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Houston Office Market Falls 1M SF, And Then Some

HOUSTON-It's no secret tenants are in the driver's seat in the city, with rates being shaved 10% to 20% along with usual perks of free rent and moving allowances. Investment sales, though, is strong and will remain so if interest rates stay low.

By Jennifer Brenner Andrade | Updated on January 25, 2004

HOUSTON-Commercial real estate professionals are buzzing about Houston’s office market, which fell back 1.5 million sf on absorption to give tenants even more control of deal-making while fueling high sales volumes of all property types.

The office absorption setback was blamed on lingering effects of the Enron fallout, last year’s flat job growth and corporate contractions, according to speakers at Grubb & Ellis Co.’s recent 2004 forecast meeting at River Oaks Country Club. Ace Schlameus, senior vice president in Houston, said even the two positives–417,740 sf in Westchase and 196,554 sf in Katy Freeway–were mitigated by the fact that only a few deals accounted for the bulk of the absorption.

Keith Lloyd, also a senior vice president, said deals are being struck at 10% to 20% below quoted rents. “Landlords have to compete at every level,” he said. Class A rents dropped 4.9% to $21.82 per sf while class B dipped 4% to $16.76 per sf. And, concessions are plentiful when it comes to rent abatements, free parking and moving allowances.

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