What Does the Future Hold for Office Leasing?

11451 Katy Freeway is a boutique office building in the Energy Corridor submarket.

HOUSTON—As the long and grinding year of 2016 came to a close, sentiment surrounding the Houston office sector took a positive turn as several indicators point to the beginnings of a market rebound, GlobeSt.com learns. Unfortunately, these indicators occurred primarily on the economic side with factors such as oil and jobs gaining ground, whereas office metrics have generally continued to weaken following the recent downturn, according to Transwestern.

In the fourth quarter, impacts of the energy downturn were still being realized as net absorption for all classes of office was again negative, posting -737,000 square feet, with class-A product coming in at -230,000 square feet, GlobeSt.com learns. The overall office availability rate (all space marketed as available for lease) declined modestly, down -0.1%, to finish the year at 21.9%, a direct result of the decrease in available sublease supply. Total availability for class-A and B properties closed the year at 23.3% and 21.2%, respectively. Direct vacancy finished at 14.2% and should continue to rise as sublease space and more efficient new construction serve as desirable alternatives for leasing activity, leaving vacant direct space in its wake.