Market Trends
Rental rates remain steady amid increasing vacancies
The Houston office space market continues to soften throughout 2016 as the oil slump remains. However, Texas as a whole has continued to do well. According to the Texas Workforce Commission, the State of Texas has added over 170,000 jobs in the past year.
Leasing needs for Houston office space remains, but the surplus of available office space has left more supply than demand. Now is a great time to lock in below market office lease terms, as eventually the market will shift up and rental rates will rise again. This Houston Office Market Report newsletter is distributed as a means of informing our clients and commercial real estate tenants about ways to save time and money during the office leasing process.
The Houston office space market had negative absorption over -330,000 square feet of office space this quarter. There is nearly 3.8 million square feet of additional office space currently in development, of which less than half of it is currently pre-leased. This large addition of vacant office space to an already soft market is expected to keep rates low until demand picks up again. Surprisingly though, current asking rates have only dropped -0.4% in the past twelve months.
If you are seeking Houston office space for lease, you may want to consider locking in a low rental rate for an extended lease term. If you have a long term existing lease with a rate that is now above market, it may be a good time to solicit an early lease renewal or re-negotiating an existing lease to obtain more favorable terms. However, you’ll want to be sure not to limit your potential growth plans. Market rental rates have been low due to decreasing demand and landlords are willing to offer concessions to get deals done. Eventually the demand will grow and rental rates will rise again.
Vacancy and Rental Rates
Dropping demand for Houston office space has continued through 2016 with the citywide office space vacancy rate dropping to 18.5% from last year’s average of 17.7%. Rental rates have remaining somewhat stagnant with an average of $30.46/sf for direct lease office space rates throughout the Houston market. This is slightly down from the 2015 average of $30.73/sf. These rates do not reflect the sublease rates that are currently found in the market.
Additional Information: Houston Office Market Report Q3 2016
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 Q3 2016 has been obtained from sources deemed reliable. While considered accurate, we make no guarantee, warranty, or representation about it.