HOUSTON-PM Realty Group’s Q3 Houston Office Market Report pointed to continued strength throughout the metro region, noting that high employment growth continues to drive office space demand. Specifically, direct net absorption during the quarter totaled a little more than 2.1 million square feet, bringing the year-to-date total to 3.7 million square feet.

Furthermore, class A direct occupancy rates stood at 90.2%, moving up 110 basis points within the past year to reach a six-year high. The report points out, however, that class B was no slouch in the leasing department either – though direct occupancy rates declined by 30 basis points to 84.3% (due to new space deliveries outpacing demand), the class experienced a 50-basis point improvement during the past year.

To no one’s surprise, the Katy Freeway/Energy Corridor led the way in construction and leasing activity, posting close to 1.1 million square feet of direct absorption growth so far in 2013, and 723,577 square feet for the quarter. Following is the FM 1960 submarket (northwest), which recorded 491,088 square feet of direct absorption and The Woodlands/Conroe, which posted 340,308 square feet of direct absorption. Occupancies in these submarkets stood at 91.9%, 91,3% and 90.3%, respectively.

PMRG forecasts that continued leasing demand will drive rental rates higher in the active submarket, while scheduled new deliveries will help tenants in their search for quality space. Furthermore, the report points out that as tenants are demanding more amenities and controlled environments to assist with recruitment and retention, many older buildings are undergoing renovations and repositioning to keep up with the quality of new construction arriving on the market.