Market Trends
Sublease space inventory keeps rental rates stagnant
The Houston office space market slump may finally be steadying out as 2016 comes to a close. Even with the dampened oil market, some of the Houston office space sub-markets have remained in demand. With the recent announcement of former Texas Governor Rick Perry being appointed as Energy Secretary, one can only hope that his presence in this role will help bolster the oil market and Houston’s economy starting next year.
Demand for much of the Houston office space market is prevalent. But as the sublease market vacancies increase, the net absorption of the Houston market remains in the red. 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 experienced negative absorption of nearly -790,000 square feet of office space this quarter. There is approximately 3.3 million square feet of additional office space currently in development, with slightly over half being pre-leased. Rental rates are likely to stay low with this large addition of vacant office space, which will be adding to an already soft market. Surprisingly though, current asking rates have only dropped -1% in the past twelve months.
If you are seeking Houston office space for lease, now can be a good time to lock in a favorable rental rate before prices increase again. However, you’ll want to be sure to limit the annual rent escalations in your lease as sometimes those can increase faster than the marketplace.
Vacancy and Rental Rates
A surplus of vacancy has been the trend for Houston office space throughout 2016. The citywide office space vacancy rate is now 19.7%, which is a significant change from the 17.9% average of last year. Rental rates have remained steady though at an average of $30.47/sf for direct lease office space rates throughout the Houston market. This is slightly down from the 2015 average of $30.80/sf. These rates do not reflect the sublease rates that are currently found in the marketplace.
Additional Information: Houston Office Market Report Q4 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 Q4 2016 has been obtained from sources deemed reliable. While considered accurate, we make no guarantee, warranty, or representation about it.