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Houston Office Space Market Update

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The fourth most populous city in the U.S., Houston, Texas, is home to over 2.1 million people.  Initially the commercial and railroad hub for the export of cotton, Houston was pivotal in the development of the Texas petroleum industry upon the discovery of oil in 1901.  In the 1970’s, Houston experienced a population boom due to the numerous employment opportunities offered by the petroleum industry.  The 1990’s recession led to a more diversified economy, focusing less on petroleum and more on aerospace and health care.  Today, Houston is known for its energy industry, with renewable energy resources, such as wind and solar, growing.

Houston is a multi-cultural city with the heart of its business sector being located in the downtown district.  Downtown Houston is home to several Fortune 500 companies, such as Chevron, JPMorgan and Shell, with a workforce of over 150,000.  In the first quarter of 2013, Houston’s CBD office market experienced the majority of activity with over 558,000 sq ft of occupancy and overall Class A asking rents averaging $36.86 sq ft.

But the good news doesn’t stop there.  Houston’s office space market is made up of several core submarkets which are experiencing solid growth as well.  The 2013 office market outlook for Houston’s most in-demand submarkets is positive, with expected gains in absorption and increases in rental rates.  From a Tenant perspective, those willing to look outside the core submarkets are expected to see lower rental rates and more favorable concessions from landlords.  Overall, inside the core submarkets, Houston is expected to retain its landlord favorable conditions until new developments come to market.

Market

Vacancy

Net Absorption

Rental Rates

Downtown

9.8%

-291,698

$36.38

FM 1960

30.2%

1,508

$24.68

Katy Freeway

3.8%

157,085

$29.92

Northwest

11.3%

20,049

$22.80

South

0.00%

0

$25.63

Southwest

18.2%

-30,085

$17.01

Woodlands

2.3%

21,669

$31.49

*1Q 2013 - CoStar Property

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By: James Osgood

Houston Office Space

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