Q4 2017 | Houston Office | Research & Forecast Report

Houston’s office market posts positive net absorption for the first time in several years

After six straight quarters of negative net absorption, Houston’s office market posts 673,000 SF of positive net absorption in Q4 2017. Although positive, Houston’s office market 2017 year-end absorption total is still well within the red, at negative 1.7M SF. After three years in an economic energy slump, Houston’s office market is ready for a boost. Even though oil prices have recently increased, the increase is not enough to spur hiring sprees in the energy industry. With the recent increase in oil prices the U.S. Energy Information Administration (EIA) has revised it’s forecast for world oil demand in 2018 by 100,000 barrels per day. Although Brent crude prices are up to $64 per barrel, the highest price since November 2014, it’s not enough to accelerate leasing of vacant office space. Recent news articles indicate that some of the large energy giants reported profits in the fourth quarter. However, profits were largely driven by continued lean budgets and staff reductions.

Developers have shown restraint over the past few years, only starting projects with a lead tenant guaranteed. A handful of planned buildings broke ground this past year with lead tenants in place including Bank of America, American Bureau of Shipping and HP. Once these projects deliver, those companies will vacate their existing space, leaving more than 1 million square feet for landlords to backfill.

In August 2017, Houston faced one of the worst natural disasters in history. Hurricane Harvey, a Category 4 hurricane, slammed the Texas coast and dumped over 50 inches of rain in parts of Houston. The event caused widespread flooding, destroying homes, businesses and infrastructure. This was a temporary set-back for many, but has had permanent ramifications for others. A joint industry survey confirmed that less than 7% of Houston’s office inventory suffered damage. Of that amount, the majority have been repaired and back in operation with a handful of buildings still undergoing repair.

According to the U.S. Bureau of Labor Statistics, the Houston MSA created 48,500 jobs (not seasonally adjusted) between November 2016 and November 2017, an annual growth rate of 1.6%, which is above than the national averages job growth rate of 1.5%.

Click here to visit our website.