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Return to Normalcy of Houston Sublease Space Expected to Arrive in 2021

HOUSTON – (Realty News Report) – Houston’s supply of sublease office space will fall below its 13-year average of 5 million SF by 2021, according to a forecast by PMRG, as more leases expire and return to regular landlord inventory.

After a steep pull-back by energy firms, the sublease supply peaked at 12.1 million SF in the third quarter of 2016. It was gradually reduced to about 9 million SF by 2017.

PMRG reports the sublease supply increased in the second quarter to 9.6 million SF, pushed by Occidental Petroleum’s dropping 814,000 SF of sublease space in Greenway Plaza. OXY is expected to relocate to the Energy Corridor on the west side of Houston.

Vacancy remains elevated, at the highest point in more than 30 years according to NAI Partners.

When will the Houston office market turn around?

“It’s definitely trying to turn around now,” says Charles Herder, a principal shareholder and Co-Chairman of Colliers International in Houston. “Announcements like the big OXY sublease space hitting the market — Occidental Petroleum is expected to vacate close to 814,000 SF in Greenway Plaza — do not help.  The question may not be “when will it turn around” but ‘when will it be a healthy balance of supply and demand.’ That could easily be post-2021.”

Overall, Houston’s commercial real estate markets are healthy and some sectors are exceptionally strong, except for the office market, says Mark Taylor, senior managing director at CBRE in Houston.

The Houston economy also delivers positive news as oil prices have returned to the $60-plus per barrel range. Job growth is also strong as Houston created 94,600 jobs in the 12-month period ending in July.

“Optimism for a quicker recovery of Houston’s office market is being fueled by the slight acceleration of the city’s leading economic indicators such as positive job growth,” reported Avison Young in its second quarter report.

The ample supply of sublease space offers opportunity to tenants.

“Signed sublease deals reported during the second quarter included Enable Midstream Partner’s 48,000 SF in One Shell Plaza, Fiesta Mart’s 28,621 SF in 5444 Westheimer and HighRadius Corp.’s 24,844-SF lease in Four Westlake Place,” Avison Young reported.

August 3, 2018 Realty News Report Copyright 2018







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