Office building vacancies on the rise throughout Houston Spring and Klein markets weather the downturn with diverse tenants

Office building vacancies on the rise throughout HoustonOffice space vacancy rates have risen in the wake of the oil and gas slowdown that began in 2014, with more than 22 million square feet of space available across the Greater Houston area, and industry experts say recovery is not around the corner.

“Just as job growth goes to zero and population growth slowed down, we decided to deliver 22 million square feet of office space inventory,” said Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston’s Bauer College of Business.

The Greater Houston Partnership estimates at least three to five years are needed for the market to recover.

“The office market tends to be cyclical,” said Patrick Jankowski, vice president of research at Greater Houston Partnership.  “We go through periods where we overbuild and then recover. The big story right now is sublease space.”

About 12 million square feet of the available space in the Greater Houston area is sublease office space, which is leased by the tenant. That figure should be closer to 3 million square feet, Jankowski said.

Gilmer said the problem is not weak demand for office space but an overabundance created in response to a booming economy that slackened in the oil and gas sector.

In areas of Spring and Klein such as the FM 1960 corridor, a mix of smaller businesses not dependent on the oil and gas industry has allowed the office space leasing market to weather the storm better than Houston’s I-10 energy corridor.

“In general, we didn’t take as hard of a hit with the oil and gas market declining,” said Sam Carrion, a leasing representative for Houston-based Boxer Properties, which leases properties in Spring and Klein. “We did take some minor drops in some tenants that were in oil and gas businesses that ended up closing their doors.”

Tax services, law offices and insurance agencies have helped make up the losses in the oil and gas sectors, he said.

Big companies have not been moving into Spring and Klein aside from the Springwoods Village community near the Grand Parkway and I-45, said Todd Edmonds, a principal at The Woodlands-based real estate company Colliers International.

“The lack of an incorporated area has been one of the hardest things to overcome because there’s no one single voice or brand,” Edwards said.

Recovery in the upstream oil business—which includes “white collar” office jobs—will translate to recovery in the office-space market, because other sectors of the economy, including retail and medical office space, continue to thrive, Gilmer said.

“Everything else has been working just fine,” he said. “The U.S. economy has been growing, and that is what has saved us from serious downturn.”

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