July 5, 2016
Office vacancy moves higher amid weak activity
Houston’s ongoing sublease saga, new deliveries and weak demand have resulted in higher office vacancy across the city.
The city’s sublease inventory has more than doubled since the fourth quarter of 2014. Much of the sublease glut can be attributed to energy sector companies, who, prior to the recent downturn in the price of oil acquired large blocks of space with plans for expansion only to find themselves needing to shed the excess space months later. In fact, all twenty of the top twenty largest sublease listings are being offered by energy sector companies.
In addition to growing sublease space, new deliveries are adding additional pressure to the market and office vacancy rate. In the first half of 2016, 1 million square feet of new office space delivered without preleasing commitments. Subsequently, total office vacancy ticked up to 18.5 percent during the second quarter. As a result, developers have by-and-large pressed pause, tabling plans for future projects until preleasing requirements are met.
Adding to the current mix, demand is weak across the board. In the second quarter of this year, Class A and B leasing activity amounted to only 1.38 million square feet. This was the first time in 15 years Houston’s office market failed to surpass 1.5 million square feet of leasing activity.
Click on the links below to view the full Houston office report and statistics for Q2 2016.