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HOUSTON-While office property rentals continue their slide, absorption is perking up, especially among class A office buildings, according to the latest office market report. In terms of both absorption and occupancy, class A space led the way, with 259,676 sf of absorption and an overall occupancy rate of 83.95%.

Kathryn Koepke, senior market analyst with O’Connor & Associates in Houston, explains to GlobeSt.com that this trend boils down to two areas: the Galleria and the CBD. “The bulk of the supply has been there, but now both of them have picked up in occupancy and absorption,” she explains. Companies are more comfortable with the offerings in the area and “road construction is not as prohibitive as it used to be,” she says. “You can actually drive to work now.”

In the meantime, rents continued their downward trek across all classes in the 171.7-million-sf inventory. Class A rents decreases eight cents per sf to $20.82 per sf. In the meantime, class D posted its fourth consecutive increase over the last quarter, ending up at $11.51 per sf.

Part of the reason for the overall decrease, Koepke says, is competition. “There’s been more aggressive leasing by the class A brokers, with rental rates being more competitive with the other classes,” she says.

While rents have likely bottomed out, she continues, we’re not going to see a sky-high increase any time soon. “As absorption gets stronger and occupancy picks up, owners will start raising the rents,” she says. “But there’s still a lot of space out there so I don’t see it accelerating so quickly in the future.”

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