Jan. 2, 2018
By: Ronnie Deyo, executive vice president and office team lead, JLL Houston
A record amount of sublease leasing activity was not enough to balance supply-heavy market conditions in 2017.
At 2.8 million square feet, subleasing activity increased by 46.5 percent over 2016’s total and accounted for nearly one-fourth of all leasing activity in 2017, the highest share on record. The uptick in activity coupled with natural expirations, helped reduce the market’s sublease inventory by more than 2.3 million square feet in 2017. Today, that inventory sits at 9.3 million square feet.
Despite this progress, new deliveries and limited growth among tenants pushed total vacancy to 23.2 percent during the fourth quarter and the market closed the year with negative net absorption to the tune of 2.8 million square feet.
The construction pipeline continues to decrease as the market remains solidly tenant favorable. There is approximately 2 million square feet of office space under construction in Houston, down from 3.5 million square feet at the same time last year.
On the demand side, leasing activity for leases greater than 20,000 square feet totaled approximately 4.8 million square feet in 2017, up from 3 million square feet in 2016. Additionally, the average lease term for this group increased approximately 16 percent from 2016 to 2017. We look to 2018 for a continuation of this progress and a meaningful rebalancing of the Houston office market.
Get our full Q4 2017 office market report here.
About the Author
Ronnie Deyo is an Executive Vice President/International Director at JLL, where he serves as the leader of JLL Houston’s Office Tenant Representation group. During his 30-year career in commercial real estate, Mr. Deyo has represented some of the most recognizable corporations including AON, KPMG, Morgan Stanley and The Williams Companies. Connect with Ronnie on LinkedIn.