- The Houston office market saw back-to-back quarters of falling vacancy and positive net absorption for the first time since 2012, absorbing over 1.6 million square feet in Q4 2018.
- New construction played a key role, delivering nearly 100% leased. Several large leases signed at new buildings in 2018 will contribute to continued positive absorption.
- However, the market still saw negative absorption for 2018 overall (-226,000 sqft) though an improvement over 2016-2017. The outlook is for sustained growth in 2019 as fundamentals continue improving.
2. Houston
Q4 2018
Office Statistics
Class Inventory (s.f.)
Quarterly
total net
absorption
(s.f.)
YTD total net
absorption (s.f.)
YTD total net
absorption (%
of stock)
Direct vacancy
(%)
Total vacancy
(%)
Average direct
asking rent ($
p.s.f.)
YTD
completions
(s.f.)
Under
construction
(s.f.)
Houston Totals
A 109,823,179 1,648,914 892,730 0.8% 20.5% 24.3% $36.13 881,826 2,241,514
B 58,237,745 38,157 -1,119,039 -1.9% 20.7% 21.7% $21.98 0 0
Totals 168,060,924 1,687,071 -226,309 -0.1% 20.6% 23.4% $31.34 881,826 2,241,514
CBD Totals 35,587,071 294,995 -354,982 -1.0% 18.9% 21.7% $42.52 0 1,887,174
CBD Totals 35,587,071 294,995 -354,982 -1.0% 18.9% 21.7% $42.52 0 1,887,174
Bellaire Totals 2,250,960 34,904 39,093 1.7% 8.1% 8.9% $28.10 0 0
Galleria Totals 22,726,946 210,021 398,814 1.8% 17.1% 19.4% $34.95 104,579 0
Greenspoint/North Belt Totals 8,948,427 46,094 217,532 2.4% 50.7% 51.7% $19.45 0 0
Greenway Plaza Totals 9,970,524 93,796 -31,152 -0.3% 16.1% 17.2% $33.89 0 0
Medical Center Totals 3,644,104 -288,333 -247,048 -6.8% 8.9% 8.9% $28.77 0 0
Midtown Totals 4,126,027 -2,003 47,827 1.2% 13.9% 14.3% $29.52 0 0
Northwest Totals 8,572,779 61,161 -428,430 -5.0% 28.7% 31.7% $23.59 0 0
San Felipe/Voss Totals 5,064,935 -102,329 -299,955 -5.9% 21.0% 22.7% $30.05 0 0
Southwest Totals 6,028,999 -70,405 -132,764 -2.2% 26.1% 27.1% $17.97 0 0
Suburban Near Totals 71,333,701 -17,094 -436,083 -0.6% 22.7% 24.3% $26.85 104,579 0
Katy Freeway East Totals 5,541,549 13,226 113,734 2.1% 12.8% 13.4% $35.31 0 0
Katy Freeway West Totals 19,859,295 225,027 33,454 0.2% 24.9% 32.6% $30.90 72,045 0
Westchase Totals 12,896,735 72,271 -480,007 -3.7% 21.4% 27.3% $29.10 0 0
Energy Corridor Totals 38,297,579 310,524 -332,819 -0.9% 21.9% 28.0% $30.58 72,045 0
FM 1960 Totals 5,891,668 161,928 -15,221 -0.3% 17.3% 19.0% $18.59 0 156,000
Gulf Freeway/Pasadena Totals 1,518,142 131,300 122,234 8.1% 9.4% 9.9% $21.04 0 0
NASA/Clear Lake Totals 3,206,107 62,913 -6,094 -0.2% 16.5% 16.6% $22.15 0 0
Sugar Land Totals 4,222,047 12,681 -82,589 -2.0% 8.7% 11.9% $28.03 0 0
The Woodlands Totals 8,004,609 729,824 879,245 11.0% 14.4% 15.1% $32.11 705,202 198,340
Suburban Outlying Totals 22,842,573 1,098,646 897,575 3.9% 14.1% 15.4% $24.06 705,202 354,340
Houston Totals 168,060,924 1,687,071 -226,309 -0.1% 20.6% 23.4% $31.34 881,826 2,241,514
CBD A 27,929,895 180,554 -325,247 -1.2% 18.6% 21.9% $44.27 0 1,887,174
CBD A 27,929,895 180,554 -325,247 -1.2% 18.6% 21.9% $44.27 0 1,887,174
Bellaire A 1,375,713 37,056 68,874 5.0% 8.7% 9.0% $28.99 0 0
Galleria A 17,779,271 215,113 656,291 3.7% 17.0% 19.3% $37.46 104,579 0
Greenspoint/North Belt A 4,676,389 68,800 94,461 2.0% 60.2% 61.4% $22.42 0 0
Greenway Plaza A 7,395,743 11,802 -66,458 -0.9% 17.6% 19.0% $36.26 0 0
Medical Center A 1,624,079 6,714 37,960 2.3% 11.2% 11.2% $31.97 0 0
Midtown A 2,006,668 8,816 79,729 4.0% 18.0% 18.1% $32.16 0 0
Northwest A 3,874,504 38,500 -409,168 -10.6% 38.5% 43.2% $25.65 0 0
San Felipe/Voss A 1,720,793 3,272 -119,895 -7.0% 27.8% 29.0% $36.15 0 0
Southwest A 1,580,642 25,469 27,075 1.7% 24.0% 24.0% $19.11 0 0
Suburban Near A 42,033,802 415,542 368,869 0.9% 24.1% 26.0% $30.47 104,579 0
Katy Freeway East A 4,105,103 23,345 103,171 2.5% 13.8% 14.1% $40.64 0 0
Katy Freeway West A 14,446,523 135,002 320,034 2.2% 22.9% 33.3% $35.20 72,045 0
Westchase A 8,788,607 -19,272 -326,193 -3.7% 22.2% 30.5% $34.61 0 0
Energy Corridor A 27,340,233 139,075 97,012 0.4% 21.3% 29.5% $35.39 72,045 0
FM 1960 A 2,347,252 121,246 32,115 1.4% 7.9% 11.0% $28.79 0 156,000
Gulf Freeway/Pasadena A 0 0 0 0.0% 0.0% 0.0% $0.00 0 0
NASA/Clear Lake A 1,342,961 13,740 -63,626 -4.7% 11.9% 12.1% $24.34 0 0
Sugar Land A 2,924,208 47,088 -57,735 -2.0% 6.4% 10.8% $31.85 0 0
The Woodlands A 5,904,828 731,669 841,342 14.2% 13.8% 14.5% $35.16 705,202 198,340
Suburban Outlying A 12,519,249 913,743 752,096 6.0% 10.7% 12.7% $31.72 705,202 354,340
Houston A 109,823,179 1,648,914 892,730 0.8% 20.5% 24.3% $36.13 881,826 2,241,514
Reid Watler | Manager, Research
1400 Post Oak Suite 1100 Houston, TX 77056 | reid.watler@am.jll.com
2019 Jones Lang LaSalle IP, Inc. All rights reserved.
3. Houston | Office Statistics | Q4 2018
Class Inventory (s.f.)
Total net
absorption (s.f.)
YTD total net
absorption (s.f.)
YTD total net
absorption (%
of stock)
Direct vacancy
(%)
Total vacancy
(%)
Average direct
asking rent ($
p.s.f.)
YTD
completions
(s.f.)
Under
construction
(s.f.)
CBD B 7,657,176 114,441 -29,735 -0.4% 20.1% 21.0% $30.55 0 0
CBD B 7,657,176 114,441 -29,735 -0.4% 20.1% 21.0% $30.55 0 0
Bellaire B 875,247 -2,152 -29,781 -3.4% 7.2% 8.8% $26.80 0 0
Galleria B 4,947,675 -5,092 -257,477 -5.2% 17.8% 19.6% $27.44 0 0
Greenspoint/North Belt B 4,272,038 -22,706 123,071 2.9% 40.2% 41.0% $15.50 0 0
Greenway Plaza B 2,574,781 81,994 35,306 1.4% 11.8% 12.0% $27.22 0 0
Medical Center B 2,020,025 -295,047 -285,008 -14.1% 7.1% 7.1% $24.69 0 0
Midtown B 2,119,359 -10,819 -31,902 -1.5% 9.9% 10.7% $27.26 0 0
Northwest B 4,698,275 22,661 -19,262 -0.4% 20.5% 22.2% $20.44 0 0
San Felipe/Voss B 3,344,142 -105,601 -180,060 -5.4% 17.6% 19.5% $25.24 0 0
Southwest B 4,448,357 -95,874 -159,839 -3.6% 26.8% 28.2% $17.34 0 0
Suburban Near B 29,299,899 -432,636 -804,952 -2.7% 20.7% 21.9% $21.27 0 0
Katy Freeway East B 1,436,446 -10,119 10,563 0.7% 9.7% 11.7% $22.01 0 0
Katy Freeway West B 5,412,772 90,025 -286,580 -5.3% 30.1% 30.8% $21.96 0 0
Westchase B 4,108,128 91,543 -153,814 -3.7% 19.6% 20.5% $20.65 0 0
Energy Corridor B 10,957,346 171,449 -429,831 -3.9% 23.5% 24.4% $21.47 0 0
FM 1960 B 3,544,416 40,682 -47,336 -1.3% 23.5% 24.3% $16.69 0 0
Gulf Freeway/Pasadena B 1,518,142 131,300 122,234 8.1% 9.4% 9.9% $21.04 0 0
NASA/Clear Lake B 1,863,146 49,173 57,532 3.1% 19.9% 19.9% $21.31 0 0
Sugar Land B 1,297,839 -34,407 -24,854 -1.9% 13.8% 14.4% $23.08 0 0
The Woodlands B 2,099,781 -1,845 37,903 1.8% 16.2% 16.6% $26.33 0 0
Suburban Outlying B 10,323,324 184,903 145,479 1.4% 18.1% 18.6% $19.98 0 0
Houston B 58,237,745 38,157 -1,119,039 -1.9% 20.7% 21.7% $21.98 0 0
Reid Watler | Manager, Research
1400 Post Oak Suite 1100 Houston, TX 77056 | reid.watler@am.jll.com
2019 Jones Lang LaSalle IP, Inc. All rights reserved.
4. Houston
Q4 2018
Office leasing activity
Leasing activity by size (s.f.)
2,631,894
31
6,491,718
106
2,461,798
170,096
123.2
Growing Shrinking Stable
83,630
0
2,469,393
78,871
0
0
Notable leasing transactions
Size Footprint Term (mos)
524,399 Stable 132
284,331 Shrinking 180
284,000 Stable 181
284,000 Stable 181
97,708 Stable 176
87,231 Stable 120
83,518 Growing 360
83,336 Stable 130
68,958 Stable 18
68,706 Growing 116Encino Energy, LLC 5847 San Felipe St San Felipe/Voss Direct
McGriff, Seibels & Williams 10100 Katy Fwy Katy Freeway East Direct
City of Houston 1100 Louisiana St CBD Sublease
Arena Energy 2103 Research Forest Dr The Woodlands
PROS, Inc.
Direct
Houston Forensic Science 500 Jefferson St CBD Direct
Direct
800 Capitol St CBDWaste Management Inc
HPE
HPE
Direct
E Mossy Oaks Rd The Woodlands Direct
3200 Kirby Dr Greenway Plaza
Type
915 N Eldridge Pkwy Katy Freeway West DirectMcDermott International
Tenant Address Submarket
Direct
E Mossy Oaks Rd The Woodlands
At a glance
Quarterly leasing activity (s.f.)
Quarterly number of
transactions
YTD leasing activity (s.f.)
Tenant footprint
6 1 24
YTD number of transactions
Leasing activity by transaction type
Leasing activity by submarketLeasing activity by industry
Quarterly Class A leasing
activity (s.f.)
Expansion in market
Expansion in building
Renewal
Extension (< 36-month term)
Relocation within market
New to market
Average term (months)
Quarterly Class B leasing
activity (s.f.)
1,376,730
351,793
528,870
110,087
264,414
0
500,000
1,000,000
1,500,000
100,000+ 75,000-99,999 50,000-74,999 30,000-49,999 20,000-29,999
23%
17%
17%
10%
10%
7%
3%
3%
3%
3%3%
CBD The Woodlands
Katy Freeway West Midtown
Galleria Katy Freeway East
FM 1960 San Felipe/Voss
Greenway Plaza Southwest
Northwest
25%
20%
15%
10%
10%
5%
5%
5%
5%
Energy and utilities Technology
Engineering Government
Real estate Law firm
Insurance Business services
Banking
0
1,000,000
2,000,000
3,000,000
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Historical leasing activity
Source: JLL Research | Note: This report analyzes all closed office leases >20,000 s.f. 2019 Jones Lang LaSalle IP, Inc. All rights reserved.
5. Houston
Q4 2018
Office development
Total available at delivery (%) 4.2%
Total leased at delivery (%) 95.8%
Average floor plate (s.f.) 35,100
Average number of stories 11
Average asking rent ($ p.s.f.) $37.19
Notable deliveries year-to-date
Building Submarket RBA (s.f.) Delivered
Leased at
delivery (%)
1701 City Plaza Dr 326,800 Q4 2018 100.0%
11300 Energy Dr 189,201 Q4 2018 100.0%
11400 Energy Dr 189,201 Q4 2018 100.0%
1600 W Loop S 104,579 Q1 2018 70.0%
2322 W Grand Parkway N 72,045 Q1 2018 92.6%
Total pre-leased (%) 45.6%
Total under construction (s.f.) 2,241,514
Total under renovation (s.f.) 0
Average floor plate (s.f.) 28,840
Average asking rent ($ p.s.f.) $48.24
Notable projects under construction
Building RBA (s.f.)
Estimated
delivery
Pre-leased (%)
801 Texas Ave 1,106,581 Q4 2021 33.2%
800 Capitol St 780,593 Q2 2019 81.0%
19350 State Highway 249 156,000 Q3 2019 0.0%
1700 City Plaza Dr 149,500 Q2 2019 0.0%
1401 Lake Plaza Dr 48,840 Q2 2019 45.2%
BTSPatrinely
BTS
Landry's
Spec/BTSOwner/developer
Speculative
BTSPatrinely
Patrinely
Historical completions
Deliveries
At a glance
881,826
YTD deliveries (s.f.)
Speculative
CBD Hines Speculative
Owner/developer Spec or BTSSubmarket
Under construction/renovation
2,241,514
Under construction/renovation (s.f.)
At a glance
Upcoming deliveries by year (s.f., excludes YTD completions)
Speculative
Speculative
The Woodlands Patrinely Speculative
The Woodlands
SkanskaCBD
FM 1960 Greenwood Properties Speculative
The Urban Companies
The Woodlands
The Woodlands
The Woodlands
Patrinely
Katy Freeway West
Galleria
1,134,933
1,106,581
1,090,000
1,095,000
1,100,000
1,105,000
1,110,000
1,115,000
1,120,000
1,125,000
1,130,000
1,135,000
1,140,000
2019 2021
4,063,481
8,071,906
2,485,974
2,819,444
881,826
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
2014 2015 2016 2017 2018
Source: JLL Research | Note: This report analyzes all office developments under construction/renovation >30,000 s.f. 2019 Jones Lang LaSalle IP, Inc. All rights reserved.
6. Houston
Q4 2018
Office sales activity
$1,706,709,138
40
$214
6.4%
5.3%
94.7%
5.5-6.5% 0 0 $0
7-8.5% 0.0% 40 $1,706,709,138
Notable sales transactions year-to-date
RBA (s.f.) $ p.s.f. Sale date
511,225 $794 Jul-18
1,197,300 $147 Feb-18
554,385 $199 Sep-18
504,609 $200 Jan-18
313,420 $322 Aug-18
574,944 $127 Mar-18
806,541 $87 Feb-18
375,440 $181 Jun-18
248,707 $255 Aug-18
276,770 $197 Mar-18
The Aztec Fund
Norvin Properties
Davidson Kempner Capital
Management, Lexington Realty
M-M Properties, Baupost Group CBRE Global Investors
Lexington Realty Trust
Griffin Partners, Investcorp
Transwestern
$176,500,000
$110,433,467
$101,000,000
$101,000,000
Top 5 sellers (s.f.)Top 5 buyers (s.f.)
Lonza Houston Zeller Realty Group Pinchal & Company $54,400,000
1001 McKinney TRC Capital Partners, Amstar
Cameron Management, Silverpeak Real
Estate Partners
$68,000,000
Westgate I Nicola Crosby Real Estate
Transwestern, Miller Global Properties,
LLC
$63,420,285
Loop Central I-III
Griffin Partners, Wheelock
Street Capital, LLC
TIER REIT $72,980,000
Brookhollow Central I-III Hertz Investment Group
Parmenter Realty Partners, Cohen &
Steers
$70,500,000
Pin Oak Park Portfolio
Westway Plaza
Marathon Oil Tower
Western Geophysical
Memorial Hermann Medical
Plaza
LaSalle Investment
Management
Mischer Investments $405,000,000
Building Buyer Seller Sale price ($)
Number of transactions
Average Class A cap rate
Sales volume $ by submarket
Urban sales volume as % of
total
Suburban sales volume as %
of total
Cap rate range
Sales activity by building classAt a glance
YTD sales volume
Foreign capital
Average partial interest
acquired
Number of foreign
buyers
Domestic capital
Average Class A price p.s.f.
Transactions details
Number of partial interest
transactions
Core Class A CBD
Core Class A suburban
Number of domestic
buyers
1,197,300 s.f.
806,541 s.f.
633,280 s.f.
574,944 s.f.
568,458 s.f.
M-M Properties, Baupost Group
Hertz Investment Group
Davidson Kempner Capital Management, Lexington Realty Trust
Griffin Partners, Wheelock Street Capital, LLC
Lawrence Wong
1,197,300 s.f.
806,541 s.f.
633,280 s.f.
574,944 s.f.
568,458 s.f.
CBRE Global Investors
Parmenter Realty Partners, Cohen & Steers
Lexington Realty Trust
TIER REIT
Halliburton
$6,025,000
$7,800,000
$14,620,000
$17,800,000
$22,026,288
$23,030,954
$39,000,000
$52,212,896
$53,000,000
$54,400,000
$89,717,029
$91,865,000
$105,500,000
$170,933,467
$173,980,000
$176,500,000
$203,298,504
$405,000,000
Southwest
Gulf…
NASA/Clear Lake
Greenway Plaza
San Felipe/Voss
Greenspoint/North…
Sugar Land
The Woodlands
Katy Freeway East
South
CBD
Northwest
FM 1960
Westchase
Bellaire
Galleria
Katy Freeway West
Medical Center
$1,180,041,400
$520,642,738
$6,025,000
$0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
$1,400,000,000
A B C
Source: JLL Research | Note: This report analyzes all year-to-date office sales > 50,000 s.f. 2019 Jones Lang LaSalle IP, Inc. All rights reserved.