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Q3 2021 | Houston Office Market Report

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“The office market stabilized in Q3 as expected. Absorption was only very slightly positive, but the positive absorption reverses what had been steady declines. The COVID Delta variant definitely caused many companies to further delay action but, in Houston at least, the move back to the office has been steadily increasing.”
Patrick Duffy, MCR | President | Houston

Key Takeaways

  • Houston office workers heading back to office
  • Vacancy continues to increase
  • Absorption turns positive
  • Construction pipeline decreases over the quarter
2021_Q3_Office_Vacancy Rate    2021_Q3_Office_Net Absorption
 2021_Q3_Office_Under Construction    2021_Q3_Office_Lease Rates

Houston Highlights

Houston’s office market posted positive absorption for the first time in 2 years, recording 27,430 square feet in Q3 2021. The vacancy rate rose over the quarter from 22.9% to 23.3%, a historical high. Houston’s office inventory increased slightly with 1,018,000 square feet of new inventory added in Q3. There is still 3.2 million SF of office space under construction and most of the new inventory which is 47% pre-leased is expected to deliver this year. 2.3 million square feet is spec development, of which 60% is pre-leased.

Market Indicators

2021_Q3_Office_Market Indicators

Historic Comparison

2021_Q3_Office_Historic Comparison


Market Fundamentals

2021_Q3_Office_Market Fundamentals


Executive Summary

Commentary by Taylor Wright | Vice President

The spot price of West Texas Intermediate or “WTI” is now at multi-year highs, currently trading around $78.00 per barrel. As commercial real estate professionals, even though we’re not in Oil and Gas directly, living in Houston, we’re all in Oil and Gas and, as such, pay close attention to commodities pricing. According to the Greater Houston Partnership, Oil and Gas directly contributes 35% to Houston’s GDP. Indirectly it’s probably closer to double that. As office brokers, we tend to use current WTI price as an indicator for future office growth and activity; however, “Break-Even” or other oil field profit calculus is not the predictive driving force it once was.

According to Bloomberg NEF, US Shale Production will expand modestly over the next 18 months. The lack of expansion is primarily due to the amount of debt shale producers took on when WTI was priced much lower. So now, with multi-year highs on commodities pricing, these producers are choosing to pay down existing debt obligations and reward shareholders as opposed to drilling new wells. This same logic applies to conventional oil producers as well. If there is no significant expansion by these oil and gas producers, there is no need to hire additional employees, which means there is no need to expand their existing office footprint. Mergers and acquisitions may change the landscape some, but long gone are the days of “defensive” leasing during the “Shale Gale,” which ended January 2015. Additionally, the office market is still facing headwinds given the protracted COVID-19 Pandemic. Locally owned private companies have been the most active during this time, as they are not beholden to decision-makers on the East and West Coast. Large corporations are still in a holding pattern as they try to work through protective protocol implementation, social distancing within the office space and juggling my least favorite acronym, “WFH.”

Anecdotally, I can tell you that activity has picked up drastically from the same period last year in the more prominent submarkets. Landlord concessions are substantial for even shorter lease terms, those that are 3-5 years; rents have stayed flat or decreased slightly, and aggressive Landlords, those willing to bend both on rate and concessions for quality tenants, are winning new tenants. All that being said, there is currently a multi-generational supply of office space on the market and it will take some time before things significantly improve.


Construction Activity Timeline

2021_Q3_Office_Construction Timeline


2021_Q2_Office_Submarket Map


Q3 2021 | Houston Office Market Report

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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.

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Taylor Wright

Vice President


Taylor Wright, Vice President with Colliers, is part of the Occupier Advisory team in the Houston office. Taylor specializes in working with users of commercial real estate to assist them in making smart occupancy decisions in line with their occupancy goals. Taylor successfully pairs data analytics, and financial modeling with proprietary market knowledge to deliver customized occupancy opportunities to each client, while saving them their most valuable resource, time.

Taylor is a native Houstonian. He attended Memorial High School and graduated from Texas Tech University, earning a Bachelor of Arts degree in 2005. Taylor, his wife Paige and daughter Tallulah “Lula” live in the Memorial area of Houston.

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