Skip to main content Skip to footer

Q3 2020 | Houston Office Market Report

Download Report

Houston’s office market posts negative absorption in Q3 2020, pushing the year-to-date total to over -2.8M SF

Commentary by Patrick Duffy, MCR | President | Houston

The Houston Office Market continued to contract during the third quarter as the COVID-driven, government-mandated lockdowns continued. After experiencing negative absorption of 1.14 million square feet in the 2nd quarter, the 3rd quarter followed posting 1.33 million in negative absorption. We track absorption as the change in physically occupied space between the current quarter and the previous quarter. Negative absorption literally means that less office space was occupied vs. discussing an increase in vacant space, including new space delivery. In the 3rd quarter, Houston delivered 490,000 square feet of new product, pushing the year-to-date total of new inventory to 1.2 million square feet. Including the new product, vacancy, therefore, increased by 1.8 million square feet. The net result was to drive the vacancy rate up to 21.3% of the inventory we track. Obviously, not a positive trend for the Houston office market.

Despite the increase in vacancy, asking lease rates stayed steady. However, the concession packages became slightly more aggressive in the last quarter, especially free rent and tenant improvement allowances. The landlord’s theory seems to be “accelerate occupancy, but hold the line on the long-term rental income,” which has historically been a sound strategy during perceived short-term economic downturns. Given the bounce back in GDP (up 35%) and employment (unemployment fell to 7.9% nationally and low 7’s in Texas) during a still COVID restrained 3rd quarter, this strategy seems sound. As the COVID slowdown subsides and the global economy slowly restarts, expectations are that GDP will continue to recover at a relatively high rate in the next several quarters and that employment will continue to improve. All of this bodes well for the office market in the mid-term.

The move toward remote work, a clear threat to office occupancy, seems to have lost the shine we felt in the early parts of the lockdowns. Most corporate leadership consensus seems to have shifted from “it’s working surprisingly well” to “we do not see our normal productivity, collaboration and innovation that we had when we were all working in the same space.” Every seasoned office advisor knows that office space is not just a place to work – if that is all it is, then remote work would quickly replace it. Office environments are designed to attract talent, enhance collaboration and productivity, act as a cultural leverage point, and create environments where our employees’ intellectual capital is best deployed. If this is true, while remote work might get the in-box emptied, it does not provide for the rest of the package required to truly leverage our workforce’s talents.


We expect that the Houston office market will continue to show weakness well into 2021 and will not recover to a balanced (12-15%) vacancy for many years. There are almost 4 million square feet of new office product in the near term pipeline that will add to our vacancy issues and keep the market landlord soft and tenant-friendly for quite some time. The new product has performed very well and has approximately 10% less vacancy than the overall market. This move toward quality and new, more efficient buildings will likely continue at the expense of older A and B office product. Unfortunately, it also encourages new development when the new buildings have superior leasing volume and can command higher rents.

As you will see from our submarket analysis in this report, Houston is a vast market and the submarket matters. The Houston MCA is physically larger than 9 states. From a population perspective, we are larger than over 30 states. This summary includes all of Houston as if it is a single, homogenous market – it is not. Even within submarkets, some office buildings have significant competitive advantages to others. Colliers believes that these quarterly reports, with the submarket data tables included, can give the reader a reasonable understanding of the market’s health and trends, but will never replace a specific requirement analysis for granular understanding by a specific occupier/user. We hope you find this information helpful and welcome the opportunity to dive deeper with our clients.

Historical Available Sublease Space


Of the 1,683 existing office buildings in our survey, 93 buildings have 100,000 SF or more contiguous space available for lease or sublease. There are 28 options with 200,000 SF available for lease or sublease. Citywide, 5.7 million SF of sublease space is listed as available and 2.8 million SF of the space is vacant. 

Absorption & Demand

Houston’s office market posted negative net absorption of 1.3M SF in the third quarter, pushing the year-to-date 2020 total net absorption to negative 2.8M SF. CBD Class A space recorded the only gain in Q3, posting 31,018 SF of positive net absorption, while suburban Class A space reported the largest loss, posting 701,731 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 Q4 2020.

Rental Rates

Houston’s average asking rental rate decreased over the quarter from $30.00 per SF to $29.85 per SF and Houston’s average suburban rental rate fell to $27.39 per SF from $27.58 per SF. In contrast, the average CBD asking rate increased from $39.35 per SF to $39.41 per SF. As stated in the commentary, rental rates have remained relative flat; however, landlords have been more generous with concessions.

Leasing Activity

Houston’s office leasing activity fell 42% over the quarter from 3.2M SF to 1.8M 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 Q3 2020 are listed in the PDF download below. 

Sales Activity

Houston’s office investment sales volume increased over the quarter from $110 million in Q2 2020 to $207 million in Q3 2020. The average sales price per square foot trended up from $197 to $276 per SF annually and Houston’s average office cap rate remained steady at 6.7%.

Office Development Pipeline

3.9 million SF of office space is under construction, and approximately 67% is pre-leased. 2.2 million SF is spec development, of which 34% is pre-leased. Below is a summary of the office buildings under construction with a GBA of 150,000 SF or greater.

Q3 2020 Houston Office Highlights



Q3 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