Houston’s office market continues to grapple with elevated vacancy rates, which hit 25% by mid-2024 — a 190-basis-point increase year-over-year — to rank third nationally behind Austin, Texas, and San Francisco, according to the latest CommercialEdge national office report. Average asking rents in Houston stood at $30.01 per square foot, slightly below the national average and showing minimal change year-over-year.

Despite high vacancies, Houston experienced robust office deliveries in 2024 with nearly 1.4 million square feet added across 12 properties during the first half of the year. This placed the metro fifth among top markets for new office space.

One significant development was the completion of Skanska’s 1550 on the Green, a 375,000-square-foot, 28-story downtown tower finished in February. Within just seven months, the building is already more than 50% leased. Notable tenants include Hicks Johnson PLLC, which recently signed for 21,000 square feet, alongside major occupiers like Norton Rose Fulbright and Boston Consulting Group.

As seen in other markets like San Francisco, Houston is witnessing a “flight to quality” as companies increasingly seek out Class A, environmentally certified office spaces that align with their ESG goals. Moreover, tenants are prioritizing high-end spaces that promote employee well-being and offer energy-efficient, sustainable features, thereby driving demand for these premium properties even in a market with elevated vacancies.

Yet, looking ahead, new development activity in Houston has slowed. As of August, the city had 1.67 million square feet of office space under construction, representing a modest 0.7% of the metro’s total inventory. However, significant projects — like the 19-story, 308,000-square-foot CityCentre Six in the Katy Freeway submarket — are still progressing, buoyed by strong pre-leasing commitments. In this case, Dow Chemical has already secured 75% of the space ahead of the building’s expected 2026 completion.

On the employment front, the office-using sectors in Houston are showing signs of resilience. Although the information sector saw a slight dip of 0.11% year-over-year, financial activities jobs grew by 0.53%, while professional and business services increased by 0.38%. These gains positioned Houston’s office-using employment growth as the third-highest among the nation’s top markets, suggesting a potential for gradual improvement in office space demand moving forward.