HOUSTON—The short- and long-term effects of Hurricane Harvey are certainly the biggest story of the third quarter. Many Houston office tenants were displaced, with the most notable damage occurring along Buffalo Bayou between the reservoirs and downtown, including the Energy Corridor, Riverway and along Allen Parkway.

“There are some class-A buildings that are not yet back open, including the AIG campus, which will probably not reopen until the end of the year,” Noah Kruger, managing director of Savills Studley, tells GlobeSt.com.

At 28.4 %, the region's high availability has presented displaced tenants opportunities for temporary space, and most tenants are expected to return to permanent space by year's end, according to the third quarter office market report from Savills Studley.

With extensive sublease opportunities, high availability and quality product, Katy Freeway/Energy Corridor and CBD currently offer some of the best value plays for tenants. Although the CBD accounted for more than a third of total leasing volume in the third quarter, overall and class-A availability rates increased to 28.2% and 26.5%, respectively, says the report.

For the 11^th straight quarter, the Houston market had negative net absorption. Landlords will continue to feel more downward pressure as the glut of available sublease space expires and turns back over to building owners.

While the storm resulted in most firms losing at least two weeks of productivity, the region still saw strong sales activity and steady leasing in third quarter. Despite coming down from the nine-quarter office sales high in second quarter, sales have totaled $3 billion during the last 12 months—nearly double the sum from the previous year. Despite trailing the long-term average, third quarter leasing activity of 2.3 million square feet was in line with the prior three quarters.

“Harvey punched us in the mouth but we're moving forward,” Kruger tells GlobeSt.com. “Generally speaking, the city is dusting itself off, or rather, drying itself off and getting back into the swing of things. The city has a strong sense of pride and purpose, and people helping each other in so many ways gives a great sense of community. It provides perspective on what's important in life and is a good lesson in patience and resilience.”

Instant Insights /

Harvey's Gut Punch Gives Way to New Perspective

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