Kiss Office Absorption Goodbye
Watch out, office landlords—Savills Studley research manager Tim Wingfield thinks the energy slowdown will affect office more than other commercial real estate property types. Houston office leasing has performed very well in the last couple of years—we’ve leased more than 3M SF per quarter for eight consecutive quarters. And Q4 2014 was above average even for this boom, with 3.8M SF of office soaked up. But that’s all about to change. Energy, energy services and energy-centric engineering firms accounted for 65% of Houston office leasing activity.
Not surprisingly, the Energy Corridor/Katy Freeway might feel the impact the most. Class-A availability has jumped from 10.8% to 18.4% in just a year, with energy and engineering firms comprising 87% of 2011 to 2014 leasing activity. Tim predicts many portions of the Houston economy should continue to do well in 2015, such as retail, healthcare and education, but they’re predominantly not office users.
