Houston Office Market Hit Skids in '09

The absorption rate is the net result of all office transactions during the year, meaning there was nearly 3 million square feet less space occupied in 2009 than the previous year.

The loss erased all of the gains in 2008, when the local office market experienced a positive net absorption of 2.74 million square feet.

Houston has about 190.6 million square feet of rentable office area. A total of 5.4 million square feet of office space was added to the local inventory during 2009. Another 2.4 million square feet of new office space remains in the pipeline, then no other facilities are in development for the foreseeable future.

A big chunk of 2009’s negative net absorption occurred in the fourth quarter. The office market had 1 million square feet of net loss in the final quarter — 805,000 square feet of which was in the suburbs.

Of the 17 submarkets assessed by CBRE, only five had positive net absorption for the quarter: Clear Lake, East, Energy Corridor, Greater Pearland and Katy Freeway.

CBRE data shows the market had an overall vacancy rate of 15.9 percent at the end of the year. However a higher amount of Houston’s office space, 18.2 percent, was available when taking into account additional sublease space.

The 15.9 percent vacancy in fourth quarter 2009 was 60 basis points higher than the previous quarter, and 400 basis points higher than the end of 2008.

As a result of higher vacancy rates, overall office lease rates declined for the first time since the second quarter of 2005, CBRE reported. Overall average gross asking rates were $24 per square foot across the city.

Sanford Criner, a CBRE executive vice president, said at the firm’s quarterly press luncheon Jan. 7 that the spike in oil prices is not yet translating into job growth, which is the fuel for office absorption. Energy firms are doing more with less, and quietly sending more jobs overseas, he said.

“There’s definitely some offshoring of jobs,” Criner said.