Class A properties outperform the broader market; Industrial market sets all-time high in development

Houston, TX – Avison Young today released its Third Quarter 2022 Office and Industrial Market Reports for Houston. Houston’s office market continues to experience a high vacancy rate; however, class A properties have been outperforming the broader market and there has been an overall increase of tenants pursuing office space. Houston’s industrial market has experienced an all-time high for construction deliveries as developers keep pace with new projects in each submarket. 

With little construction and flight-to-quality a key trend, office leasing activity in Q3 was led by energy-related firms and has been concentrated in the Central Business District and several west Houston submarkets. At 23.7%, the Q3 office vacancy rate was slightly higher than that of Q2 which was 23.4%.

“Office leasing activity still lags from its normal pre-pandemic pace, however, touring activity has increased as tenants are more confident and willing to execute on long-term leasing decisions,” said Wade Bowlin, Principal and Managing Director of the firm’s Houston office. “Many of these occupiers are exploring ways to optimize and reconfigure their space to meet new work patterns which could inevitably lead to more space becoming available as some companies reduce their footprint.”

Principal and office tenant representation specialist Anthony Squillante added, “Houston’s office market continues to reflect a tale of two cities. For well-located, amenity rich, class A assets, leasing velocity is strong, and vacancy does not reflect the city average. Conversely, class B assets or buildings lacking amenities or in a less favorable location, struggle to keep up with their class A competition. Overall, given that concessions remain strong for tenants, now is an ideal time for companies to procure space here.”

With a Q3 vacancy of 6%, Houston’s industrial market had 8.6 million square feet (msf) of new deliveries and preleasing almost 25% of the 24.5 msf under construction during Q3. Population increases coupled with elevated shipping activity through the Port of Houston were factors that stimulated growth in both e-commerce and consumer products. As the region grows, large retailers have been occupying more warehouses and distribution centers to provide consumers with rapid product delivery.

Rand Stephens a Principal and industrial property specialist said, “The fundamentals of the industrial market remain very strong. New development supply is being readily absorbed and with continued population growth in Houston, we expect to see an elevated demand for distribution space.”

For more information:
 

• Download 2022 Third Quarter Office Market Report and Industrial Market Report
• Wade Bowlin, Principal & Managing Director, Houston: +1.713.209.5753
• Rand Stephens, Principal, Houston: +1.713.993.7810
• Anthony Squillante, Principal, Houston: +1.713.993.7831
• Drew Coupe, Principal, Houston: +1.713.993.7832