HOUSTON—A joint industry survey confirmed that less than 7% of Houston's office inventory suffered damage after Harvey. Of that amount, the majority have been repaired and back in operation, with a handful of buildings still undergoing repair.

Beyond Harvey, after three years in an economic energy slump, Houston's office market is ready for a boost. Recent news indicates that some of the large energy giants reported profits in the fourth quarter, however, profits were largely driven by continued lean budgets and staff reductions.

Still, the Houston MSA created 48,500 jobs (not seasonally adjusted) between November 2016 and November 2017, an annual growth rate of 1.6%, which is above the national average job growth rate of 1.5%, according to the US Bureau of Labor Statistics.

With the recent increase in oil prices, the US Energy Information Administration has revised its forecast for world oil demand in 2018 by 100,000 barrels per day. Although Brent crude prices are up to $64 per barrel, the highest price since November 2014, it may not be enough to spur hiring sprees in the energy industry and accelerate leasing of vacant office space, according to the latest report by Colliers International.

Developers have shown restraint during the past few years, only starting projects with a lead tenant guaranteed. A handful of planned buildings broke ground this past year with lead tenants in place including Bank of America, American Bureau of Shipping and HP. Once these projects deliver, those companies will vacate existing space, leaving more than 1 million square feet for landlords to backfill.

After six straight quarters of negative net absorption, Houston's office market posted 673,000 square feet of positive net absorption in fourth quarter 2017. Although positive, Houston's office market 2017 year-end absorption total is still well within the red, at negative 1.7 million square feet, according to Colliers.

One example of available office space is 3033 Chimney Rock. Houston-based commercial real estate firm, Boxer Property, has entered into an agreement with a third-party client to manage and lease office space there. The six-story property features 86,321 square feet of office space for lease.

Building amenities at 3033 Chimney Rock include a connected covered parking garage with direct access to the first three floors. The property's prime location in the prestigious Galleria/Post Oak area offers convenient access to major highways including US-59 and I-610.

The ownership will be deploying extensive capital expenditures to upgrade both exterior and interior finishes.

“The centerpiece will be a club floor Workstyle project, consistent with our other third-party building repositionings,” says Stephen Kradjian, head of Boxer Property's asset services group, who negotiated the agreement with ownership. “Boxer has shown success in increasing rental yields through the implementation of tactical capital and 3033 Chimney Rock fits this strategy.”

Houston's citywide vacancy rate decreased 20 basis points from 19.3% to 19.1% during the quarter and increased 150 basis points from 17.5% in fourth quarter 2016. During the quarter, the average suburban vacancy rate decreased 20 basis points from 18.9% to 18.7% and the average CBD vacancy rate increased 20 basis points from 20.4% to 20.6%, GlobeSt.com learns.

The average CBD class-A and -B vacancy rates increased 20 basis points during the quarter from 18.3% to 18.5% and from 28.2% to 28.4%, respectively. The average suburban class-A vacancy rate decreased 60 basis points from 21.9% to 21.3% between quarters, while the average suburban class-B vacancy rate rose 10 basis from 16.7% to 16.8%.

Of the 1,709 existing office buildings in the Colliers survey, 86 buildings have 100,000 square feet or more of contiguous space available for lease or sublease. Furthermore, 24 buildings have 200,000 square feet or more of contiguous space available. Citywide, available sublease space totals 8.8 million square feet or 3.8% of Houston's total office inventory. Available space differs from vacant space in that it includes space that is currently being marketed for lease and may be occupied with a future availability date. Vacant space is truly vacant and is and may still be immediately available, Colliers points out.