HOUSTON—The Texas office market is looking particularly positive development-wise, with 6 million square feet of office space delivered in the second quarter. However, sales activity is still far from its peak in the second half of 2016 and second quarter dollar volume ended 34% below its first quarter level, according to a recent office report from Yardi-Matrix.
The Texas office sales trends demonstrate cyclical historical office sales–where the third and fourth quarters represent the greatest sales volumes during the last four years of history. The average price per square foot across the four Texas markets decreased by 8%, but even at its current level–resting at $270–is the second-highest level since 2013, says Yardi-Matrix.
There were 15 deals completed in DFW–twice the number of deals closed in Houston in second quarter–but the average price per square foot in Houston reached $354, making it 76% pricier than the Dallas market's average at $201.
The report highlights that vacancies rose 20% in the first quarter, which is a 220-plus basis point year-over-year increase. In addition, class-A vacancies have faltered but class B improved. Negative yearly absorption was 2.5 million square feet and asking rents have ceased declining but are flat. This constancy in rates (4%-plus year-over-year) as new supply becomes available shows market strength and scalability, says Yardi-Matrix. Class A price per square foot rates are running 25% over class B and 56% over class-C rates.
“Everyone wants to know if and when Houston has reached the bottom. We believe that Houston's decline has begun its slow ascent but the variations in the energy market make it an 'up/down' recovery,” Doug Ressler, director of business intelligence, Yardi-Matrix, tells GlobeSt.com. “New construction and repurpose of existing office to medical office buildings (of less than 50,000 square feet) represents a strong market in Houston. Investment demand is still present in Houston demonstrated by the fact that the top-priced Houston market was home to the quarter's two biggest Texas sales (i.e. local REIT Whitestone dished out $158 million for BLVD Place in the biggest deal of the quarter).”
The report concluded that the Texas office markets show the greatest growth potential based on factors such as net immigration gains, right-to-work and business-friendly governance.
HOUSTON—The Texas office market is looking particularly positive development-wise, with 6 million square feet of office space delivered in the second quarter. However, sales activity is still far from its peak in the second half of 2016 and second quarter dollar volume ended 34% below its first quarter level, according to a recent office report from Yardi-Matrix.
The Texas office sales trends demonstrate cyclical historical office sales–where the third and fourth quarters represent the greatest sales volumes during the last four years of history. The average price per square foot across the four Texas markets decreased by 8%, but even at its current level–resting at $270–is the second-highest level since 2013, says Yardi-Matrix.
There were 15 deals completed in DFW–twice the number of deals closed in Houston in second quarter–but the average price per square foot in Houston reached $354, making it 76% pricier than the Dallas market's average at $201.
The report highlights that vacancies rose 20% in the first quarter, which is a 220-plus basis point year-over-year increase. In addition, class-A vacancies have faltered but class B improved. Negative yearly absorption was 2.5 million square feet and asking rents have ceased declining but are flat. This constancy in rates (4%-plus year-over-year) as new supply becomes available shows market strength and scalability, says Yardi-Matrix. Class A price per square foot rates are running 25% over class B and 56% over class-C rates.
“Everyone wants to know if and when Houston has reached the bottom. We believe that Houston's decline has begun its slow ascent but the variations in the energy market make it an 'up/down' recovery,” Doug Ressler, director of business intelligence, Yardi-Matrix, tells GlobeSt.com. “New construction and repurpose of existing office to medical office buildings (of less than 50,000 square feet) represents a strong market in Houston. Investment demand is still present in Houston demonstrated by the fact that the top-priced Houston market was home to the quarter's two biggest Texas sales (i.e. local REIT Whitestone dished out $158 million for BLVD Place in the biggest deal of the quarter).”
The report concluded that the Texas office markets show the greatest growth potential based on factors such as net immigration gains, right-to-work and business-friendly governance.
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