HOUSTON-As mentioned in a report last week, Houston is considered the economy that's firing on all cylinders. However, in examining another Q1 2013 office report, we find that someone forgot to tell the office market the good news. Avison Young's First Quarter 2013 Houston Office Market Analysis points out that the office market recorded a negative net absorption of 690,452 square feet, compared with 837,370 square feet of positive net absorption racked up during Q1 2012.

Furthermore, the negative absorption has prompted the vacancy rate to increase by 50 basis points from the previous quarter to 11.2% out of a total inventory of 219.7 million. As can be anticipated, the absorption and vacancy drops have led to a downward pressure on rents. Full-service asking rates, overall, declined by $0.21 per square foot from the previous quarter to $23.88 per square foot. The exception is asking rates among class A product, which climbed from $31.18 per square foot to $31.54 per square foot.

Unlike the previous report posted, which indicated that the negative absorption was a class issue, the Avison Young research points out that the negative absorption issues are more of a geographic issue. The majority of the space losses took place in the NASA/Clear Lake submarket and downtown; the former because of continued governmental/economic uncertainty and the latter due to anticipated large relocations out of the submarket.

The report also sounded a positive note, pointing out that, continued increased employment growth in the area will lead to increased activity in the office market throughout the remainder of the year. Submarkets to pay attention to include the CBD, West Houston/Energy Corridor and The Woodlands in the far north metro area.