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Houston Office market outlook remains cautiously optimistic.
AN ANALYSIS OF ACTIVITY DURING THE FIRST TWO MONTHS OF THE YEAR—FEBRUARY 2022 COMPARED TO FEBRUARY 2021.
HOUSTON OFFICE VACANCY AT 24.9%
Two months into 2022, overall vacancy is at 24.9%, up 110 basis points from this time last year. Availability is at 29.0%, up 50 basis points from February 2021. The difference between this figure and the vacancy rate reflects expected future move-outs. The Houston office market has recorded 1.7 million sq. ft. of leasing activity, down 20% from 2.1 million sq. ft. this time last year and the lowest amount on record for the first two months of the year. Leasing activity is comprised of both new leases and renewals. Net absorption (move-ins minus move-outs) is at a positive 634,000 sq. ft., up from negative 513,000 sq. ft. year-over-year. In addition, the amount of construction underway is at 1.7 million sq. ft., down 60% from this time last year and down an equal amount from pre-pandemic levels.
POSITIVE NET ABSORPTION IN 2022
A notable move-in that contributed to the positive net absorption so far in 2022 includes Hewlett Packard Enterprise moving into their new 60-acre campus and global headquarters, which was announced in their plans to relocate from California in December 2020. The 440,000 sq.-ft. campus is located at 1701 East Mossy Oaks Road, about 26 miles north of downtown Houston within City Place, a mixed-use development formerly known as Springwoods Village where Exxon Mobil’s headquarters are also moving.
OIL PRICES SURGE TO HIGHEST SINCE 2014
As of this writing, the price of crude oil WTI has surged over $125 a barrel and rising, signaling possible expanding production, rising employment in the state’s petroleum industry, and significant price hikes at gas pumps. However, rising oil prices have yet to benefit Houston’s struggling office sector where high oil prices have traditionally equaled expansion by energy firms, including absorption of office space. For now, these price gains are unlikely to mean more office usage by energy tenants due to an abundance of caution.
Director of Research
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