Q4 2025 Houston Industrial Market Report

Houston’s office market is stabilizing entering 2026. Net absorption remained positive for four consecutive quarters, the longest stretch since 2015, supported by flight-to-quality demand and owner-user acquisitions. Vacancy improved from 20.2% to 20.0%, and available space fell to a five-year low of 70.3 MSF. Demand is strongest in walkable suburban districts like Katy Freeway East, where buildings near CityCentre are 94% leased, while the CBD is still giving back space.

 

Leasing volume fell sharply. Tenants signed roughly 13 MSF in 2025, a 16-year low against a 2015–2019 average of roughly 20 MSF. Only one lease above 100,000 SF was signed all year, and average deal size was just 3,000 SF, about 25% below pre-pandemic norms. With large Class A blocks scarce, more occupiers are renewing rather than relocating.

 

Tenant leverage remains substantial. Concessions are elevated, with build-out allowances at $75–90/SF for legacy buildings and $110–120/SF for new spaces. Asking rents have held near $30.00/SF, with overall growth of just 0.6%, well below inflation. Amenity-rich newer developments are the exception, posting growth of 10–20%.

 

Construction remains limited. Just 1.4 MSF is under construction,0.4% of inventory and less than half the 10-year average, with roughly 85% preleased. Most activity is in fast-growing suburbs and the Medical Center, where life science expansion has driven nearly 2 MSF in deliveries over the past three years. With new supply near a standstill, landlords are relying on renovations or exploring conversions to backfill older space.