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Market Report

Houston Office Investment Forecast

2020 Outlook

Consolidation Among Energy Firms Leaves Large Blocks Of Available Space in Houston’s Major Office Districts

 

Supply overhang resulting in elevated competition for tenants. Houston developers have expanded office stock by 9 percent over the past five years, significantly outpacing the 3 percent demand growth recorded over the same period. That trend will persist into this year, keeping vacancy above the 20 percent threshold. As a result, rent growth will remain relatively muted as operators leverage significant concessions to attract firms seeking space in the market. Although elevated vacancy persists, most of the dark space is located in major office districts that could turn around in short order if accelerated hiring encourages more leasing activity, particularly in the energy sector. Among the seven largest submarkets, six have vacancy well above 20 percent entering the year. Global tensions in oil-producing regions could buoy energy prices in 2020, though the long-term outlook remains steady. Medical office, on the other hand, continues to shine in the metro, supported by demand around the Texas Medical Center, northern suburbs and west Houston.

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