Q2 2022 Office Space Report: Houston, TX
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Q2 2022 saw many interesting developments in the office space sector in Houston, Texas. Chief among these was a quarterly increase in overall Class A asking lease rates, along with a quarterly increase in Houston office space construction.
Let’s take a deeper look into Houston, TX’s office space sector performance in Q2 2022.
General Area Overview & Demographics
Houston is the largest city in Texas, with an estimated population of 2,228,250. This population number also puts Houston as the fourth-largest city in the United States, trailing behind only New York City, Los Angeles, and Chicago.
The median value of owner-occupied housing units from 2016 to 2020 in Houston was $186,800. The city has an unemployment rate of 4.3%, and the annual percentage change in employment was 6.1% in Q2 2022.
Summary of Houston Office Space Performance in Q2 2022
Office space performance in Q2 2022 is still recovering from the work-from-home phenomenon that has forced occupiers to make adjustments to how they deal with office space.
Many organizations are still focusing their resources on short-term problems in the face of the current economy. This has stifled the office space sector, as many large organizations that could make an impact on the performance of office space are currently focusing elsewhere.
What are office space rents like in Houston?
The overall Class A asking lease rate for Houston office space in Q2 2022 was about $36.00 per square foot, which was an increase from $35.10 per square foot in Q1 2022. The Q2 number is also an increase from Q2 2021 as well.
This quarterly and yearly increase forecasts that Q3 will likely see an increase also as employers push for a return to the office.
Purchase & Leasing Activity
Q2 saw most of Houston’s office space purchase and leasing activity come from smaller, private companies.
This is due to larger organizations dealing with the impact of the increasing amount of work-from-home employees.
While these issues demand most of the attention from these large organizations, investors can expect most of the relevant purchase and leasing activity to be done by smaller, private companies.
Notable Office Space Deals in Houston in Q2 2022
Some notable office space deals in Q2 2022 include:
- The leasing of 1233 West Loop S. This is a 23k square foot space.
- The leasing of 700 Louisiana Street. This is a 26k square foot space.
- The leasing of 845 Texas Avenue. This is a 151k square foot space.
- The leasing of 3 Allen Center. This is a 14k square foot space.
- The sale of 450 Gears Rd. This is a 189k square foot space.
These are some among many notable office space deals in Houston that took place in Q2 2022.
New Office Space Development Activity in Houston in Q2 2022
Office space construction has picked up compared to Q1 2022: There are currently 2 million square feet of office space under construction in Houston.
However, while this is an increase from the amount of space under construction in the previous quarter, it is a decrease from Q2 2021, which saw almost 3.5 million square feet of office space under construction.
Market Forecast for Houston’s Office Space Market
There are a few key market indicators that investors can look at to try and get an idea of where the Houston office space market is headed.
These include unemployment rates and annual percentage changes in employment. The current unemployment rate in Houston is 4.3%, and the city has a 6.1% annual change in employment.
These indicators can be used to look at the market forecast for data such as vacancy rates, net absorption, office space under construction, and overall Class A asking lease rates.
The office vacancy rate for Houston in Q2 was about 17% and is forecasted to remain quite stable in the coming quarters. Net absorption was 224.4k square feet in Q2 and is expected to rise.
There are 2 million square feet of office space under construction in Q2, and this number is expected to decrease in future quarters. The overall Class A asking lease rate in Q2 was about $36.00 per square foot, and this number is expected to increase.
Takeaways for Office Space Investors
One positive sign for office space investors was the increase in construction in Q2 2022, but that number is forecasted to drop in future quarters.
Office space investors should keep a close eye on net absorption and Class A asking lease rates. These two metrics are expected to rise, but whether or not they do is something that investors should look at when analyzing the office space market in Houston.
Stay diligent, do your research, and happy investing.
Methodology
All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.
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