HOUSTON—The Oil Patch’s office market recovery has so far defied most of the nation, fueled by above-average job creation and limited new supply. According to Marcus & Millichap‘s Q3 report, Houston is among the tightest markets in the nation with a 13.9% vacancy predicted by the end of 2012.
Class A in the urban core is in excess of 90% occupied, but M&M predicts corporate relocations from leased space to build-to-suit properties will hamper the pace of recovery over the next few quarters.
In addition to multiple build-to-suits, the firm reports that the pipeline of planned projects has grown to include 13 million square feet of competitive office space. The Energy Corridor and Westchase area account for about 40% of that total.
In those cases where building owners are making significant investment in upgrades, class A assets are ready to compete on a nationwide scale. Such is the case, for instance, at Pennzoil Place, with its investments in a fiber-optic backbone to optimize building system controls, security monitoring, automated climate regulation, maintenance operations and lighting management.
Marcus & Millichap reports that asking rents for Houston office space rose 2.1% over the past year to $24.51 per foot. Year-over-year, class A asking did slightly better, with a 2.3% increase to $29.30 per foot. M&M predicts that asking rents will rise 3.5% overall and will soon see a faster rise to 4.3% as owners pare concessions.