Houston office vacancy rate continues to climb

The overall office vacancy in Houston continues to climb. The overall vacancy rate is around 15% (depending upon which broker report you read). Today the Houston Business Journal confirmed that Freeport-McMoRan has put 474,000 sq feet of downtown office space  on the market.

Since 2000, the vacancy rates have varied from a low of around 11% in 2008 and late 2014 to 17% in early 2005 and 14% in early 20110. Obviously Houston has added a considerable amount of office space over that period. Given the huge burst of new office space added between 2012 and 2014 and the sharp fall in activity for the whole energy sector, I would expect the peak to be much higher than 17%.

Overall asking rents are beginning to fall. Class A rental rates are around $35 per sq ft, Class B around $21. Class A rental rates for sublease space are falling sharply and are now around $26. That discount of $9 is much higher than the long-term average discount of around $5.

 

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