Skip to main content Skip to footer

Q2 2020 | Houston Office Market Report

Download Report

Houston’s office market weakens over the quarter and most likely will not see improvement in the short-term

Commentary by Patrick Duffy, MCR | President | Houston

The Houston office market weathered the first phase of the COVID-19 pandemic, as we anticipated, with limited immediate impact on “the numbers.” The lock-downs and social distancing forced companies to embrace a work from home strategy and begin the process of rethinking their office utilization going forward. The majority of surveys we have seen indicate that the vast majority of office workers and their managers were pleasantly surprised by the productivity they were able to maintain in a remote environment. Returning to the office has been a slow process as the stay-at-home orders were incrementally lifted. Many companies have decided to keep all of their workers out of the office for the balance of the summer and some have told employees to plan on working from home indefinitely. Most companies have adopted a voluntary return to the office policy combined with strong protocols for reducing the risk of infection at the office.


As we begin the 3rd quarter, we have seen an increase in activity from potential office users in pursuing new leases. It appears that after an initial shock and some “wait and see” delays, most companies are starting to realize that we will be operating in a COVID-19 reality for some time and that they can no longer just sit back and wait for the virus to resolve.

The overall vacancy rate increased to 20.5% from 20.1% at the end of Q2. This increase in the vacancy rate was caused by net negative absorption of 513,316 square feet and the delivery of 454,523 square feet of new product. We also observed an increase in sublease availability of approximately 1,000,000 square feet in the second quarter. The bulk of this space was placed on the market by companies concentrated in the energy and petrochemical industries, both hit hard by the drop in demand for refined products caused by the global lock-down.

Asking rents were relatively flat from the previous quarter and the second quarter last year. Downtown saw the most significant decline year over year and suburban asking rents increased very slightly. Our team reports that Landlords continue to fight to hold face rates, but are being much more generous with free rent and tenant improvement allowances for larger, good credit tenants, effectively reducing the occupancy expense over the term.

Newer buildings continue to perform better than the older inventory as the “flight to quality” continues in Houston. With subdued demand and over 4 million square feet of office under construction, we expect the overall vacancy rate to increase over the next twelve months. Companies will be re-balancing their office strategy with more work from home AND more social distancing in the office, which will move us toward a less dense office occupancy. Less density, more distance requires more space – that need will be off-set by more employees working from home. We will not clearly understand the net impact of these two forces on net office space requirements for some time, but we do expect the office market to remain weak for the foreseeable future.

Historical Available Sublease Space


Of the 1,661 existing office buildings in our survey, 87 buildings have 100,000 SF or more contiguous space available for lease or sublease. There are 27 options with 200,000 SF available for lease or sublease. Citywide, 6.6 million SF of sublease space is listed as available and 2.3 million SF of the space is vacant.

Absorption & Demand

Houston’s office market posted negative net absorption of 513,316 SF in the second quarter, pushing the mid-year 2020 total net absorption to negative 794,972 SF. CBD Class B space recorded the only gain in Q2, posting 17,121 SF of positive net absorption, while suburban Class B space reported the largest loss, posting 246,412 SF of negative net absorption. Since tenants typically do not move into lease space immediately after signing a lease, absorption lags and can occur at anytime after. We believe absorption numbers will trail even longer than usual in the short-term due to the “stay-at-home” orders amid COVID-19, so absorption will more than likely remain negative moving into Q3 2020.

Rental Rates

Houston’s average asking rental rate increased over the quarter from $29.59 per SF to $29.77 per SF. The average CBD asking rate dropped from $39.38 per SF to $39.10 per SF and Houston’s average suburban rental rate rose to $27.34 per SF from $27.02 per SF. Overall, rental rates only increased by 0.6% on a quarterly basis and by 0.1% on an annual basis. Suburban Class B rates posted the largest annual percentage increase of 4.6%, while CBD Class A rates posted the largest annual percentage decrease of 3.9%.

Leasing Activity

Houston’s office leasing activity fell 35% over the quarter from 4.5M SF to 2.9M SF primarily due to the Covid-19 “stay-at-home” orders in the greater Houston area. Leasing activity includes new/direct, sublet, renewals, expansions in existing buildings and pre-leasing in proposed buildings. Some of the more notable transactions that did occur in Q2 2020 are listed in the table below.

Sales Activity

Houston’s office investment sales volume decreased significantly over the quarter from $462 million in Q1 2020 to $74 million in Q2 2020. The average sales price per square foot trended up from $268 to $281 per SF annually and Houston’s average office cap rate moved from 6.8% to 6.7%.

Office Development Pipeline

4.3 million SF of office space is under construction and approximately 63% is pre-leased. 2.4 million SF is spec development of which 29% is pre-leased. Below is a summary of the office buildings under construction with a GBA of 150,000 SF or greater.

Q2 2020 Houston Office Highlights



Q2 2020 | Houston Office Market Report

Download Report
Related Experts

Lisa Bridges

Director of Market Research


Lisa joined Colliers in 2010 as Director of Market Research and has 37 years of commercial real estate experience. Lisa initiates proactive market research projects to further the business goals of the company. She writes and prepares 29 market reports annually, including quarterly reports on Houston's retail, office, industrial and healthcare properties.  Further, she prepares statistical ownership reports for various clients as well as an annual Houston Economic Overview. Lisa also creates PowerPoint market presentations, trade journal articles, and other marketing materials supporting the company's business endeavors. She works with senior management in planning the company's marketing strategy and public relations support for local and national conferences, luncheon meetings, recruitment programs, and special events.  Lisa works closely with the company's brokers to develop effective custom market research material specific to existing and potential clients.

Lisa serves on the Colliers Editorial Board, the Colliers U.S. Research Council, and is a recipient of the Colliers Researcher of the Year Award.

Lisa earned the Commercial Property Research Certification (CPRC) from Colliers University.  CPRC is the first and only accreditation for commercial real estate research professionals. It offers a professional development path to increase strategic and tactical expertise in marketing/research, knowledge of the industry and capabilities with commercial real estate tools.

View expert

Patrick Duffy



Pat is the managing director of brokerage services in Houston for Colliers.  Pat has more than 37 years of experience in commercial real estate as a producing broker, educator, sales manager and managing broker. Pat relocated to Houston from Florida where he served as President of the Colliers offices in Tampa Bay, Orlando and Southwest Florida.

​Pat started his career as Director of Marketing for a real estate data base company where he spent three years interviewing top brokerage houses throughout the United States and assisted in their automation needs as a consultant and instructor.   As President of the Colliers Houston office, he has direct responsibility for recruiting, training and managing the sales and leasing teams, property management and business plan creation and coordination for the company.

Pat was responsible for building and organizing retail service delivery capabilities for Colliers worldwide as chairman of the Colliers Retail Specialty Group (96-2000, 2002-2013).  Pat is also a founding member of the Colliers Oil and Gas practice group.  Among his academic accomplishments, Pat wrote the capstone case study for the CCIM program's final course offering from 1986 - 1998.  The case study combined the marketing and financial concepts taught by CCIM to allow the students to apply the material to a simulated commercial property disposition.

He has been an instructor for NACORE’s (now CORENET) Intermediate Finance Course and was awarded the Top-Rated Faculty Certificate in 2000.  Pat has been quoted in national and regional publications including the Wall Street Journal, Dow Jones, Newsweek, Real Estate Forum, National Real Estate Investor, Globe Street and others.  He has been an expert panelist for NAIOP, Real Share, ICSC and many other real estate organizations.

Pat has served as a member (and Chairman) of the Colliers Managers Steering committee, the Board of Directors for Colliers USA and is the past Chairman of the Colliers USA Board of Advisors.  In 2003, Pat was awarded Colliers Manager of the Year.  In 2004, he was chosen by Colliers as the Tom Richardson Award recipient, an honor based on strength of character. In 2012, Pat was chosen as the recipient of the Colliers USA Pinnacle Award for service excellence.  Pat is the only person in Colliers to win all three of these awards.  He served as an instructor for Colliers University 2010-14.   In 2017 Pat was recognized as a “Best Boss” by Real Estate Forum magazine.

View expert