Houston Office Leasing Volume Cools Off

The office sector continues to grapple with ongoing challenges characterized by elevated vacancy rates but is showing signs of edging closer to recovery, that’s according to a recent report from Avison Young. Nearly 79% of the city-wide vacancy is concentrated in buildings constructed 20 to 50 years ago, while office product built since 2010 is only 12.2% vacant.

“Falling interest rates and tamed inflation could entice owners to convert outdated or aging office buildings into a variety of other uses, especially if there are government incentives,” said Wade Bowlin, Principal and Managing Director of Avison Young’s Houston office.

Leasing velocity, which started off strong in the first half of 2023, has cooled significantly due to the tightening financial conditions and economic slowdown. This has led to a 28.9% decline in annual leasing volume compared to the prior year, and a 38% decline compared to the five-year pre-pandemic average.