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Houston leads the nation in positive net absorption in the office sector after four years of annual occupancy losses

Houston leads the nation in positive net absorption in the office sector after four years of annual occupancy losses July 13, 2023

Houston leads the nation in positive net absorption in the office sector after four years of annual occupancy losses

Houston, TX – Avison Young today released its Second Quarter 2022 Office Market Report for Houston. After four consecutive years of annual occupancy losses, the Houston office market saw positive net absorption in the first half of 2023. The city recorded 281,000 square feet (sf) of positive net absorption, led by the CBD submarket with 224,000 sf absorbed, followed by the Energy Corridor and The Woodlands with 218,000 sf and 209,000 sf, respectively.

“We are finally seeing that slow upward trend for the office sector,” said Wade Bowlin, Principal and Managing Director for Houston. “The flight-to-quality trend has helped us experience expansion in the market, particularly on the West Side.”

Office leasing activity continues to gain traction with nearly 2.7 million sf leased in the second quarter of 2023. The surge in corporate relocations to the West Side of town is driving this trend, as companies snap up large blocks of office space to be closer to their workforce.

Principal and office tenant representation specialist Anthony Squillante stated, “As the population center of Houston moves further west due to substantial growth in major suburbs like Katy and Cypress, corporations are being prompted by their employees to locate their offices closer to their workforce. This paradigm has caused the Energy Corridor to experience substantial leasing activity during the second quarter this year. Further, as a result of this leasing activity, the remaining large blocks of class A space have been substantially reduced.”

The total vacancy for the Houston office market sits at 26%. Due to the flight-to-quality trend, class A and trophy assets outperform the broader market with the quality and amenities they offer. The direct vacancy rate for trophy assets stands at 16.4%, while class A product built since 2010 is 11.3%.

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