Houston Office Performance Holds Despite Vacancy Pressures

Houston’s office sector has maintained largely healthy fundamentals year-to-date as of July, according to Yardi Matrix data.

Investment activity remained strong, with Houston ranking sixth nationally for sales volume. Pricing was softer, averaging below the national average.

The metro maintained one of the largest pipelines among comparable markets, much of it driven by medical office, research and life science projects. Deliveries also increased roughly 20 percent year-over-year.

However, the high vacancy rate remained the market’s primary challenge. It climbed 330 basis points over the past 12 months, significantly above the 17.7 percent national average.

Strong investment activity, prices trail national average

Houston’s investment activity totaled $1.5 billion in the first seven months of the year, placing it sixth among the top 25 markets and second within the peer set. Among similar metros, Space City trailed Dallas ($2.3 billion) but surpassed Austin ($1.4 billion), Atlanta ($792 million) and Phoenix ($791 million).

Properties sold at $158.90 per square foot on average, well below the $197.97 per square foot national benchmark. Peer markets with more affordable pricing included Atlanta ($157.54 per square foot) and Denver ($98.16 per square foot), while Nashville ($465.24 per square foot) and Austin ($352.39 per square foot) were more expensive.

One of the largest transactions was Williams Cos.’ acquisition of its namesake tower at 2800 Post Oak Blvd. Invesco Real Estate sold the 1.5 million-square-foot, 64-story skyscraper for $300 million. It was the biggest single-building office sale to close in Houston since 2019.

Another significant deal involved the 844,763-square-foot Hess Tower. Canada-based H&R REIT sold it after 15 years of ownership to TPG for an estimated $224.3 million. The sale was part of the REIT’s efforts to sell a $1.5 billion portfolio that also included ownership stakes in retail properties and multiple Canadian assets.

Houston pipeline gears toward medical, research space

Metro Houston had roughly 2.3 million square feet of space underway across 21 projects at the end of July. The figure accounted for 0.8 percent of its existing stock. Among similar markets, Space City ranked second for construction volume after Dallas (3.4 million square feet).

As for competitive office space, Houston had 823,528 square feet under development, accounting for 0.3 percent of stock—below the 0.4 percent national average. Dallas led the peer ranking with 2.8 million square feet underway, followed by Austin (1.2 million square feet) and Nashville (955,995 square feet).

Space City’s top five largest developments as of July were primarily geared toward medical office and lab use, continuing an established trend. In June 2025, Houston led the U.S. in medical office inventory, with 101.2 million square feet across 896 properties.

The metro’s largest property underway was Research Building 5 within the MD Anderson South Campus. The 600,000-square-foot life science building has been under construction since 2023 and is set to come online by 2027. The University of Texas MD Anderson Cancer Center is the owner and developer of the $668 million development at 1920 Old Spanish Trail.

The second-largest project was the 281,254-square-foot research facility at 7510 Bertner Ave. Owned by the same developer, the property broke ground in the fall of 2025 and is expected to reach completion in 2028. It is part of MD Anderson’s growing footprint near the Texas Medical Center.

As of July, 896,874 square feet of office space came online in Houston across 10 projects. That total represented a 19 percent year-over-year increase in office deliveries.

A notable completion was CITYCENTRE Six, a 319,904-square-foot property at 903 Town and Country Blvd. Developer Midway broke ground on the project in 2024 and delivered it this March as part of a larger mixed-use campus with five office buildings, a hotel and a multifamily component.

As for construction starts, developers broke ground on nine projects totaling 703,384 square feet year-to-date as of July. They account for 0.3 percent of Houston’s existing stock.

Houston vacancy climbs, rents stay low

Houston’s vacancy rate stood at 24.1 percent in July, well above the 17.7 percent national average. The index marked a 330-basis-point increase over the past 12 months. Among peers, Austin recorded a higher figure (24.5 percent), while Atlanta (18.6 percent) and Phoenix (16.9 percent) had less available space.

Space City’s average listing rates stood at $29.45 per square foot, below the $33.58 per square foot national average. The figure placed Houston on the 20th spot among the top U.S. office markets. Orlando ($25.52 per square foot) and Detroit ($21.11 per square foot) recorded the most affordable rents in the nation as of July.

Houston office space also was the most affordable in the peer set that month. Austin ($46.77 per square foot) led the ranking, followed by Atlanta ($36.64 per square foot) and Dallas ($32.99 per square foot).

Early July, Mitsubishi Corp. signed a lease for 91,761 square feet at 1100 Louisiana St., an office tower in Houston’s central business district. The company will occupy four floors at the 1.3 million-square-foot building owned by energy specialist Enterprise Products Partners.

Houston flex office inventory ranks high among peers

Houston’s coworking sector totaled roughly 5 million square feet across 255 locations in July, according to CoworkingCafe. Space City ranked third in the peer set for inventory size, trailing Dallas (7 million square feet) and Atlanta (5.9 million square feet).

The metro’s footprint accounted for 2 percent of its leasable office inventory, below the 2.4 percent national average. Similar markets with larger shares included Nashville (3.3 percent), Atlanta (2.8 percent) and Denver (2.6 percent).

Regus maintained the largest footprint in Houston, at 678,294 square feet. Workstyle Flexible Spaces (404,528 square feet), The Cannon (375,017 square feet), Spaces (317,125 square feet) and Urban Office (211,852 square feet) rounded out the top 5.