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HOUSTON-The fifth largest real estate market in the US, Houston saw growth in the energy sector by mid year that, along with increased diversification in the regional economy, has boosted absorption of office space and held vacancy rates at bay, according to data compiled by Delta Associates, Alexandria, VA. About 1.8 million sf was absorbed during the first half of 2000, much the same pace as in 1999, while the vacancy rate stood at 19.7%.

Deliveries amounted to 2.2 million sf, half of which was pre-leased on delivery. Last year, 7.5 million sf was delivered, but only 36% of it was pre-leased, according to Delta.

So far this year, rents have risen at about 2.5%, on an annualized basis, although some submarkets are enjoying double those increases.

Major trends here include increased absorption of class A buildings, which began to go up in 1998 after a 15-year lull. Also, less office space is being erected now than in 1998-99, which has tamped fears of overbuilding.

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