HOUSTON – (Realty News Report) – Houston’s office market slipped in the first quarter as 1.5 million SF of negative absorption was recorded in early 2018, according to Colliers International.
With a net of 1.5 million square feet being vacated, the first quarter of 2018 is considered one of the toughest quarters ever for the Houston office market.
The biggest blow was the result of the merger of Technip and FMC Technologies, which caused 376,000 SF to be vacated in the Energy Tower II building on the Katy Freeway.
The first quarter office vacancy rose to 20.1 percent, up from 18.5 percent a year earlier, Colliers reported.
The Houston office market has more than 9 million square feet of office space on the sublease market. Most of the sublease supply was amassed because of downsizing in the energy industry.
“I don’t know how long it will take to burn through what we have,” said Kristin Rabel, senior vice president of CBRE. “The office market is touch and it’s been tough for the last 24 months.”
Current deals, which often have concessions such as several months of free rent, have been unchanged lately, Rabel said. There is also a “flight to quality” as tenants look to relocate to better office properties.
Overall, Houston’s real estate market is healthy, said CBRE’s Mark Taylor, speaking at the CBRE press luncheon last week.
“The market continues to be very, very strong with the exception of one category,” Taylor said.