HOUSTON—Last year ended with office subleasing contracting for the first time since 2014, and the sublease inventory will likely continue to decrease this year, says the latest JLL Office Insight report, offering insight into last quarter and a look ahead to what is in store for 2017. The report indicates that inventory dropped from 12.4 million square feet in the third quarter to 11.9 million square feet in the fourth quarter.
As a result, the total vacancy climbed higher amid weak leasing activity and vacancy is expected to remain at elevated levels during 2017. JLL said market-wide total vacancy eclipsed 20% for first time since the second quarter of 2004, more than a decade ago. Year-end total leasing activity settled at 8.9 million square feet, down significantly from 18.4 million square feet in 2014.
“Energy sector move-outs lay at the heart of the issue in 2016, as many of the industry's tenants reduced headcounts and placed excess space on the sublease market,” Ronnie Deyo, international director and executive vice president at JLL and lead of the Houston office tenant representation group, tells GlobeSt.com. “We saw some progress at year-end when the sublease inventory decreased slightly, but we will likely continue to see elevated supply levels as we work through the current inventory. In general, though, I think there is a sense of optimism about the coming year.”
JLL points to prominent submarkets which accounted for the bulk of negative net absorption in 2016, saying that net absorption was below average in four of the five major submarkets. The office market recorded its second consecutive year of negative net absorption, the first time since 2002. The fourth quarter's negative net absorption of 125,349 square feet is still far less than the negative net absorption of almost 800,000 square feet in the third quarter.
As previously reported, the tree of life is part of a four-mural art project on the future site of Skanska's Capitol Tower development.
HOUSTON—Last year ended with office subleasing contracting for the first time since 2014, and the sublease inventory will likely continue to decrease this year, says the latest JLL Office Insight report, offering insight into last quarter and a look ahead to what is in store for 2017. The report indicates that inventory dropped from 12.4 million square feet in the third quarter to 11.9 million square feet in the fourth quarter.
As a result, the total vacancy climbed higher amid weak leasing activity and vacancy is expected to remain at elevated levels during 2017. JLL said market-wide total vacancy eclipsed 20% for first time since the second quarter of 2004, more than a decade ago. Year-end total leasing activity settled at 8.9 million square feet, down significantly from 18.4 million square feet in 2014.
“Energy sector move-outs lay at the heart of the issue in 2016, as many of the industry's tenants reduced headcounts and placed excess space on the sublease market,” Ronnie Deyo, international director and executive vice president at JLL and lead of the Houston office tenant representation group, tells GlobeSt.com. “We saw some progress at year-end when the sublease inventory decreased slightly, but we will likely continue to see elevated supply levels as we work through the current inventory. In general, though, I think there is a sense of optimism about the coming year.”
JLL points to prominent submarkets which accounted for the bulk of negative net absorption in 2016, saying that net absorption was below average in four of the five major submarkets. The office market recorded its second consecutive year of negative net absorption, the first time since 2002. The fourth quarter's negative net absorption of 125,349 square feet is still far less than the negative net absorption of almost 800,000 square feet in the third quarter.
As previously reported, the tree of life is part of a four-mural art project on the future site of Skanska's Capitol Tower development.
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
