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Market Research - Houston

United States: Houston office market - Q4 2019

Sales activity picks up at year's end

Annual Job Growth Figures Inflated

Houston metro area job growth for 2019 finished the year at 88,000, a strong year of growth on the surface. However, it should be noted preliminary BLS estimates are anticipated to be inflated. 2020 is projected to see slowed growth across the metro area as the oil and gas sector deals with the continued challenges.
Annualized absorption topped 1.1 million SF as fourth quarter totals of 507,490 SF helped the market squeak past the million SF threshold. The Energy Corridor accounted for the largest portion of activity over the period. The CBD was the most active submarket over the year with cumulative absorption totaling 828,198 SF. Annual absorption in the CBD was driven in large part by the delivery of Bank of America Tower, while quarterly absorption was bolstered by Bank of America’s short-term lease.


Vacancy and Availability Trend Down at Year’s-End

Fourth quarter activity saw improvement in both direct vacancy and total availability, as the metrics both declined by 30 basis points. Direct vacancy ended the year at 16.2% for all classes of property, up 10 basis points year-over-year. Total availability closed the year at 23.6% up 40 basis points year-over-year. Over the quarter, 22 of 33 submarkets registered decreases in direct vacancy with the Westbelt recording the largest decline of 130 basis points, at 14.4%. Year-over-year, total availability increased in 20 of 33 submarkets led by Katy Far West (+870 basis points to 23.5%). Considering pending vacant space from tenants such as Waste Management, Transocean, and Marathon, vacancy will likely see setbacks as lease terms expire.


Sales activity picks up at year's end


Sales activity ticked up during the year’s final quarter as two notable transactions occurred. The Howard Hughes Corp acquired Occidental Petroleum’s Houston portfolio comprised of two Class A trophy office towers and a Class A warehouse in the Woodlands, as well as a 63 acre campus in the Energy Corridor with Occidental leasing back one of the Class A Woodlands office assets. The Bank of America Tower also traded hands over the quarter as Beacon Capital Partners acquired a 90% take in the premium CBD office tower from Skanska for $373 million. Looking to 2020, sales volume is anticipated to remain slow but steady. 



AAG Houston office market Q4 2019
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