Despite office brokers reporting increased activity and lease commitments, vacancy and availability continue to rise.
AN ANALYSIS OF ACTIVITY DURING THE FIRST FOUR MONTHS OF THE YEAR—AUGUST 2022 COMPARED TO AUGUST 2021.
Houston Office Vacancy at 25.5%
Eight months into 2022, overall vacancy is at 25.5%, up 100 basis points from last year’s 24.5%. Availability is 29.9%, up 80 basis points from August 2021 at 29.1%. The difference between this figure and the vacancy rate reflects expected future move-outs. The Houston office market has recorded 9.3 million sq. ft. of leasing activity comprised of both new leases and renewals, down 13% from this time last year at 10.7 million sq. ft. Net absorption (move-ins minus move-outs) is at negative 100,000 sq. ft., up significantly from negative 2.2 million sq. ft. year-over-year. In addition, the amount of construction underway is at 2.5 million sq. ft., down 28% from last year.
Large downtown office leases
In the largest office lease this year, law firm Baker Botts renewed and extended its downtown lease in the former One Shell Plaza at 910 Louisiana St. Baker Botts will now lease a total of 173,201 sq. ft., where the company’s Central Business District headquarters has existed for 51 years. The tower’s largest tenant is NRG Energy, which occupies 458,455 sq. ft. in the 50-story tower. Until now, Cheniere Energy’s 151,490 sq. ft. lease at Texas Tower was the year’s biggest office deal.
Oil and gas update
Over the past month, oil prices have trended downward. On July 22nd, prices closed at $94.70. Since then, prices have hit a high of $98.62 on July 29th and a low of $86.53 on August 16th. On August 26th, prices closed at $93.06. The August 26th Baker Hughes rig count report shows a slight rise in active rigs compared to July. Baker Hughes reported 765 active drilling rigs in the U.S. One month ago, the total active rig count was 758, and one year ago, it was 508 rigs. The oil rig count is currently 605 rigs, compared to 599 one month ago and 410 one year ago. The gas rig count is 158, compared to 155 one month ago and 97 last August.
Director of Research
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