Q1 2023: Houston Office Market Report

Uncertainty continues to cause paralysis in the Houston office market despite several positive indicators signaling ongoing economic recovery. Even as inflation runs high, job growth in the city is relatively strong and unemployment low. In addition, employees are venturing back to the office in greater numbers as the city ranks among the highest in the nation in workplace occupancy with a midweek peak nearing 70 percent, according to security solutions firm Kastle Systems. Yet, demand is slow to return with quarterly leasing volume down over 30 percent as companies have become more accustomed to flexible work models. With total availability at a historic level over 25 percent, Houston ranks the highest among all major US metros. Sublease space also remains elevated, tallying an increase of 2.5 million square feet since the start of 2020 to reach 7.3 million square feet. This glut of available space paired with hesitation regarding office occupiers and their space needs depresses rent growth, which is among the weakest in the US.