Third Quarter 2023 | Houston Office Market Report

HOUSTON - Oct. 11, 2023 - PRLog -- "Houston's office market fundamentals reversed course during the third quarter with decreased leasing activity and rising vacancy.

Tenants continue to evaluate their office space needs, with numerous downsizing and consolidating and a few adding sizable sublease space to the market.

Landlords are also feeling pressure as the costs of capital and construction continue to climb, challenging their ability to offer aggressive concessions to stay competitive."

Danny Rice | President

Key Takeaways

• Office vacancy rate increases 50 basis points
• Sublease space rises after recent decline
• Net absorption negative for first time in 2023
• Leasing volume drops

Houston Highlights

Houston's office market posted negative net absorption of 1.0 million square feet during the third quarter, reversing the positive totals from the first half of the year. This dropped net absorption to a negative 485,701 square feet year-to-date. The overall average vacancy rate increased to 22.3% from 21.8% at both midyear and year-over-year. Leasing activity plunged 54.7% from second quarter, with only 1.7 million square feet counted during the third quarter. Year-to-date activity totals 8.4 million square feet, with the Katy Freeway submarket accounting for 29% of that total. Three other submarkets, The Woodlands, West Loop and CBD, each accounted for 10% to 12% of the total; the four submarkets collectively represented 62% of the overall total. The under-construction pipeline remains limited at 1.6 million square feet as proposed projects remain on hold, while five buildings totaling 329,170 square feet were delivered during the third quarter. Houston's overall average gross rental rates nudged up to $30.06 from the previous quarter's $29.87 but declined from the same period last year. Houston's Class A average rental rate increased to $35.96 per square foot from $35.46 in Q2 2023.

Read the full report here: https://www.colliers.com/en/research/houston/q3-2023-hous...