Office investment sales volume in the first half of 2025 exceeds 2024 totals

Houston, TX – Avison Young, a global real estate advisory firm, today released its Second Quarter 2025 Office Market Report for Houston. The office investment sales market has witnessed a significant rebound in activity over the past six months signaling a foundational shift in market dynamics and growing confidence in the sector's ongoing recovery.

The first half of 2025 witnessed a substantial surge in sales volume, reaching $876 million. This marks an impressive 146% increase compared to the same period in 2024 and has already surpassed last year's total sales. This boost is largely driven by private buyers, who are seizing opportunities to acquire properties at more favorable valuations. While the average price per square foot has dropped to the upper $60s – levels last seen in the early 2000s – transaction activity has been on the rise since late 2024. This increase suggests that prices are beginning to stabilize, establishing a new pricing floor for the market.

"Houston's office market is showing clear signs of a foundational shift," said Wade Bowlin, Principal and Managing Director of Avison Young’s Houston office. "We're seeing strong investment interest, particularly from private buyers who recognize the current value. While pricing has adjusted, the increase in transaction activity indicates a new stability is taking hold, which is great news for the market's long-term health.”

In the leasing market, trophy and Class A+ properties continue to show impressive resilience, boasting 4.2 million square feet (msf) of positive absorption since 2020. These top-tier spaces have absorbed 501,000 sf year-to-date. However, this pace is slowing down after a robust 1.9 msf of absorption last year – the highest annual gains since 2015. This deceleration is mainly due to a shrinking availability of space in the top-tier segment. With limited high-end availability and a constrained construction pipeline, leasing activity is now expanding into the Class A tier 2 segment. This tier has experienced 236,000 sf of positive absorption during the first half of 2025.

Houston's office leasing activity reached 2.4 msf in the second quarter of 2025, bringing the year-to-date total to 5.5 msf. While this represents a 35% decline compared to the 10-year first-half average – making it the lowest first-half leasing volume in a decade – the demand outlook remains positive. This is fueled by an increase in expansion-related deals and growing demand from active small- to mid-sized tenants. Furthermore, upcoming lease expirations are expected to generate significant new demand over the next two years, as most companies have already adjusted their space needs since the oil downturn and the pandemic.

Small- to mid-sized office lease transactions have dominated leasing activity during the first half of 2025. Notably, leases under 10,000 square feet comprised 41% of all transactions year-to-date, significantly surpassing pre-pandemic averages. In contrast, large leases over 50,000 square feet have accounted for only 19.6% of all leases signed this year, a considerable drop from the 34.8% average between 2015 and 2020.

According to Anthony Squillante, Principal and office tenant representation specialist at Avison Young, "While there has been a reduction in total leasing activity thus far in 2025, a more granular analysis of the Houston office market reveals persistent demand. The notable engagement from small- to mid-sized firms underscores a fundamental need for space. Furthermore, limited availability in top-tier properties, combined with scheduled lease rollovers, forecasts a methodical recalibration and subsequent absorption within the market.”

Houston's job growth is decelerating after rapid post-pandemic expansion, with a noticeable slowdown compared to recent years. This reflects a return to more typical growth patterns and increased economic uncertainty. Over the past 12 months, Houston created 29,600 jobs, which is lower than the 10-year pre-pandemic average of 57,600. Despite slowing to 0.9% year-over-year, job growth remains healthy, settling into a more sustainable pattern. The unemployment rate remains relatively low at 3.9%.