Q3 2015 Houston Office Market Research & Forecast Report

HOUSTON - Oct. 27, 2015 - PRLog -- Known as the Energy Capital of the World, Houston is home to more than 3,700 energy related companies which make up just over half of the local economy.  Houston’s Q3 2015 office market indicators reflect the dramatic drop in oil prices that occurred in Q4 2014 and the subsequent reevaluation and adjustments in growth plans implemented by the “upstream” sector of the energy market.  The “mid” and “downstream” players remain very strong but tend to occupy less office space than the “upstream” companies.

Houston’s office leasing activity declined 39.7% between quarters, recording only 0.7 million SF in Q3 2015.  When compared to the 3.4 million SF recorded 12 months ago in Q3 2014, leasing activity decreased by 77.7%.  Tenants are renewing existing leases, but in today’s market, more companies are contracting, not expanding.

Over 1.4M SF of new inventory delivered during Q3 2015 and 41.4% of the space was vacant.  Houston’s office construction pipeline totals 10.8M SF and 62.4% is pre-leased.  The majority of the new space is located in suburban submarkets and is scheduled to deliver over the next 12 months.

Houston’s office market posted 338,584 SF of positive net absorption, pushing year-to-date positive net absorption to 891,825 SF. Average rental rates increased marginally, however submarkets with higher than average vacancy rates have slightly lower quoted rental rates than a year ago. Recent hikes in property taxes have increased operating expenses, thus increasing gross rental rates.

The Houston metropolitan area created 38,400 jobs between August 2014 and August 2015, an annual increase of 1.3%. Sectors creating most of the jobs contributing to the annual increase include Legal Services and Accommodation & Food Services.  Employment sectors that lost the most jobs over the year include Durable Goods Manufacturing and Real Estate & Rental and Leasing.

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