The Long Road Ahead
March 23, 2021
By: Anthony Fritsche

While the current softness of the Houston office market is well documented, some industry experts have suggested we have already reached the “bottom” and things will start improving in 2021. Others feel it will be 2022 or later before the initial signs of recovery become apparent.

What is less debatable, however, is that the timeline for the market to return to “normal” will be a lengthy one. So how long will it take?

Simple math suggests if the Houston Class A office market absorbs space at the same average annual pace it has since 2005, almost every submarket is years (plural) away from returning to their statistical average occupancy levels.

Takeaways from the data:

CBD + Galleria + Greenway Plaza…collectively make up 52% of the total Houston market and are decades away
Energy Corridor…statistics are heavily enhanced by the fact that 46% of the entire city’s Class A absorption has occurred here since 2005. Availability of new Class A+ product helped push the absorption
Greenspoint…mathematically never gets there
Sugar Land…the only submarket statistically healthier today than its historical average since 2005
Westchase…its average absorption includes a 1.8 million SF year in 2016
Woodlands…historically statistically dominant, still over a year away

Will these timelines ultimately play out? Unlikely. But it does emphasize the need for Houston to attract and retain new corporate users at a pace that exceeds the average for the healthy return of the market and the city itself. For the near term, Covid and WFH implications along with an aging building population are going to intensify the challenges for landlords as they try to chip away at the surplus of vacant space citywide.