Houston Office Market
Annual full-service asking rental rates decreased to $29.69/SF, a 1.0% decrease year over year. Occupancy declined, pushing overall vacancy rates to increase by 50 basis points year over year, to 24.6%. The under-construction pipeline continued to remain steady, with 3.0 MSF in progress. Total leasing activity closed the quarter at 3.5 MSF, averaging 4,343 SF per deal and reflecting an increase in deal size by 29.9% quarter over quarter and 0.1% year over year.
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The market realized 3.6 MSF of positive absorption in the second quarter of 2023, bringing year-to-date totals to 8.4 MSF. Overall rental rates grew 9.6% year over year to $9.17/SF, reaching a new historical high. Construction pipeline remains strong with 9.5 MSF of deliveries, with another 28.9 MSF under construction. Following yearly supply outpacing demand for the first time since the pandemic, as of the end of the second quarter of 2023, vacancy increased by 100 basis points year over year to 6.3%.
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