Q3 Houston Office Numbers Marked by Flight to Quality

Absorption figures were somewhat confusing when it came to Houston’s Q3 2019 office reports. While CBRE pointed to “continued job growth and a reviving Houston economy” as the reason for positive absorption, NKF joined Colliers International in pointing out negative absorption, adding that “leasing activity waned moderately over the quarter.” NAI Partners also pointed out that “with vacancy hovering above 50 million square feet, positive quarterly absorption of 58,000 square feet does little to move the needle.” Colliers, in the meantime, noted that leasing activity has been concentrated in “pockets.”

In terms of outlook, Colliers analysts noted that Class A landlords are busy upgrading older product to slow the departure of tenants that prefer newer assets. NAI Partners agreed, explaining that tenants are flocking to newer buildings to offer “best in class amenities for their employees.” This demand, NAI Partners continued, is “leading owners of older, more traditional Class A buildings to invest heavily in upgrades to stay competitive.”

Meanwhile, the NKF researchers pointed out that, while Houston’s economy is in growth mode, having added 81,900 jobs in the past 12 months, trade tensions and the potential for a global slowdown could be problematic, as Houston’s “share of the GDP that is attributable to exports has nearly doubled,” since 2003.