Q1 2025 Houston Office Market Report

Houston’s office market continues to favor occupiers, with elevated vacancy and generous concessions defining leasing conditions across much of the metro. Despite a modest rebound last year in activity, vacancy has crept back up to 22.8%, the second-highest among major U.S. cities, driven largely by weak demand in older office product. 

 

In contrast, newer, amenity-rich buildings, particularly those in mixed-use environments near population centers, are attracting the bulk of leasing activity. The Katy Freeway East submarket stands out, with vacancy below 10%. Meanwhile, the Galleria/West Loop submarket has seen vacancy rise to over 30%, a sharp increase fueled by aging building inventory.

 

The development pipeline remains limited with just 2.0 million SF underway, most of which is pre-leased. Projects like CityCentre Six and 1550 on the Green illustrate the strong demand for newer, premium space. With little new supply on the horizon, competition for quality space is expected to continue to tighten, further widening the gap between trophy assets and legacy buildings.

 

Looking ahead, economic uncertainty and lingering questions regarding inflation, interest rates, and potential tariffs are prompting some companies to take a more cautious approach to long-term real estate decisions.