HOUSTON – (Realty News Report) – Most sectors of Houston’s commercial real estate market remain relatively healthy, though the office sector is likely to take longer to recover, according to Colliers International.
The combined effects of the pandemic and pressures on the energy industry led to the loss of about 140,000 jobs in Houston, contributing to higher office vacancy rates.
“The Class A vacancy rate is 22.1 percent. That’s the highest in the United States,” said Patrick Duffy, president of Colliers International, speaking at the firm’s annual Trends event.
Reoccupying Houston’s vacant office inventory will not happen overnight.
“To reduce vacancy by 5 percentage points, we would need roughly 50,000 to 60,000 new office jobs,” Duffy said. “We’re several years away from the office market returning to equilibrium.”
Nearly 4 million square feet of office space is currently under construction in Houston, including the 47-story Texas Tower being developed by Hines. New, high-quality buildings have generally been successful at attracting tenants, while owners of older office properties are investing heavily to renovate and upgrade their assets.
Snapshot of other Houston property sectors:
Industrial – Houston delivered 30.4 million square feet of industrial space in 2020, more than any other U.S. market, Colliers reports. “This was the year of the big box,” Duffy noted. With the surge in new supply, industrial vacancy rose to 8.8 percent from 6.6 percent a year earlier. The pace of construction is expected to ease in 2021.
Retail – E-commerce sales jumped sharply in 2020 because of the pandemic, but that growth should moderate as in-person shopping returns. Retail development is expected to be active along the Grand Parkway, where suburban housing growth remains strong.
Multifamily – After about 20,000 units were delivered in 2020, multifamily construction is forecast to slow in 2021. On the investment side, the average price per unit in Houston was $136,344. “Multifamily is healthy and we expect it to remain so,” Duffy said.
Healthcare – Medical office space is positioned for rent growth and expansion in 2021. Recent completions included roughly 568,000 square feet of medical space (excluding hospitals), and life sciences continues to be a growing niche.
Feb. 1, 2021 Realty News Report Copyright 2021
File: Houston Office Recovering Slowly: Colliers Trends Outlook
Caption: Downtown Houston. Photo by Ralph Bivins. Copyright 2021 by Realty News Report.
File: (2) Colliers International. Hines. Houston Office Recovering Slowly: Colliers Trends Outlook 2021. Grand Parkway.