Houston Office Market
Average annual full-service asking rental rates fell to $28.67/SF, reflecting a 2.5% decrease year over year. Direct rates dropped to $28.84/SF while sublease rents decreased to $22.88/SF, resulting in a narrowing rent spread of $5.96/SF. Overall vacancy rates remained at a peak of 25.9% in the first quarter of 2025, unchanged from the prior quarter and increasing by 40 basis points year over year. The first quarter of 2025 closed with positive absorption of 123,831 SF, as occupancies steadied and new supply modestly outpaced demand. Total leasing activity closed the quarter at 2.1 MSF, well below the long-term first-quarter average of 4.4 MSF. The average lease size was 3,340 SF, decreasing 27.0% quarter over quarter and 16.1% year over year.
Houston Industrial Market
The market realized 875,142 SF of positive absorption in the first quarter of 2025, a decrease of 77.8% quarter over quarter, and could not keep pace with deliveries. Overall rental rates grew 6.5% year over year to $9.69/SF, reaching a new all-time high for the fourth consecutive quarter. Construction deliveries rose to 3.5 MSF in the first quarter of 2025, while the pipeline grew to 16.7 MSF under construction. As deliveries significantly outpaced demand, the vacancy rate rose by 30 basis points quarter over to quarter to 6.8%.