Market Trends
Office market recovery slow, extent of Harvey damage still unknown
The recovery of the Houston office space market has been slow throughout 2017. As things started looking up, the devastation caused by Hurricane Harvey has everyone fearing for the worst. However, according to the Bureau of Labor Statistics the unemployment rate in the Houston Metropolitan Area has dropped over the past year. There has been a 1.8% increase in non-farm employment from July 2016 to July 2017. This was a great sign of an improving Houston-area economy. Over 54,000 new jobs were created in the Greater Houston area over the past 12 months.
Until the flood waters fully recede, it will be hard to determine the total effect of Hurricane Harvey on the Houston economy and the commercial real estate market. Before the storm, there was ample amounts of office space ready to occupy. However, to properly negotiate an office lease in the best manner possible to ensure long-term savings was proving to be a tedious task for most tenants. This 2nd 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 had negative absorption of nearly -215,000 square feet of office space in the 2nd quarter of 2017. Houston “Class A” office space showed positive absorption with lower tier options reflecting negative amounts. Rental rates have remained steady throughout most of the Houston, TX metro area. To the benefit of many small business owners, concessions are becoming much more common.
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 demand 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 will rebound and rental rates will rise. However, it is important to plan for future business expansion needs though and not limit your long-term options.
Vacancy and Rental Rates
Rental rates have remained fairly steady and concessions are becoming more readily available as 2017 progresses. The market-wide Houston office space vacancy rate has risen to 17.2% over the past quarter. There is currently over 9.3 million square feet of office space available for sublease throughout the Houston area. The current market-wide average asking rate is approximately $28.34/sf gross, with an average of $37.16/sf gross for downtown office space. Sublease office space options throughout the Houston area are now leasing for an average of $25.42/sf gross.
Additional Information: Houston Office Market Report Q2 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 Q2 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.