Just How Deep is the Bottom?

Holland says the bottom depth is being driven by oil company vacancies of class-A products.

HOUSTON—Houston is well into the falling phase of its office market cycle, a market environment which favors tenants and buyers over landlords and sellers. The current falling phase of the office market began in early to mid-2014, prior to the oil downturn. Nevertheless, the falling office market has been greatly exacerbated by the downturn in the energy industry, likely leading to a deeper bottom than might otherwise be recorded, according to NAI Partners Data Insight, a forecast report of office vacancies.

In particular, there is a drastically softer class-A market than class B, as large amounts of class-A space are being vacated by oil and associated service companies. NAI uses office vacancy to examine Houston’s office market cycle, including forecasts of how deep the bottom may be and how differences may manifest among class A, B, and C buildings.