Market Trends
Leasing momentum is slow as an improving confidence in the market increases
Stagnant demand for Houston office space has continued into 2017. According to the Bureau of Labor Statistics, the employment rate in the Houston Metropolitan Area has remained fairly steady of the past year. There has been a slight 0.3% increase in non-farm employment from January 2016 to January 2017. In comparison to the US and Texas-wide economies, this is moving at a slower than average pace. Over 9,300 new jobs were created in the Greater Houston area over the past 12 months though.
With much of the Houston office space market being in a slump, there are a myriad of office space options for tenants to consider. How to find and properly negotiate an office lease in the best manner possible to ensure long-term savings can be a tedious task. This 1st Quarter Houston Office Market Report newsletter is distributed as a means of informing our clients and commercial tenants about ways to save time and money during the office leasing process.
The Houston office space market absorbed over 120,524 square feet of office space in the 1st quarter of 2017. This positive absorption is great to see as much of the past year was plagued with negative amounts. Class A office space is responsible for much of this positive absorption, as Class B space has still been experiencing minimal demand. The trend of stable rates has continued throughout the Houston, TX metro to the benefit of many small business owners. Surprisingly though, the current asking rates are now approximately 3% higher than they were at this time last year.
If you are seeking Houston office space for lease, it may be in your best interest to sign the longest lease term that you are comfortable with. Market rental rates won’t remain low forever and now is a good time to negotiate some additional concessions that come with a longer term lease commitment. Eventually the market demand will increase and rental rates will rise. However, it is important to plan for future growth needs and not limit your long-term options.
Vacancy and Rental Rates
Rental rates have remained fairly steady and concessions are becoming more readily available in 2017.. The market-wide Houston office space vacancy rate has risen to 17.0% over the past quarter. If you add sublease space to the mix, the actual vacancy rate is closer to 21.6%. The surplus of available sublease office space has had a great effect on the office space market. There is currently nearly 10 million square feet of office space available for sublease throughout the Houston area. Office space rental rates have increased slightly over the past 12 months to a now current average of $28.74/SF Gross for office space throughout the Houston market. This reflects an increase of $0.91/SF from an average $27.83/SF Gross twelve months ago.
Additional Information: Houston Office Market Report Q1 2017
If you are interested in rental rates for a certain location or are seeking Houston office space for lease, please contact us with your requirement.
Information in this Houston Office Market Report Q1 2017 has been obtained from Xceligent, Inc. and Commercial Gateway, sources deemed reliable. While considered accurate, we make no guarantee, warranty, or representation about it.