HOUSTON OFFICE MARKET – 3rd QTR 2015
Houston’s second place rank in Fortune 500 headquarter locations, coupled with one of the healthiest population and employment growth rates among major U.S. cities, has resulted in one of the most stable commercial real estate markets in the nation over the past ten (10) years. Houston’s population growth, affordable housing and cost of living, young educated work force and a thriving energy industry, Houston faired the 2008 global recession better than all of the nation’s largest employment bases, and Houston was first to recover all jobs lost in the recession. The overall office market turned positive in 2010 with absorption just under 2 million square feet citywide. The citywide total absorption from 2011 through 2014 totals just over 21,300,000 square feet. This year started strong for the overall market with total citywide absorption at 1,677,915 square feet through the third quarter 2015.
The Houston office market continues to benefit with the growing local economy supported by energy, the Port of Houston and the medical sectors of the economy. The overall citywide vacancy rate is 12.9%, which is up from 10.8% at year end 2014. We anticipate rental rates level off in the central, northern and western submarkets for the second half of 2015. As shown below, the outlook for positive job growth (projected at 2% for 2015 and increases to 2.8% in 2016) and decreasing new office supply over the next two (2) years.
Houston is the energy capital of the world so with the price of oil decreasing from $100.00 per barrel to $40.00
per barrel from August 2014 to March of 2015, the industry has reacted quickly. Capital spending for new
exploration and production were diminished across the board anywhere from 10%-50% in 2015.
This has forced the reduction in new drilling programs and oil service providers to adjust their work forces in a major way. The bright spot in this decline has created an expansion with the midstream companies (storage pipeline).