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Houston Office Market Faring Better Than Expected


Houston's Q1 office market is struggling due to the low price of oil, but it appears to be doing better than expected. Houston’s citywide vacancy rate remained unchanged at 15.3% over the quarter; however, the annual rate rose significantly, increasing by 220 bps from 13.1% in Q1 2015.

Data from Colliers International shows sublease space was a major factor; it doubled between Q4 2014 and Q4 2015, increasing from 3.8M SF to 8M SF, and then increased to 9.2M SF in Q1 2016. Houston’s office leasing activity declined 30.3% over the year, and 5.5% over the quarter. Houston’s office construction pipeline is shrinking and totals 6.3M SF, 50% of which is pre-leased. Houston’s office market posted 1.3M SF of positive net absorption in Q1 2016 and average office rental rates have remained relatively flat.

None of these numbers seem inspiring, but we can be thankful they aren't worse. So far, Houston has avoided a nose-dive.