Office Posts Negative Absorption
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Houstons office market slowed in Q1, according to data Avison Young released yesterday. We recorded 690k SF of negative absorption across the metro, compared with 837k SF of positive absorption in Q1 12. Our vacancy rate rose 50 bps from the end of the year to 11.2%, and overall rents declined $0.21. But research director Jeannie Roberts tells us we shouldnt be alarmed; negative absorption was caused by large blocks of sublease space hitting the market after a record year of oil and gas M&A, and the trend wont continue. (For those who already opened up the Armageddon bunker, hopefully it's resealable.)
The CBD was hit particularly hard. It recorded a 180k SF loss, though space is still tight at 9.9% vacancy and new availabilities will be snapped up quickly. (For example, Chevron already snagged 345k of the 560k SF Devon Energy vacated in Two Allen Center.) Jeannie says our market fundamentals are stronger than ever. We added nearly 119,000 jobs in the 12 months ending in February (a 4.5% increase). Our Class-A office product is doing very well; rents for the asset class rose $0.36 in Q1. The Katy Freeway submarket posted particularly strong numbers: It absorbed 151k SF, dropping its vacancy rate 100 bps to a killer 4.5%.