Houston Office Absorption This Year Almost Quadruple All Of 2018, But We're Not Out Of The Woods
Key fundamentals show Houston’s office market is rebounding quickly so far this year.
Net absorption has been positive 762K SF year-to-date, according to NAI Partners’ February market snapshot. That is nearly quadruple all of 2018, which recorded a total positive absorption of 207K SF. The overall vacancy was at 21.1% in February, trending down from 22% in Q2 2018.
While the space being absorbed has improved, in many cases, the leases represent companies moving to new locations.
"For the Houston office market to thrive again it will need to start seeing an increased number of expansions, new entities taking space up, and existing companies not yet in Houston expand their operations to the Bayou City," NAI Partners Director Leta Wauson said in the report.
Several Houston submarkets have improved. The Galleria/West Loop submarket noted a 200% increase year-over-year in positive absorption, from negative 206K SF in Q4 2017 to positive 205K SF in Q4 2018. Vacancy in the submarket declined from 20.3% in Q4 2017 to 19.2% in Q4 2018.
On the flip side, the Texas Medical Center has had more tenants move out of space than move in, according to NAI Partners’ Q4 2018 submarket spotlight. The submarket record negative absorption of 39K SF in Q4 2018, though it had positive absorption of 57K SF in the previous quarter. Overall vacancy in the submarket is 5.2%, rising 20 basis points quarter-over-quarter and up 10 basis points year-over-year. It still shows tightness in the marketplace as the vacancy in other submarkets is in the double digits.