HOUSTON – In the prime towers of downtown Houston – the Class A office buildings – vacancy has doubled in the last three years – rising to 13.4 percent, up from 6.4 percent in 2014, according to the CBRE real estate firm.
In many ways, the Central Business District shows strength. Downtown Houston is a more vibrant place these days with thousands of new residents patronizing dozens of new restaurants and bars. A number of new hotels and apartments have been built in downtown and more are under development.
New skyscrapers rising always bring the auru of optimism into the air. The brand-new Hines office tower, the 1 million-SF 609 Main at Texas, celebrated its grand opening last week and it is already 60 percent leased. Skanska is developing a 754,000-SF tower two blocks away and its structural steel is beginning to rise.
In terms of street-life and potential, downtown Houston seems to be brimming over – until you peel back the veneer of success and look at the office market.
Some dark clouds shadow downtown. Big blocks of sublease space are looming over the market, notable over 800,000 SF in One Shell Plaza and over 130,000 SF in BG Group Place.
The downtown availability rate – measuring the supply of sublease combined with direct vacancy – has skyrocketed. The availability rate is near 20 percent, up from about 10 percent in 2014, reports CBRE.
This means some 6 million SF of space is vacant. At the current pace of leasing, it could take years to fill it. And the tide has been pulling the other way, as the Houston market has been registering negative absorption, instead of filling up buildings.
A rebound of oil prices to the $50 a barrel range has solidified economic conditions in the oilfields, but that has not translated into a big hiring gains in the white collar jobs that fill Houston office buildings, according to Patrick Jankowski of the Greater Houston Partnership.
May 24, 2017 Realty News Report Copyright 2017