Houston office vacancy decreases for first time in 14 quarters

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Oct. 2, 2018

By: Ronnie Deyo, executive vice president and office team lead

total office vacancyTotal vacancy in Houston’s office market decreased in the third quarter, snapping a streak of vacancy increases that dates back to the fourth quarter of 2014.

Total office vacancy decreased from 24.5 percent in the second quarter to 24.2 percent in the third quarter. While only a slight drop, the decrease is a welcome sign for a supply-weary market.

The office market also recorded 435,000 square feet of positive net absorption and a 10 percent decrease in its sublease inventory. Both are improvements that hint at market stabilization.

Positive absorption was the product of increased leasing activity and no new office deliveries. The market saw 33 transactions of more than 20,000 square feet, up from 19 transactions greater than 20,000 square feet in the second quarter. Approximately 60 percent of third quarter leases were companies relocating within the market, signaling tenants are taking advantage of tenant favorable market conditions.

The CBD and Katy Freeway West submarkets, home to the largest sublease inventories in Houston, saw improved leasing volume and accounted for 63 percent of leasing activity in the third quarter.

Total vacancy in the Katy Freeway West submarket decreased from 37.4 percent to 33.6 percent quarter over quarter, after recording 778,460 square feet of positive net absorption.

While the Houston office market is in the early stages of stabilizing, there is still a long way to go before we reach a more balanced office market. In the meantime, flashes of improving conditions are encouraging to everyone in the market.

View our full Q3 2018 office market report.

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, Ronnie has represented some of the most recognizable corporations including AON, KPMG, Morgan Stanley and The Williams Companies. Connect with Ronnie on LinkedIn.