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Slow Start, Momentum And Hope: Houston Brokers Predict What 2024 Will Bring


After a slow start to the year, brokers across Houston saw deal volume pick up in the latter half. Despite elevated interest rates, difficulty securing capital and a large drop-off in new development, many brokers told Bisnow they expect the end-of-year momentum to carry into 2024.


“I think it’s going to continue into next year,” said Gus Lagos, a senior vice president of investments for Marcus & Millichap who specializes in the sale of retail centers. “Then, if the optimists are correct, if by the summertime the Fed starts dropping the rates … then we can have a banner second part of next year.” 

Lagos said he isn’t that optimistic himself, predicting the Federal Reserve will hold rates where they are through next year. “But I hope I’m wrong,” he said. 

The Federal Reserve Open Market Committee held the base rate at 5.25% to 5.5% this month, and most of its members believe rates will be lower next year. 

While some asset classes, like industrial and food and beverage, have had solvent years despite the larger market conditions, all are impacted in some way by high interest rates and will be watching closely for them to start dropping next year.


There is pent-up demand from people who want to buy houses, so if interest rates drop, that could push Houston’s multifamily occupancy down, said Bruce McClenny, industry principal with MRI Apartment Data.

But there are numerous factors in the multifamily market that make it difficult to predict, McClenny said. Houston’s rent growth remains positive, at about 1%, but it will likely “settle down,” he said. 

“We’re seeing all these tremendous swings,” he said. “After the pandemic, everything is arbitrarily controlled.” 

There also remains a significant construction pipeline of multifamily product, which will keep deliveries almost as high in 2024 as they were in 2023. While many people are thinking 2025 will provide relief from new multifamily deliveries, McClenny said he has heard numerous developers talking about whether that might be the right time to get in on the action. 

Overall, McClenny said he expects winners and losers in every multifamily segment, with some rents growing and some declining. It will likely all shake out to flat rent growth in 2024, he said.

Meanwhile, a wave of distress began impacting Houston’s multifamily market, leading to several foreclosures in 2023. There is significant money sitting on the sidelines, and McClenny said he expects opportunities will continue to arise.



2023 ended up being a better year than most people anticipated for office leasing volume, said Lonna Jenks, a vice president on JLL’s Houston tenant representation team. 

“There were a lot of [companies] that were pushing off making a decision for so long. Finally, those deals were made, a lot of them in the last two quarters,” Jenks said. 

Jenks said she thinks 2024 will start off slow, but there will likely be a good amount of activity in the second half of the year, though she believes the average deal size will be smaller. 

There have been a “few big pops” out in West Houston this year, but those have been the anomaly, said Anya Marmuscak, senior vice president for JLL. Fluor’s lease for 308K SF at Three Eldridge Place in a relocation from Sugar Land and Kiewit’s expansion to 277K SF in Energy Center I were some of the largest office leases in 2023.

Most leases are around 10K SF now, Marmuscak said, adding that is because of the same hybrid work, flight-to-quality and right-sizing trends the office market has been seeing for years.

“In terms of quality of space, that trend is going to continue,” Jenks said. “Everyone has relocated to enhance their work environment or be closer to their employees.” 

However, one trend likely to emerge in 2024 is companies realizing they downsized too much and they need to lease more space, she said, and that could result in some larger deals next year. 

As companies move into nicer, amenitized offices, more employees have been returning, Marmuscak said. It’s difficult to plan for peak times and determine how many people may be in the office, she said.

“[Companies] will have to go back and look at their floor plate to see if they took enough space or not,” Jenks said.


The first six months of 2023 saw deal volume down about 60% to 75%, Marcus & Millichap’s Lagos said. But the market picked up from the summer until year-end, which Lagos credited to people’s lagging acceptance of the market circumstances. 

“When a market changes like this … the sellers need to be realistic more than the buyers. The sellers are stuck in yesterday and the buyers are stuck in reality,” Lagos said. “So the seller has to come off a little bit on their pricing to get a deal done.” 

Cap rates are keeping it a seller’s market, he said. Prices may be below the peak, but sellers are still getting high prices when considering historical data for Houston, he said.

That’s why Lagos predicts deal momentum will carry into 2024. If interest rates drop, that could lead to a banner fourth quarter, and if they don’t, it will likely be a year of slow, steady deal volume, he said.

“I suspect there will be more sales next year, based on the trend we saw this year,” Lagos said.

“At least we’re in Texas and in a major market, where a lot of money is being spilled,” he added. 

Houston has been very strong in the restaurant and bar space this year, said Emily Durham, senior vice president of food and beverage advisory for JLL. 

“A lot of the time this past year, we have not been able to find locations for all of the tenants we have looking,” she said. “It’s been extremely competitive.” 

The highest demand is for spaces that have already been restaurants, as they are cheaper and easier for an operator to get open, Durham said.

“You're seeing the demand for second-generation spaces far exceed the supply,” she said.

Home Run Dugout's Biergarten Baseball mini-field.

Additionally, development is down because of the rocky capital markets conditions, which also makes the market more competitive, Durham said. So next year, Durham expects to see high-quality chefs and restaurants, including some from overseas, competing for spaces inside the Loop, she said. 

She also expects to continue seeing eatertainment concepts — like Home Run Dugout in Katy or Puttshack in The Highlight at Houston Center — which are “just on fire,” she said.

“Eatertainment happens to require larger spaces, so from a real estate perspective, it’s wonderful,” Durham said.


While 2023’s industrial deal volume was down from 2022, it was still incredibly strong, JLL Director of Texas Research Rachel Alexander said. 

“I think it exceeded our expectations,” she said.

There is also a large number of tenants in the market pipeline, which is how JLL judges future demand, she said.

“Those levels remain at or very near highs as far as volume looking ahead for next year. The average deal size remains high on those,” Alexander said. 

The momentum in industrial leasing also picked up in the second half of 2023.

“We think that’s going to roll into next year and allow us a healthy start to 2024,” Alexander said.

The southeast submarket, near Port Houston, will likely continue to outperform other submarkets, she said. 

Construction levels should end 2024 at less than half of Q1 2023’s peak. Groundbreakings have declined every quarter this year, and that is expected to level off in 2024 with total quarterly construction levels at or below the five-year average, Alexander said.

“Developers in Houston have always been really good about self-checking when there's been a lot of supply, they kind of naturally pull back,” she said. “It's easier to turn off an industrial project because it’s so easy to get them out of the ground versus a multifamily housing project or a high-rise.” 

While industrial demand cooled off faster than its supply pipeline this year, the decrease in construction is expected to ease the rise in industrial vacancy and rebalance the market going into 2024. 

Life Sciences

Houston’s life sciences market is at an “interesting inflection point,” said Zach Leger, a senior associate with Stream Realty Partners. That is because there is a large amount of purpose-built product coming online during a downturn in the biotech industry.

“It’s been a pretty tough year,” Leger said. 

New funding is now more similar to 2019 levels than 2020 to 2021 levels, since the latter saw low interest rates that drove a ton of money toward biotech, “whether it was necessarily a good idea or not,” Leger said.

One argument for bringing life sciences business to Houston is that it is cheaper than other established clusters, he said, but the high quality and therefore high price of renting the product being delivered can present a challenge next year.

“It’s hard to recruit people from those clusters here,” he said.

Workforce development in Houston also remains disjointed, Leger said. 

But the market also has some positive things going for it, like the passage of Proposition 10, which will bring significant cost savings. Houston also has major opportunities in the contract development and manufacturing space, and product in the suburbs could work for that, he said. 

“There weren’t a ton of deals this year, so I hope more [next year],” Leger said. “But I don’t think Pfizer is setting up shop in Houston any time soon.”