Leasing, Rents Are Up, Savills Studley Says

HOUSTON--Savills Studley, the commercial real estate services firm, has released exclusive new Q3 findings on the state of Houston's office market.

Among the highlights:

• Class A Availability is Up: As hiring and leasing slow, the region's class A availability rate inched 0.7 pp lower to 17.5 percent in the third quarter, but has jumped by 3.8 pp year-on-year. In addition, the class A availability rate has soared by 12.3 pp to 18.1 percent in Katy Freeway and jumped by 9.4 pp to 30.3% percent in Northwest/290 Far.

• Overall Rents Rose: The region's overall average asking rent rose by 1.0 percent to $28.05 during the third quarter and has spiked by 15.1 percent year-on-year. Class A rent fell by 0.9 percent to $34.87 in the quarter but has jumped by 11.0 percent compared to a year ago.

• Leasing Rose: Leasing activity increased, rising by 6.0 percent to 3.5 msf in the quarter, slightly above the market's five-year average. Class A deal volume jumped by 23.0 percent to 2.0 msf, with strong increases in activity in Katy Freeway (590,118 square feet) and West Loop/Galleria (320,236 square feet).

Savills Studley's office outlook for the near future?

"Some Houston real estate industry experts have growing concern that the combination of rapidly dropping energy prices and soft energy demand could spell the end of the longest sustained positive office market in the past 30 years," Steve Biegel, executive vice president and co-branch manager at Savills Studley, told GlobeSt.com. "Wary veterans of Houston's historically cyclical real estate market are wondering if the cloudy future for the energy industry, combined with the prospect of increasing interest rates, will produce the next downturn."