Houston Office leasing activity up 13% year-over-year

Houston Office

Eight months into 2023, the overall vacancy rate in the Houston office market was at 25.1%, up 90 basis points from 24.2% year-over-year. Flight-to-quality continues as demand for new construction leaves older buildings vacant. Year-to-date, net absorption—move-ins minus move-outs—is at-766,608 sq. ft., down from the prior year-to-date tally of 645,827 sq. ft. Year-to-date, leasing activity—comprised of new leases and renewals—registered at 9.1 million sq. ft., increasing 13% from the previous year-to-date figure of 8.0 million sq. ft. Leasing activity is mixed amid company expansions and downsizing. Waste Connections signed a 116,817-sq.-ft. office lease for expansion and renewal in The Woodlands at 3 Waterway Square Place in June 2023. On the flip side, Technip Energies plans to downsize—inking a deal for a 171,600-sq.-ft. lease in April 2023, currently occupying 298,000 sq. ft. near the Energy Corridor. The average asking rent currently stands at $30.29 per sq. ft., up slightly from $30.08 per sq. ft. year over-year.

Houston Industrial

The overall vacancy rate in the Houston industrial market as of August 2023 was 6.4%, up 100 basis points from 5.4% year-over-year. Completions have continued to outpace net absorption contributing to the increase in the vacancy rate. By year-end, vacancies are projected to exceed 7% according to CoStar. Year-to-date, net absorption is at 12.4 million sq. ft.—down 27% from the previous year-to-date amount of 16.9 million sq. ft. Year-to-date, deliveries totaled 22.8 million sq. ft, more than doubling from the previous year-to-date deliveries at 9.1 million sq. ft. A notable delivery in August 2023 was a 759,693-sq.-ft. distribution center at 4838 Borusan Road within the Southeast submarket. The average asking rent currently stands at $0.76 per sq. ft, up 7% from $0.71 per sq. ft. the prior year.

Houston Multifamily

Year-to-date, 12,072 multifamily units have been absorbed in Houston, tripling from 4,904 units this time last year. Overall occupancy in the Houston multifamily market declined to 90.4% in August 2023, down 100 basis points from 91.4% in August 2022. As of August 2023, 32,254 units filled Houston’s multifamily construction pipeline. Over the prior three years, construction averaged around 34,000 units annually. Year-to-date, deliveries have amounted to 16,946 units, increasing 81% from the prior year-to-date number of 9,382 units. The average monthly rate currently stands at $1,304 per unit, up slightly from $1,290 per unit the prior year.

Houston Retail

As of August 2023, the overall vacancy rate in Houston’s retail market was 5.1%, up 20 basis points from 4.9% the previous year. The vacancy rate is projected to hold steady as positive absorption continues over the next several quarters. Year-to-date, net absorption is at 1.9 million sq. ft., down 39% from the previous year-to-date total of 3.2 million sq. ft. Year-to-date, leasing activity tallied 4.5 million sq. ft., down 10% from the prior year-to-date amount of 5.0 million sq. ft. Retail construction was at 4.0 million sq. ft. in August 2023—slightly above the three-year average of 3.9 million sq. ft. Year-to-date, deliveries increased 67% from 1.4 million in August 2022 sq. ft. to 2.4 million sq. ft. in August 2023. The average asking rent increased 3% year-over-year, currently standing at $20.12 per sq. ft.

Alex Babcock
Senior Research Analyst
[email protected]
tel 713 275 9618