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Houston's office market continued to reflect a tenant-favorable environment in 4Q25, with the overall vacancy rate elevated to 19.6% even as it declined slightly quarter-over-quarter. Leasing activity remained selective, with absorption positive but modest compared with historical norms, and overall performance characterized by a continued flight to quality, as tenants favored newer, amenitized space. Asking rents held steady near record levels, roughly around $30/SF NNN, supported by demand in prime assets, although effective rents were tempered by concessions in older buildings. These dynamics underscore a market that is gradually stabilizing but still navigating the impacts of structural change and elevated availability.

Houston's office market remained one of the nation's strongest in 3Q25, ranking among only three major U.S. metros with positive absorption year-to-date. Construction activity is limited, with just 2.3 million SF underway, about 80% preleased, primarily for build-to-suit and medical office projects in north and west Houston. This lack of new supply is helping stabilize fundamentals, keeping vacancy near 19.8% and average asking rents above $30 pSF. With few groundbreakings and steady demand for high-quality space, Houston's office sector is positioned for continued gradual improvement into 2026.

The Houston office market showed signs of recovery in 2Q25, bouncing back from prior slowdowns. Despite a dip in leasing activity, there remains a substantial 73 million SF of available office space, creating both opportunities and challenges for landlords and tenants. With only 2.4 million SF under construction, the market's development pipeline remains constrained because of the upward trend in construction costs. Sublease rates have stabilized, offering a more optimistic outlook as we approach 3Q25. The focus is now on managing older office inventory, as there is a limited new supply on the horizon. The market outlook for 3Q25 is cautiously optimistic, bolstered by improving leasing activity and steady vacancy rates, despite ongoing challenges with older inventory.