An unwanted distinction
Houston market’s office vacancy rate eclipses all others across the nation
Houston has the highest office vacancy rate in the nation, pushing the metro area lower in a ranking of 46 major markets based on forward-looking economic factors, a new report showed.
Houston’s office vacancy, projected to reach 21.5 percent in 2017, contributed to a drop of eight spots to No. 31 in Marcus & Millichap’s 2017 National Office Property Index. In 2014, local office vacancy stood at 16.3 percent.
Nationally, the vacancy rate is forecast to be 14.3 percent in 2017.
The index ranks the markets based on 2017 projections on employment growth, vacancy levels, construction deliveries and rents.
The top five office markets are San Jose Calif., SeattleTacoma, San Francisco, Portland, Ore., and Boston.
Other Texas cities also moved down in the ranking, although only slightly for Austin and San Antonio.
Austin, with a tight vacancy rate of 11.3 percent and an increase in office completions in recent years, ranked No. 7, down from No. 6 last year.
Dallas/Fort Worth, one of the nation’s strongest markets, with projected demand of 6.2 million square feet in 2017, moved to No. 22 from No. 17 last year as supply increased. Developers finished 5.2 million square feet of office space in 2016, and are projected to add another 7.8 million this year. Dallas has the second highest vacancy rate of 18.6 percent.
San Antonio fell one position to No. 25.
Houston ranked fourth for the amount of office completions projected in 2017, behind San Jose, Dallas and Seattle. Other Houston highlights: Employment is projected to grow by 19,500, or 0.6 percent, in 2017.
Developers are projected to add 3.7 million square feet in 2017, down from 5.1 million in 2016, and 9.8 million in 2015.
Average asking rent will increase 1 percent to $29.17 per square foot per year.
Net absorption is projected to total negative 290,000 square feet in 2017, an improvement from the negative 3.3 million square feet in 2016. Its recent peak hit 7.4 million square feet in 2014.