Latest Quarterly Snapshot

The Houston office market continues to add new buildings while struggling to lease vintage products. In 1Q23 the vacancy rate remained unchanged from 4Q22 at 18.8%, causing Houston to keep its record of highest vacancy in the nation among major markets, but interestingly is the 8th largest market for new construction with over 108 new office buildings under construction totaling 5,164,000 SF. Houston is the 7th largest US office market with 350 million SF, but the Houston market has struggled to breathe new life into its older buildings as new companies are drawn to its new, LEED and green properties with state-of-the-art amenities and modern, fresh designs. Houston continues to grow and its higher quality properties classed as trophy and class A+, continue to outperform the wider market evidenced by the pre-leasing strength of new buildings under construction at 63.9% before the doors are even opened.

The Houston land market has been hot for several years and 2022 was an exceptional year finishing 2nd in the nation issuing 47,633 single family permits and 28,153 multi-family permits for a total of 75,786 total residential permits. This is an all-time high for the Houston MSA dating back to 1988, but supported more by multi-family permits in 2022 than in a typical year. Single family home sales topped 95,100 homes sold, down 10.9% from 2021, but 36,500 new home starts helped make for an incredible year. Factoring in this year-over-year decrease, single family home sales for 2022 was $39.3 billion, but down only 1.5% from 2021 at $40 billion with steady home sale price increases for half of 2022.

The retail market in Houston appears to be well positioned for a possible economic recession. Leasing activity is strong, and landlords are raising rents in strong, high-demand market areas. Consumer demand has been notably high for home improvement, drive-thru, discount, pharmacy, and beauty concepts. Similarly, the largest move-ins over the next couple quarters will be grocery stores. This high demand allows developers to continue to bet on Houston's eagerness for new retail development.