Houston Office Market Report

Opening quarter brought a setback after progress in 2023. Sentiment surrounding Houston’s office sector was improving entering this year, as the metro’s 50-basis-point vacancy reduction in 2023 was tied for the third strongest among major U.S. markets. That trend was not sustained across the first three months of 2024, however, as the negative net absorption of 1.1 million square feet during that span marked the weakest quarter since 2020. The recalibration was not unanticipated as the new year brought on the expiration of additional pre-pandemic leases, putting large blocks of space on the market. Through the rest of 2024, the relinquishment of space via firms opting not to renew leases should be mostly offset by new demand. For instance, the construction pipeline was roughly 85 percent pre-leased as of May. As such, about half of this year’s expected vacancy increase should have already occurred.