2023 News Archive

The Houston Office market continued to grapple with ongoing challenges throughout 3Q23. One of those challenges is a continued high office vacancy rate at 18.7% due to overbuilding in the 1980a€™s, tenants downsizing their office footprint, and choosing to sign leases in newer, class A, office buildings instead of older, vintage buildings. This vacancy rate comes as no surprise to the market because it has been a constant obstacle for the past few years. Available inventory of 77.4 million SF for lease continues to be a cloud over the office market. Landlords are still struggling to fill large spaces as tenants are consolidating and reevaluating their needs. Despite these weaknesses, quality lease space and high-end building amenities are factors that are keeping the office market alive.

The land market in the Houston region picked up in 2Q23 from a slower 1Q23. Single-family home sales fell 12.8% in June 2023 compared to last year; down to 8,542 from 9,845 homes. Developers and homebuilders continue to work through land acquired in 2022 to deliver lots and homes as quickly as possible. Homebuyers are getting more comfortable with interest rates after an extended period without any reprieve in sight, but knowing they will refinance when interest rates improve. The good news is home sales are strong and inventory is falling back into a healthy range of available product. While interest rates remain high, the homebuilding impact on the land market continues to be robust as a result of Houstona€™s strong job market and population growth.

Houstona€™s population growth in the past 12 months has motivated retailers to launch and expand local businesses. This increased growth has elevated the Houston retail market to the third strongest market in the nation when it comes to new demand. The Houston retail market availability rate is 5.7% as of 2Q23, which balances out the high demand and low supply within the last year. To keep up with residential growth, more than 4.2 million SF of new retail space is expected to be delivered to the market this year, which is 3 times more than what was delivered in 2022. In 2024, we will determine if the market will be able to absorb that much new inventory without affecting rental rates.