Houston remains one of the few major U.S. office markets to post growth this year, recording nearly 1.9 MSF of positive net absorption through the first three quarters. Demand is highly uneven, with leasing concentrated in newer suburban product while towers built before 1990 continue to lose occupancy. Submarkets such as The Woodlands and Katy Freeway East/West are leading absorption, while the CBD is still giving back space.
Leasing has slowed significantly. Tenants signed 9.0 million SF year-to-date, , with just two leases above 100,000 SF. The average new lease is only 3,200 SF, reflecting occupier caution. Still, overall availability has compressed modestly to 74.0 MSF, and sublease space continues to trend down, hinting the market may have reached a floor.
Tenant leverage remains substantial. Concessions are still elevated, with build-out allowances and free rent continuing to support deal activity. Overall asking rents have held relatively flat near $30.00/SF, though amenity-rich, newer developments are outperforming, posting double-digit rent growth over the past 18 months.
Construction remains limited. Only 1.9 MSF is underway, roughly half the 10-year average, with more than 80% already pre-leased. Most of the new development is medical office or build-to-suit projects in fast-growing suburbs, while speculative development in the CBD has largely halted. With new supply scarce, landlords are increasingly relying on renovations or considering conversions to backfill older space.