Houston’s Office Market Not As ‘Atrocious’ As It Appears. The Numbers Are Starting To Prove It
Commercial real estate players in Houston are nearly begging people to take more than a passing glance at the city’s office market performance.
The headline numbers are dismal. Houston carries one of the highest office market vacancies in the country, and it's far from a landlord's market. But some metrics are starting to prove the long-held assertion that Houston has significant obsolete office stock and carries a higher static vacancy than other markets, skewing the picture in a positive direction.

Demand for square footage was up 7% from 2023 to 2024, while concessions offered were down 5%, according to data from office leasing proptech firm VTS.
Houston office demand is increasing, and demand from energy and professional services is particularly robust, VTS Director of Investor Research Max Saia said, adding that there is definitely truth to the “higher static vacancy” theory in Houston. Static vacancy is space expected to remain vacant because no one wants to lease it even when the market is functionally full, pushing rents up.
“If nothing changes from a supply standpoint, the office market across the board, and certainly in Houston, is going to be structurally at a higher vacancy going forward … We continue to see that year over year in our stats,” he said.
Energy companies were the biggest driver of office demand in Houston last year, totaling 2M SF, according to VTS. Professional services was the primary industry driver for the last quarter, totaling 700K SF, which is up 5% from the same period last year, the data shows.
With the continued flight to quality, the spread between Class-A and Class-B rents keeps widening, Saia said. The gross asking rental rate for Class-A properties in the fourth quarter of 2024 was $38.53 per square foot, according to CBRE, while Class-B was $25.07 per square foot.
“If you look at the office figures on their face, they're atrocious, obviously,” said Nina Seyyedin, first vice president of CBRE's Houston advisory and transaction services, investor leasing team at a CBRE press luncheon last week.
“So we don't deny that, but if you actually peel back the layers, there's a lot to be positive about.”
Colliers Houston President Danny Rice had a similar sentiment at the firm’s Trends event on Tuesday.
“If you really peel the onion back in terms of the data around office space, it's not as bad as it looks,” Rice said. “Sure on the cover, 27% vacancy is probably one of the worst around the country. It’s not a good feeling if you’re outside the market looking to invest.”
But in buildings built since 2015, the rate is closer to 11% or less, Rice said. Class-A buildings built since 2015 also had 1.2M SF of positive absorption last year, he said.
“We still had 12M SF of leasing activity that happened last year,” Rice said. “It’s still a very robust and active market that I would say is getting a little bit of a bad rap.”
Since about 13% of Houston’s employment is in the government sector, President Donald Trump’s executive return-to-office order for federal employees could spur even more office leasing activity this year, Rice said.
Corporate return-to-office mandates are also slowly boosting office attendance, Saia said.
“[The mandates] are translating into increased requirements in the market and also larger requirements,” he said. “In Houston and other markets, we saw the average requirement get much smaller throughout 2022, and we've started to see a reversal of that, both in ’23 and last year as well.”
As companies bring employees back to the office, they are recognizing a need for the right space to foster collaboration and connectivity, Seyyedin said. That means they’re looking for highly amenitized office space in the best locations, which helps improve the financial performance of Houston’s top office inventory.
“Occupiers are really focused on stable landlords that can transact, and they're not so rate sensitive anymore. They're willing to pay for nice space,” she said.
Overall rents increased 2% year-over-year, according to CBRE's Q4 report.
The landlords that can offer build-out packages, collect high rents and get deals done will continue to perform well, while owners of older, obsolete buildings will struggle, Seyyedin said.
“We're in this really interesting part of the market where there are clear winners and clear losers,” she said.
The exact size of the obsolete office market in Houston still remains to be seen, Saia said. And even though demand is increasing, it is nowhere near putting landlords and tenants on equal footing, he said.
While concession offers for free rent dropped 10% in 2024, they’re still above average levels, Saia said.
“It’s definitely going to be a while before you can say it’s a landlord’s market,” Saia said. “Though it probably depends on which landlord you talk to … that speaks to the quality of their space.”