Houston Office Market Heading South

HOUSTON-Overall, the third quarter resulted in few changes to Houston’s office market, but emerging trends show troubled times ahead. Trione & Gordon ONCOR International’s Houston office says the reality is there are no obvious signs of near-term job growth, major employers are likely to slash even more positions and the CBD continues to get weaker.

Sanford Criner, Trione & Gordon principal, said the third quarter office numbers aptly reflect the stock market pummeling of many top employers in Houston, specifically Dynegy, El Paso, Reliant Resources, Calpine and Williams Communications.

A Chevron Phillips commitment, made a long time ago to a suburban market, has helped to push the CBD into a negative absorption of 650,694 sf year to date. In the third quarter, the CBD added 175,827 sf of empty office space, 25,294 sf more than what came on line three months ago. Other high negative Q3 readings came from the Energy Corridor, 108,261 sf; Westchase, 99,536 sf; and West Loop, 92,909 sf.

As a result of the changing office scene, the suburbs year to date have posted 588,239 sf to the positive, with 97,040 sf evolving from the third quarter. Greenway Plaza leads the pack with 197,484 sf. Next in line are the Woodlands, 184,387 sf, and Kingwood, 176,901 sf. The Woodlands gain came from Chevron Phillips while Kingwood got its boost from Administaff’s completion of a 147,000-sf office building on its 28-acre campus.

Based on year-to-date numbers, Houston is going south. It slipped from a positive reading of 16,332 sf at the end of the second quarter to 62,455 sf to the negative at the end of the third quarter. In turn, the broad picture has pushed up vacancy has to 13.54%. It was 13.31% at the second quarter close. Rent, for now, is flat. The average stayed exactly the same as last quarter, $18.45 per sf.