Q4 2016 Houston Office Market Report

After several years of economic woes, Houston’s office market coasts into 2017

After several challenging years, Houston’s office market saw some improvement over the quarter. The market will most likely remain relatively flat, coasting through 2017.  The citywide vacancy rate increased by only 40 basis points between quarters, and absorption, although negative, was only a third of the previous quarter’s total.  Q4 2016 witnessed several energy companies remove available sublease space as they began to shift out of the contraction mode and begin looking forward again.  Although leasing activity remains lower than normal, deals are getting done and some of those even include pre-leasing of proposed developments. 

Houston’s office market posted 0.1M SF of negative net absorption during the fourth quarter, an improvement from the 0.3M SF of negative net absorption posted in the previous quarter.  Houston’s city-wide office vacancy rate rose significantly on an annual basis, increasing by 220 basis points from 15.3% to 17.5% in Q4 2015.  As stated earlier, the vacancy rate rose by only 40 basis points over the quarter, much less than in previous quarterly comparisons during 2015 and 2016.

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