HOUSTON – Local office leasing activity in 1Q2023 was down 28.7 percent from the previous quarter, the latest market report from Savills shows. However, it improved by 7.5 percent over year-ago levels levels.
The fundamentals of leasing office space have changed, Savills Texas Region President Mark O’Donnell said. Companies are being much more conservative about the space they take up, rather than leasing excess space for growth, he said.
“It used to be if you had 100 people, a company might say, ‘We’re going to have a 15 percent carry vacancy rate,’ which means they’d add 15 percent, 15 vacancies,” O’Donnell said. “Now if you have 100 people, you might lease 15 percent less, or even 40 percent less seats than that.”
They’ll manage space around peak occupancy, which is around 60 percent depending on the industry, he said.
Houston’s office market availability rate ticked down slightly from the previous quarter, and the average asking rental rate ticked up, coming in at 29.7 percent and $30.26 per sf, respectively.