Steady Office Demand Tempers Houston's Negative Absorption
NRG vacating 479K SF of office space in Houston’s central business district resulted in negative absorption for the first quarter, despite a 10% increase in leasing activity and other positive indicators.
Houston saw 2.4M SF of office leasing in the first quarter, according to a Colliers report. The 10% quarter-over-quarter increase was led by energy companies like Boardwalk Pipeline, which leased 143K SF at 990 Town and Country Blvd., and Forum Energy Technologies, which renewed 81K SF at 10344 Sam Houston Park Drive.
With NRG’s move out of 910 Louisiana, which was expected to drop the building’s occupancy to 35%, Houston saw a reduction of 310K SF of office space occupied in the first quarter, but vacancy remained steady at 27.7%, according to Colliers. This followed 274K SF of negative net absorption in the fourth quarter, but Colliers found that Houston tenants leased 719K SF more than they vacated in 2025, the market's first annual gain since 2019.
“The NRG move did have a big impact on the numbers,” Colliers Research Director Deandre Prescott said. “That, just coupled with your Class-B move-outs, really pushed us back negative this quarter.”
Houston's office bifurcation continued, with Class-A buildings capturing 70% of the quarter’s leasing volume. The flight-to-quality trend is expected to persist, creating demand for the minimal newly developed product.
There was 500K SF of new office space delivered in the first quarter, including the 90% leased CityCentre Six and the 95K SF 2960 Riverby Road, which is fully leased by the Port of Houston Authority.
“It would be more of a negative trend if we were to see leasing slowing and negative absorption, but we're seeing leasing stay stable,” Prescott said.
Some continued demand comes from tenants in lower-class buildings moving to smaller spaces in nicer buildings. That is something Jenny Zhan, founder and CEO of Beyond International Management, saw despite just starting to invest in Houston Class-B offices last year.
Zhan’s real estate investment firm bought two Class-B office buildings in the Westchase District in April 2025: a 177K SF, eight-story building at 9800 Richmond Ave. and a 118K SF, six-story building at 11000 Richmond Ave.
Beyond International has boosted the buildings’ occupancies from about 40% to almost 90% by upgrading amenities and adding spec suites and coworking space, Zhan said. Small to midsized businesses can lease these spaces and share amenities like kitchens or information technology services with other tenants on their floor, she said.
“You can move the kitchen out. That saves you a lot of unnecessary space,” Zhan said.
She said she foresees the rightsizing trend sticking around for the next decade, but it doesn’t have to hurt office owners if they adapt to tenants’ needs.
“Our goal is to move the fixed monthly rental bill down, while price per square footage actually increases,” Zhan said.
Location is also extremely important, she said, adding that the Westchase District is supply-constrained. Zachry Engineering leased 53K SF at 3151 Briarpark Drive in Westchase during the first quarter, the fifth-largest office lease of the quarter, according to Colliers.
Overall, Houston’s office fundamentals remain strong and favorable, Prescott said.
“Companies are still looking at Houston as a primary market to be in,” Prescott said. “We’re optimistic that trend will continue, and despite the negative absorption we’ve seen this quarter, the overall sentiment is we’re optimistic for 2026.”
