Leasing, construction, vacancy – the latest from Houston’s office market
Houston’s office market faced all-too-familiar headwinds of low leasing activity, rising vacancy, and softening rental rates during the second quarter of 2018. Despite a few signs of improving conditions earlier this year, the market has a long way to go before it regains equilibrium.
Here’s a look at where Houston’s office market stands today.
A lack of growth in leasing demand continues to besiege the office market. The second quarter saw only 19 transactions greater than 20,000 square feet and only three of those represented growing tenant footprints. Since the close of 2014, Houston office leasing activity has surpassed 4 million square feet on two occasions. In contrast, from the third quarter of 2011 to the fourth quarter of 2014, office leasing activity surpassed 4 million square feet every quarter.
In terms of new development, 2018 is on course to be the market’s lightest year since 2010. The market has seen 176,000 square feet of new deliveries year-to-date and only 503,000 square feet in total are expected to deliver in 2018.
Total office vacancy has increased for 14 consecutive quarters from 13.4 percent in the fourth quarter of 2014 to 24.5 percent today, the highest level in recent history. Houston’s Greenspoint submarket continues to have the highest total vacancy rate at 53.6 percent, while the Medical Center stands in stark contrast at just 8.8 percent total vacancy.