021 at 28.7%. The difference between this figure and the vacancy rate reflects expected future move-outs. The Houston office market has recorded 5.0 million sq. ft. of leasing activity comprised of both new leases and renewals, down slightly from this time last year. Net absorption (move-ins minus move-outs) is at a positive 293,000 sq. ft., up from a negative 1.4 million sq. ft. year-over-year. In addition, the amount of construction underway is at 2.3 million sq. ft., down 43% from this time last year and close to an equal amount to pre-pandemic levels.

POSITIVE NET ABSORPTION IN 2022

Year-to-date net absorption in the Houston office market is close to a positive 300,000 sq. ft. Large move-ins this year include Vinson & Elkins (211,995 sq. ft.), DLA Piper LLP (31,843 sq. ft.), and McGuireWoods (29,492 sq. ft.) for a combined 273,330 sq. ft. in the new Texas Tower in the CBD; and Hewlett Packard Enterprise in CityPlace 8 (220,000 sq. ft.) and CityPlace 10 (220,000 sq. ft.) for a combined 440,000 sq. ft. in The Woodlands. The largest move-out was Vinson & Elkins, leaving 338,026 sq. ft. at 1001 Fannin St. in the CBD.

HOUSTON EMPLOYMENT EXCEEDS FEBRUARY 2020 PRE-PANDEMIC LEVELS

The recovery has been uneven; however, employment now exceeds pre-pandemic levels in nine sectors as of April 2022, the latest data available. Construction, has recouped a small fraction of its losses (37.7% of lost jobs recovered), and two sectors continued to lose jobs even as the economy reopened – energy (down 10,800 jobs since Feb 2020), and manufacturing (down 14,200 jobs). Although oil and gas job creation has lagged since the pandemic’s onset, the industry’s market has improved.

 


Leta Wauson
Director of Research
leta.wauson@naipartners.com
tel 713 275 9618

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