Job growth reaches 94,600 yoy
Houston job growth continues to rise at a rapid pace with 94,600 jobs created over the 12-months ending in June, the highest year-over-year growth since February 2015. The sectors that drove job growth were professional and business services (41.2k) and construction (19.3k). Professional & business services is one of the main drivers of office-using job growth which is a welcomed sign for the office sector as hiring ramps up and space requirements expand. Also of note, the increase in construction job growth can likely be attributed to continued construction repairs from Hurricane Harvey, but new development activity has also started to pick up around the metro. With oil prices gaining momentum and the economy beginning to show signs of a recovery in the near future, job growth should show further gains through the remainder of the year.
Sublease space exceeds 9.0 million sf
The total availability rate for all classes of space rose in 2018 due to several large additions of sublease space. Notably, Oxy listed over 800,000 SF of sublease on the market in Greenway Plaza between two buildings as it looks to build a corporate campus. Total sublease space for the market sits at 9.1 million SF, the majority of which is in the Class A market with 7.5 million SF available. Direct vacancy increased to 16.2% for all classes of space. Class A vacancy remained unchanged recording 15.7% at mid-year, while Class B increased to 17.7%. The submarkets recording the lowest vacancies are Kingwood Humble - 3.4%, South Main / Medical Center - 3.6% and Northeast - 5.0%. As over 1.0 million SF of sublease space is set to expire over the next 18 months, expect to see further increases in direct vacancy throughout the metro.
Portfolio activity decreases
Sales in the second quarter slowed, recording $254.3 million, down from the $715.7 million in the first quarter. The largest sale of the quarter was the longtime listed former Halliburton campus in Westchase. The campus is situated on approximately 49 acres and consists of a 570,000 SF (NRA), three story office building. Garden Capital Partners, a group led by Lawrence Wong acquired the property for an undisclosed price. Plans for the former campus have yet to be announced, but it is anticipated that the campus will be a redevelopment opportunity infusing mixed-use components. Also of note this quarter, 1001 McKinney traded hands after only six months on the market.