Q1 2025 | Houston Office Market Report
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HOUSTON - Txylo -- Houston's office market in Q1 showed signs of stabilization, with a much smaller negative net absorption of 96,726 square feet compared to the significant give-back of space that occurred in the previous quarter.

The continued flight-to-quality favored Class A and newer buildings — which saw positive absorption — while construction remained limited.

Danny Rice | President

Key Takeaways

Flight to quality persists
Net absorption losses slow
Construction remains limited
More smaller deals recorded

Houston Highlights

Houston's office market continues to face headwinds in early 2025 as tenants maintain a strong preference for higher-quality space, driving the ongoing flight-to-quality trend. Despite recording a negative net absorption of 96,726 SF, the figure marks a substantial improvement from the previous quarter's negative 838,462 SF and a similar year-over-year result. Tenants clearly preferred Class A properties, which posted positive net absorption of 55,645 SF. The overall vacancy rate held steady at a historically high 27.9%, unchanged from the prior quarter but up 50 basis points from Q1 2024. Vacancy rates improved significantly for newer properties, underscoring the market's preference for modern, high-quality space. Quarterly leasing activity decreased to 2.4M SF – representing 31.8% of the previous quarter's volume and 34.5% of the same period last year. Construction activity remains limited, with just three buildings totaling 597,413 SF underway, 80.1% of which is preleased. No new projects were delivered or initiated during the first quarter. Class A asking rents decreased to $33.13 PSF, down from $35.03 PSF year over year, while overall gross asking rents fell to $28.92 PSF from $29.90 PSF during the same period last year.

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