Commercial Real Estate in The Woodlands Area Experiences Toxic ‘Surge of Sublease Space’ Due to New Work-From-Home Norm
THE WOODLANDS, TX – A recent article by Wolf Street states that commercial real estate in Houston is, “getting hammered by a tsunami of sublease space,” due to the recent switch from traditional office space to a work-from-home job environment.
The article states:
“At the end of Q3, overall office availability in Houston rose to a new record of 27.9%, up from around 17.5% in 2014, when it was already high following a Texas-magnificent construction boom. Class A availability jumped to 29.1%.
In terms of submarkets, availability ranged from 8.4% at Medical Center/South – health care and life sciences being a big industry in Houston – via 29.5% in the Central Business District, to a catastrophic 50.7% in North Belt/Greenspoint, according to data from Savills Research.
But leasing volume in Q3 plunged by 47% to just 2.0 million sf.
Overall asking rental rates have been wavering in the same narrow range since 2014, with the overall asking rent currently at $29.15 per sf per year. The Class-A asking rent at $33.67 per sf per year is down about 6% from 2014. Over the years since the oil bust began, companies, when their leases came up for renewal, upgraded to the latest and greatest office space, leaving their old digs behind and vacant. But that too appears to have ended now, as “cost-consciousness has come to the forefront with tenants actively seeking out lower-cost options.”
“While optimistic landlords are slow to implement downward asking rent revisions, the reality is that the variance between asking rates and taking rates is widening and concession offerings are becoming increasingly competitive,” Savills said.
The largest lease signed in Q3 was by JP Morgan Chase for 252,000 sf at 600 Travis Street in the Central Business District.”
The article is titled, Commercial Real Estate Office Sector Crushed by Work-from-Home, Tsunami of Supply in Q3: Manhattan, San Francisco, Houston, Chicago, Los Angeles. Click here to read it in full.