Houston Office Market Report

Demand sorts by space and place. The glut of office space is receding as right-sizing and construction slow, even as leasing fell 17 percent over the year ended June. Flight to quality remains evident, with Class A vacancy down 120 basis points annually versus 20 basis points for Class B/C. Tenants are also favoring expanding western suburbs with lower rents, alongside premium downtown towers. Vacancy fell 160 to 330 basis points in Westchase, the northwest FM 1960 corridor, and the CBD, though rates still topped 23 percent. West Loop improved less, while Greenway Plaza vacancy jumped nearly 600 basis points as aging offices lost tenants, including Boardwalk Pipeline’s move to CityCentre.