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Market Research - Houston
USA

United States: Houston office market - H1 2019

Office sales activity picked up pace in the second quarter after being relatively quiet since a flurry of major portfolio transactions in 2017.

Year-To-Date Job Growth Totals 44,900 Jobs

In the 12 months ending in June, the Houston metro area added 82,900 jobs. The sectors adding the most jobs year-over-year include professional and business services (17,600), manufacturing (11,000), and education and health services (9,500). Absorption for the second quarter totaled 684,000 SF, buoyed by the delivery of new construction in the CBD. On a rolling four quarter basis, Class A properties have absorbed 2.5 million SF. Class A submarkets with the highest absorption over the second quarter were the CBD  (596,000 SF), on the delivery of Bank of America Tower, and Westchase (248,000 SF) via leases by Honeywell (114,000 SF, 2107 CityWest Blvd) and LJA Engineering (91,000 SF, Westchase Park II).

 

Vacancy Ticks Up Despite Positive Absorption

Direct vacancy increased by 30 bps during the second quarter despite positive absorption, ending the period at 16.3%. The tick up in vacancy was due to the delivery of new construction in the CBD and The Woodlands. In total, 18 of 32 reporting submarkets registered increases in direct vacancy, with the largest occurring in the FM 1960/I-45 North (+870 bps). Despite the overall market uptick, Class A properties remained relatively stable, increasing by 10 bps over the period and down 60 bps over the year, to 15.5%.

 

Investment Activity Increases 64% Year-Over-Year

Office sales activity picked up pace in the second quarter after being relatively quiet since a flurry of major portfolio transactions in 2017. Sales activity was highlighted in the first quarter by the sale of Houston’s tallest building - JPMorgan Chase Tower. A joint venture of Cerberus Capital and Hines has agreed to acquire the 1.6 million SF JPMorgan Chase Tower along with the adjacent 407,000 SF Chase Center for $627 million ($300 PSF) from Hariri Interests. Also of note, Stockdale Capital Partners acquired 20 Greenway Plaza, a 433,000 SF Class A creative office building located in the heart of Greenway Plaza.  The 10-floor building was 95% occupied at the time of acquisition.
 

 

AAG Houston office market H1 2019
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