Q4 2014 Houston Office Market & Forecast Report

Houston’s Office Market Records 6.8M SF of Positive Net Absorption in 2014

Houston’s office market posted 2.2M SF of positive net absorption in Q4 2014, bringing the year-end total to 6.8M SF. 

Over 2.1M SF of new inventory delivered during Q4, bringing 2014 year-end delivered inventory to over 6.6M SF. ExxonMobil began moving into a portion of its new north campus and Southwestern Energy moved into it’s new corporate headquarters just south of the ExxonMobil campus.

Houston’s office construction pipeline still contains over 17.0M SF and 7.5M SF of that is speculative development which is 28.8% pre-leased.  The majority of the space is located in the suburban submarkets and is scheduled to deliver in 2015.

The citywide average rental rate decreased slightly between quarters, 1.6% from $27.08 to $26.78 per SF, but is still 3.2% higher than it was a year ago. Both CBD and suburban Class A average rental rates decreased over the quarter; however, both Class B average rental rates rose.

Houston’s office investment sales market is benefitting from the foreign capital that is pouring into the U.S.  According to a recent survey by the Association of Foreign Investors in Real Estate (AFIRE), Houston ranked #3 in the top five U.S. cities for foreign investors.

The Houston metropolitan area created 120,600 jobs between October 2013 and October 2014, an annual increase of 4.3% over the prior year’s job growth. Sectors creating most of the jobs contributing to the annual increase include mining and logging, construction, transportation, warehousing and utilities, and health care and social assistance. Houston’s unemployment rate fell to 4.7% from 5.9% one year ago. 

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