HOUSTON - eTradeWire -- Looking back at 2024, the flight-to-quality trend led the way with nearly 1 million square feet of positive absorption in buildings constructed since 2015, contrary to the overall 1.2 million square feet of negative absorption reported citywide.

The year will be remembered as a transition year, as employers prioritized enhancing the employee experience through upgraded office space, improved workplace culture, and greater employee satisfaction.

Danny Rice | President

Key Takeaways

• Downsizing continues
• Net absorption losses mount
• Construction limited
• Flight to quality persists

Houston Highlights

Houston's office market faced challenges in 2024, posting negative absorption each quarter for a year-end annual loss of 1.2M SF. Vacancy rates ticked up to 27.0% in Q4 from 26.7% in Q3 and 26.2% a year ago. Reflecting a broader trend of firms downsizing is the largest Q4 office absorption: Technip Energies moved into 171,600 SF in West Memorial Place II, reducing the firm's footprint by 42.4%. Quarterly leasing activity rose slightly to 2.5M SF, but this marks a 16.8% year-over-year decline. Annual leasing totaled 11.9M SF, the lowest since 2009, with the Katy Freeway West/Energy Corridor leading all activity with 1.5M SF. Notable leases in 2024 included Subsea7's 177,100-SF in Westgate I in Katy Freeway West/Energy Corridor in Q4 and Ovintiv's 168,805-SF renewal at Four Waterway in The Woodlands in Q2; Vitol's new 146,003-SF lease at 3120 Buffalo Speedway in Greenway Plaza will take up all space in the new building underway. The construction pipeline remains tight, with just three buildings totaling 597,413 SF under construction at 80% preleased. No new projects were delivered or started in Q4, and only Norton Rose Fulbright's CBD headquarters was completed earlier in the year. Class A rental rates fell to $35.25 PSF from $36.24 year-over-year, while overall gross rents declined to $30.41 PSF from $31.25 last year.

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Read the full report: colliers.com/houstonresearch