Home > Uncategorized > Houston sees highest office vacancy rate in five years

Houston sees highest office vacancy rate in five years

Nearly 28 million sf, or 18.4 percent of Houston’s office space, was vacant at the end of 1Q 2010, according to Jones Lang LaSalle Inc (JLL).

The figure includes all sublease space that’s available.

Kevin Block, JLL’s research analyst in Houston, says this is the highest vacancy rate in nearly five years, when 18.7 percent of the city’s office space was empty following the implosion of Enron Corp.

The current vacancy rate could be from a negative net absorption of 1 million sf in the 1Q 2010.

Houston experienced a 15.4 percent vacancy and negative net absorption of approximately 865,000 sf in 1Q 2009.

A lot of last year’s vacancies occurred in Class B buildings and in the suburbs, Block says, but now it is the Class A buildings that are being hit hard by large blocks of space going vacant.

“I think you’ll continue to see, this year, more pain to be felt by the Class A landlords,” Block says.

A majority of the 1Q 2010 loss was attributed to significant changes in three Class A buildings that were previously announced and therefore not a surprise, says Block. They included:

Chevron Corp.’s move downtown left 515,000 sf vacant in Lake Corporate Center at 14141 Southwest Fwy. in Sugar Land.

ABB Inc.’s 340,000 sf in 3010 Briarpark became fully vacant due to a relocation and consolidation into Westchase Park.

Locke Lord Bissell & Liddell LLP gave back nearly 100,000 sf in JP Morgan Chase Tower at 600 Travis as part of a reorganization and contraction of its office footprint.

On a positive note, the number of tenants in need of more than 100,000 sf of space has increased and the number of tenants who are out looking at office space is up, Block says, though that activity is not expected to translate into executed leases until the latter half of 2010 or 2011.

JLL predicts Class A absorption rates will be flat or decline over the next two quarters. The shift will likely prompt a reduction in effective rental rates, says Block, which will allow more Class B tenants to move into nicer facilities.

Posted via web from Lester Langdon’s Real Estate Blog

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