"With the economy slowly recovering, businesses are finally starting to make decisions," says Ariel Guerrero, research services manager in Houston for Grubb & Ellis Co. Those decisions translated into 211,744 sf of positive absorption in the Uptown/Galleria submarket and 139,131 of black ink in the CBD.
Overall vacancy dipped to 19.9%, down 0.10% in three months in an inventory of 154 million sf. In the CBD, the quarter ended with a 21% vacancy or 7.5 million sf of empty space versus a first-quarter close of almost 21.5%. The suburbs' overall vacancy was 19.5%, a 0.2% drop.
Guerrero tells GlobeSt.com that depressed rental rates were a contributing factor to the surge in absorption in Q2, a striking contrast to the first-quarter backslide of more than 1.7 million sf. The average class A, full-service rent slipped 21 cents per sf to $20.96 per sf in the second quarter while the class B rate dropped 18 cents per sf to $16.34 per sf. The CBD took a hard hit as the average class A rent fell 27 cents per sf to $21.83 per sf and class B plummeted 49 cents per sf to $16.99 per sf.
Guerrero believes tenants now realize the window of opportunity is starting to close for negotiating good deals. He predicts rental rates will remain largely flat for the remainder of the year with the exception of select smaller markets like Sugar Land, Katy Freeway and Energy Corridor, all positioned for rent hikes. Sugar Land is ahead of the game with a second-quarter rent hike of $1.69 per sf to take class A space to $21.51 per sf.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
