Market Conditions Still Favor Houston Office Tenants but Maybe Not for Long
The Great Recession began in December of 2007, but it wasn’t until September of 2008 that Houston reported net job losses. This coincided with the arrival of Hurricane Ike and in the first quarter of 2009 the recession made’s it’s impact on the Houston office market. Houston absorbed 13.9 million square fee of office space from 2006-2008 and as 2009 began the overall vacancy rate was 12.8% for all classes of office space.
Since the beginning of 2009, the cumulative net absorption for the Houston office market is negative 1.3 million square feet and the overall vacancy rate is currently 15.9%, after a peak of 16.6% at the end of the 3rd quarter of 2010. The Houston office market recovery appeared underway in the 4th quarter of 2010 when the market recorded 618,000 square feet of positive absorption. However, since that point while still positive, net office space absorption is trending in the wrong direction.
Houston – Historical Net Office Space Absorption (All Classes)
The Window is Still Open for Office Tenants
Given the current state of economic uncertainty, recent job figures and the fact the office market typically lags movements in the labor market by 2-3 months, then it may very well be 2012 before Houston’s office market experiences any significant improvement. Furthermore, as we move into an election year there is a tendency for corporations to take a wait and see attitude towards hiring.
Many Houston office tenants have already taken advantage of softer market conditions and secured attractive long-term lease deals. However, for those who have not particularly those with leases rolling in 2012 and 2013, the window of opportunity still exists, but maybe not for long if we see rapid employment growth from the energy sector which is always a possibility in Houston.