Q4 2014 Houston Office Market & Forecast Report

HOUSTON - Jan. 12, 2015 - PRLog -- 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.

VACANCY AND AVAILABILITY

Houston’s citywide vacancy rate fell 40 basis points between quarters from 11.9% to 11.5% and fell by 50 basis points annually from 12.0% in Q4 2013. Between quarters, the average suburban vacancy rate decreased 20 basis points from 12.2% to 12.0% while the average CBD vacancy rate decreased 110 basis points from 10.9% to 9.8%.

The average CBD Class A vacancy rate decreased 130 basis points between quarters from 9.9% to 8.6%, and the average CBD Class B vacancy rate fell 30 basis points from 10.4% to 10.1%. The average suburban Class A vacancy rate increased 30 basis points from 9.6% to 9.9%, and the average suburban Class B vacancy rate decreased 80 basis points from 14.6% to 13.8% between quarters.

Of the 1,647 existing office buildings in our survey, only 47 have 100,000 SF of contiguous space available for lease or sublease. Further, only 16 have 200,000 SF of contiguous space available. Citywide, available sublease space totals 4.6 million SF or 2.2% of Houston’s total office inventory, but only 1.7 million SF of this sublease space is currently vacant.


Click the link below to visit our website and download the full report as a PDF:

http://www.colliers.com/en-us/texas/houston/marketreports...