HOUSTON - s4story -- EXECUTIVE SUMMARY

Houston's 3rd quarter office market delivered an uneven result across classes. With virtually no city-wide net absorption and change in average rental rates, the CBD continues to hemorrhage tenants with quarterly negative net absorption of 234,740 square feet while suburban office buildings accounted for 100% of the quarter's positive net absorption of 195,002 square feet. What's more, 100% of the broader market YTD net absorption of 328,530 square feet can be traced directly to Class A suburban YTD net absorption of 816,761 square feet. These numbers are driven by workplace utilization, continued metro population growth to the southwest, west and northwest suburbs that drive employers to move closer to their employees, and quality amenitized buildings that help encourage workers to come to work.

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The office quarter forthcoming will continue the trend of Class A outperforming Class B with few exceptions. The landscape will be heavily influenced by capital markets such as cost of capital, favorable basis resets from sales, and, capital available for leasing, capex and amenitization will result in additional pressure being applied to higher basis assets and/or ownerships that lack capital. As always, tenant office space demand will drive the broader market performance and it's reasonable to expect the energy economy, AI, and corporate office sizing to have significant impact as the ups and downs of uncertain international affairs are tempered by Houston's population growth, diversity of business, and, having nation leading port activity.

BILL INSULL, CCIM | Principal

Read the full report here: https://www.lee-associates.com/houston/2026/10/19/greater-houston-office-market-report-q3-2026/