Greater Houston | Office Market Report Q3 2026

EXECUTIVE SUMMARY

Houston’s 3rd quarter office market delivered an uneven result across classes. With virtually no city-wide net absorption and change in average rental rates, the CBD continues to hemorrhage tenants with quarterly negative net absorption of 234,740 square feet while suburban office buildings accounted for 100% of the quarter’s positive net absorption of 195,002 square feet. What’s more, 100% of the broader market YTD net absorption of 328,530 square feet can be traced directly to Class A suburban YTD net absorption of 816,761 square feet. These numbers are driven by workplace utilization, continued metro population growth to the southwest, west and northwest suburbs that drive employers to move closer to their employees, and quality amenitized buildings that help encourage workers to come to work.

The office quarter forthcoming will continue the trend of Class A outperforming Class B with few exceptions. The landscape will be heavily influenced by capital markets such as cost of capital, favorable basis resets from sales, and, capital available for leasing, capex and amenitization will result in additional pressure being applied to higher basis assets and/or ownerships that lack capital. As always, tenant office space demand will drive the broader market performance and it’s reasonable to expect the energy economy, AI, and corporate office sizing to have significant impact as the ups and downs of uncertain international affairs are tempered by Houston’s population growth, diversity of business, and, having nation leading port activity.

BILL INSULL, CCIM | Principal

KEY TAKEAWAYS

ASKING RENTS REMAIN STABLE

Direct asking gross rents measured $31.36 per square foot in Q3 2026, down just 0.4% quarter over quarter, while rents remained near $31.00 per square foot for the fifth consecutive quarter.

VACANCY REMAINS ELEVATED BUT STABLE

Direct vacancy held at 22.9%, reflecting limited movement in overall occupancy as tenants continue to evaluate space requirements and workplace strategies.

LEASING ACTIVITY MODERATED

Q3 leasing activity totaled approximately 2.0 million square feet, down 20.8% from Q2 2026, but remained within the range recorded during the past five quarters.

OCCUPANCY REMAINS ESSENTIALLY FLAT

Q3 2026 net absorption totaled negative 39,738 square feet, bringing 2026 YTD net absorption to approximately 50,900 square feet. The limited movement highlights how slowly Houston's office market is working through elevated vacancy.

FLIGHT TO QUALITY CONTINUES TO SHAPE THE MARKET

Class A asking rents remained significantly above Class B at $36.47 per square foot versus $23.32 per square foot, a $13.15-per-square-foot premium. Building quality, location, amenities, and workplace functionality continue to influence tenant decisions.

DEVELOPMENT REMAINS LIMITED

Approximately 488,000 square feet is currently under construction, while 2026 YTD deliveries total approximately 662,000 square feet. Limited new supply should allow existing inventory more time to absorb vacancy.

DIRECT ASKING GROSS RENT VS DIRECT VACANCY RATE

Houston's office market remained stable during Q3 2026, with direct asking gross rents holding near recent highs while direct vacancy remained unchanged. The citywide direct asking gross rent measured $31.36 per square foot, down just 0.4% from $31.48 in Q2 2026, while direct vacancy held steady at 22.9%.

Rental performance has remained remarkably consistent over the past five quarters. Citywide direct asking gross rents have remained near $31.00 per square foot since Q3 2025, demonstrating continued pricing stability despite elevated vacancy and uneven occupancy gains.

Rather than competing primarily through lower asking rents, landlords continue to utilize tenant improvement allowances, concessions, building upgrades, and other incentives to attract tenants.

Q3 2026 net absorption totaled negative 39,738 square feet, reflecting limited movement in overall occupancy during the quarter. While the result represents a moderation from the positive absorption recorded in Q2 2026, the relatively small change is consistent with a market where tenant activity continues but meaningful occupancy gains remain gradual.

Looking ahead, limited new supply should continue to provide support for existing office properties, while performance is expected to remain increasingly differentiated by asset quality and location. Well-located, high-quality buildings should remain best positioned to maintain pricing and capture tenant demand as Houston's office market continues to work through elevated vacancy.

FLIGHT TO QUALITY CONTINUES AS ASKING RENTS HOLD STEADY

Tenant preference for higher-quality office space continues to influence Houston's leasing market, while asking rents remained remarkably stable during Q3 2026. Class A direct asking gross rents averaged $36.47 per square foot, down just 0.4% from $36.63 in Q2 2026. Class B rents increased 0.4% quarter over quarter to $23.32 per square foot, compared with $23.23 in Q2 2026.

The pricing gap between Class A and Class B space remained substantial at approximately $13.15 per square foot, narrowing slightly from $13.40 in Q2 2026. The continued premium reflects the market's differentiation between premier office properties and older commodity inventory as occupiers remain focused on building quality, location, amenities, operational efficiency, and employee experience.

Despite elevated vacancy, Class A landlords have largely maintained asking rents, competing through tenant improvement allowances, concessions, amenity investments, and building upgrades rather than significant reductions in face rates. Class B properties continue to face greater competitive pressure, particularly where aging improvements, location, or limited amenities make it more difficult to compete with higher-quality alternatives.

Looking ahead, the flight-to-quality trend should continue to shape leasing decisions. With limited new construction, well-located Class A properties offering modern amenities and high-quality space should remain best positioned to capture tenant demand, while older Class B assets may increasingly require capital investment, repositioning, or more aggressive leasing strategies to remain competitive.

NET ABSORPTION VS DIRECT VACANCY RATE

Houston's office market recorded relatively stable occupancy during Q3 2026, with net absorption totaling negative 39,738 square feet following positive absorption of 368,268 square feet in Q2 2026. Despite the quarterly moderation, direct vacancy remained unchanged at 22.9%, reflecting limited movement in overall occupancy.

Quarterly absorption has continued to fluctuate as tenants evaluate space requirements, renew existing leases, relocate to higher-quality properties, and adjust footprints. Q3's modest occupancy loss represents approximately 0.02% of Houston's office inventory, underscoring how little the market's overall occupied base changed during the quarter.

The composition of absorption also tells an important story.

Class A recorded negative 105,800 square feet of Q3 2026 absorption, while Class B posted positive 66,062 square feet. While the broader flight-to-quality trend remains important, quarterly absorption can be influenced by the timing of individual move-ins and move-outs and should be evaluated alongside leasing activity and longer-term trends.

Through the first nine months of 2026, Houston recorded approximately 50,900 square feet of positive net absorption, reflecting essentially flat occupancy year to date. On a rolling 12-month basis, net absorption remained positive at approximately 328,500 square feet, providing additional context for a market where occupancy gains remain gradual.

Looking ahead, limited new construction should help prevent significant additional supply pressure, while leasing activity and tenant move-ins will remain critical to generating sustained occupancy improvement.

Houston's workplace utilization remained above the broader national benchmark during Q3 2026. According to Kastle Systems' Back to Work Barometer, Houston's average weekly office occupancy reached 57.9% for the week ending September 16, 2026, compared with 56.3% across Kastle's 10-city average. While Austin and Dallas reported higher workplace attendance during the same week, Houston continues to demonstrate relatively strong office utilization compared with several other major U.S. markets.

Through the first nine months of 2026, Houston recorded approximately 50,900 square feet of positive net absorption, effectively representing flat occupancy across the market's approximately 238 million square feet of Class A and Class B office inventory. The limited movement in occupied space illustrates that stronger workplace attendance has not yet translated into significant expansion of leased office footprints.

This distinction remains important. Employees are using office space at relatively healthy levels, while occupiers continue to evaluate space efficiency, hybrid work strategies, lease expirations, and opportunities to relocate into higher-quality buildings. Increased workplace attendance therefore does not necessarily result in immediate growth in leased square footage.

One encouraging indicator remains the continued preference for higher-quality office environments. Kastle's national Class A+ occupancy measure reached 79.0% in the latest weekly reading. While this is a national rather than Houston-specific measure, it supports the broader flight-to-quality trend evident across Houston's office market.

CONSTRUCTION PIPELINE

LIMITED DEVELOPMENT CONTINUES TO DEFINE HOUSTON'S OFFICE MARKET

Houston's office construction pipeline remained historically limited during Q3 2026, with approximately 487,968 square feet under construction. While the pipeline increased from Q2 2026, development remains well below pre-pandemic levels as elevated vacancy, higher construction and financing costs, and changing office-use patterns continue to limit speculative development.

No new office buildings delivered during Q3 2026, leaving 2026 year-to-date deliveries at approximately 662,000 square feet. New supply has remained highly selective, with recent deliveries and active projects primarily consisting of single-tenant, owner-occupied, mixed-use, or strategically located developments rather than traditional large-scale speculative office construction.

The current pipeline includes SCI's 210,000-square-foot headquarters and the 127,651-square-foot Autry Park One, both in Midtown and expected to deliver during Q4 2026. Longer-term projects include Southern Land Company's 104,434-square-foot Kirby Office Tower in Greenway Plaza and Majestic Developers' 45,883-square-foot headquarters in Fort Bend County/Sugar Land.

Houston's limited development pipeline remains important given the market's relatively flat occupancy environment since the pandemic. With direct vacancy at 22.9% and only approximately 51,000 square feet of positive YTD net absorption, restrained construction reduces the risk of significant new supply entering the market before existing vacancy has time to work through the system.

	2026 Q3	2026 Q2	2026 Q1	2025 Q4	2025 Q3
Direct vacancy rate	22.9%	22.9%	23.0%	22.8%	22.5%
Direct asking gross rent	$31.36	$31.48	$31.07	$31.08	$30.96
Leasing activity	2,033,883	2,567,879	2,860,602	2,215,369	2,596,679
Sales activity (SF) manual	4,664,441	7,674,510	2,557,003	2,740,735	10,500,886
Net absorption	(39,738)	368,268	(277,613)	(180,316)	377,456
Construction pipeline	487,968	487,968	488,445	820,234	869,351
Deliveries	0	150,794	511,580	80,000	49,117
Available sublease	4,854,083	4,600,054	4,899,748	5,611,529	5,468,998

STABILITY DEFINES HOUSTON OFFICE MARKET

Houston's office market remained relatively stable during Q3 2026, with direct vacancy holding at 22.9% and direct asking gross rent measuring $31.36 per square foot, down just 0.4% quarter over quarter. Asking rents have remained near $31.00 per square foot for five consecutive quarters, demonstrating continued pricing stability despite elevated vacancy and limited occupancy growth.

Quarterly leasing activity totaled approximately 2.0 million square feet, down 20.8% from the revised 2.57 million square feet recorded in Q2 2026. While leasing volume moderated, activity remained within the range recorded over the past five quarters. Q3 2026 net absorption totaled negative 39,738 square feet, following revised positive absorption of 368,268 square feet in Q2 2026.

Available sublease space increased 5.5% quarter over quarter to approximately 4.85 million square feet but remained below the 5.61 million square feet recorded in Q4 2025. The movement in sublease availability continues to reflect changing tenant requirements as occupiers evaluate space efficiency, lease expirations, and workplace strategies.

Overall, Q3 2026 reflects a Houston office market that continues to work through a prolonged post-COVID stabilization period rather than a rapid recovery. Stable asking rents, relatively unchanged vacancy, moderated leasing activity, and limited net absorption point to a market increasingly defined by tenant selectivity, asset quality, and location.

KEY ACTIVITIES
Tenant	Building Name/Address	Square Feet	Submarket
Commencements
Westlake Corporation	5444 Westheimer	140,600	West Loop/Galleria
Magnolia Oil Company	990 Town & Country Way	60,000	Katy Freeway East
Quanta Infrastructure Solutions	1000 Energy Drive	30,983	Woodlands
Leasing Activity
Harris County Flood Control District	4425 Westway Park Boulevard	86,743	West Belt/Highway 290
Target Hospitality	1790 Hughes Landing Boulevard	52,234	Woodlands
Michel’s Corporation (Sublease)	12140 Wickchester	50,380	Katy Freeway West
Available Sublease
NOV	NOV Headquarters	410,465	Southwest/Beltway 8
JP Morgan Chase	The Jones on Main	122,365	Central Business District
McDermott International	Energy Center V	99,501	Katy Freeway West
Buyer \| Seller	Building Name/Address	Square Feet	Submarket
Sale Transactions
The Williams Companies \| Invesco/MetLife	Williams Tower	1,452,818	West Loop/Galleria
The Wideman Company \| Brookfield	1201 Louisiana	834,000	Central Business District
Fuller Realty \| Granite Properties, Inc.	Eldridge Place Campus	828,784	Katy Freeway West
Developer / Owner	Building Name/Address	Square Feet	Submarket
Deliveries
No Deliveries Q3 2026
Construction
Service Corporation International	1945 Allen Parkway	210,000	Allen Parkway/Midtown
Hanover Company	Autry Park Drive	127,651	Allen Parkway/Midtown
Southern Land Company	2811 Kirby Drive	104,434	Greenway Plaza

SALES OVERVIEW

SELECTIVE CAPITAL ACTIVITY CONTINUES ACROSS HOUSTON’S OFFICE MARKET

Houston's office investment market remained active during Q3 2026, although capital continued to be selective and transaction activity varied across submarkets. Buyers remained focused on well-located office properties where pricing, leasing potential, redevelopment opportunities, or owner-user considerations can support long-term value.

Sales activity remained concentrated across several Houston submarkets, with the Submarket Sales Activity chart illustrating where capital was most active during the quarter. The diversity of transactions reinforces that office investment is not being driven by a single submarket or property strategy, but rather by individual asset characteristics and basis.

The Historical Sale Price trend continues to demonstrate the significant repricing that has occurred across Houston's office market since the pandemic. Current pricing remains well below prior-cycle levels, creating opportunities for investors willing to evaluate properties on an asset-by-asset basis. At the same time, elevated vacancy and uncertainty surrounding future office demand continue to require careful underwriting.

Investment activity remains highly differentiated between well-located, higher-quality assets and older commodity properties. Buyers pursuing value-add opportunities are increasingly evaluating opportunities for repositioning, leasing improvements, and alternative uses, while owner-users continue to represent another source of demand for select office properties.

Overall, Houston's office investment market remains active but highly selective, with transaction volume and pricing increasingly determined by asset quality, location, occupancy, basis, and the potential to create additional value.

OVERALL MARKET STATISTICS
Submarket / Class	Inventory (SF)	Direct Vacancy Rate	Sublease Vacancy Rate	Total Vacancy Rate	Previous Quarter Direct Vacancy Rate	Direct Asking Gross Rent	Current Quarter Leasing Activity (SF)	YTD Leasing Activity (SF)	Current Quarter Net Absorption (SF)	YTD Net Absorption (SF)	Construction Pipeline (SF)	YTD Deliveries (SF)
Total Houston Market
Class A	139,546,016	23.9%	1.3%	25.2%	23.8%	$36.47	1,438,973	3,169,708	(105,800)	788,047	487,968	662,374
Class B	98,399,771	21.4%	1.0%	22.4%	21.5%	$23.32	594,910	1,432,054	66,062	(459,517)	0	0
Total	237,945,787	22.9%	1.2%	24.0%	22.9%	$31.36	2,033,883	4,601,762	(39,738)	328,530	487,968	662,374
Central Business District
Class A	39,304,566	25.0%	0.8%	25.9%	24.5%	$43.89	177,348	488,682	(205,301)	(28,714)	0	0
Class B	11,289,811	27.7%	0.3%	27.9%	27.7%	$21.40	0	460	(29,439)	(28,032)	0	0
Total	50,594,377	25.6%	0.7%	26.3%	25.2%	$39.44	177,348	489,142	(234,740)	(56,746)	0	0
Suburban
Class A	100,241,450	23.4%	1.5%	24.9%	23.5%	$33.20	1,261,625	2,681,026	99,501	816,761	487,968	662,374
Class B	87,109,960	20.6%	1.1%	21.7%	20.7%	$23.58	594,910	1,431,594	95,501	(431,485)	0	0
Total	187,351,410	22.1%	1.3%	23.4%	22.2%	$28.90	1,856,535	4,112,620	195,002	385,276	487,968	662,374

Submarket / Class	Inventory (SF)	Direct Vacancy Rate	Sublease Vacancy Rate	Total Vacancy Rate	Previous Quarter Direct Vacancy Rate	Direct Asking Gross Rent	Current Quarter Leasing Activity (SF)	YTD Leasing Activity (SF)	Current Quarter Net Absorption (SF)	YTD Net Absorption (SF)	Construction Pipeline (SF)	YTD Deliveries (SF)
FM 1960/Highway 249
Class A	2,573,667	56.9%	0.0%	56.9%	56.1%	$30.10	93,692	159,536	66,444	115,596	0	0
Class B	4,012,089	27.3%	0.3%	27.6%	27.6%	$29.46	42,271	61,174	(32,380)	(34,414)	0	0
Total	6,585,756	38.8%	0.2%	39.0%	38.8%	$29.78	135,963	220,710	34,064	81,182	0	0
Greenway Plaza
Class A	7,935,545	27.2%	1.2%	28.4%	27.2%	$36.14	55,239	188,934	(5,919)	20,136	104,434	150,794
Class B	3,066,442	24.6%	0.2%	24.8%	22.7%	$29.19	23,491	61,961	(57,391)	(129,644)	0	0
Total	11,001,987	26.5%	0.9%	27.4%	26.0%	$34.62	78,730	250,895	(63,310)	(109,508)	104,434	150,794
Gulf Freeway/Pasadena
Class A	522,746	7.3%	0.0%	7.3%	7.3%	$35.00	0	0	0	0	0	95,000
Class B	2,448,030	17.6%	0.6%	18.2%	17.8%	$23.95	28,931	102,945	5,814	(3,205)	0	0
Total	2,970,776	15.8%	0.5%	16.3%	16.0%	$25.00	28,931	102,945	5,814	(3,205)	0	95,000
I-10 East
Class B	510,209	11.6%	0.0%	11.6%	10.2%	$19.60	7,580	8,053	(7,051)	7,120	0	0
Total	510,209	11.6%	0.0%	11.6%	10.2%	$19.60	7,580	8,053	(7,051)	7,120	0	0
Katy Freeway East
Class A	6,470,140	9.2%	2.1%	11.3%	10.3%	$57.79	110,321	246,127	57,656	498,501	0	336,580
Class B	2,251,727	18.6%	0.0%	18.6%	17.5%	$25.24	29,963	62,351	(24,705)	(40,070)	0	0
Total	8,721,867	11.6%	1.6%	13.2%	12.1%	$37.93	140,284	308,478	32,951	458,431	0	336,580
Katy Freeway West
Class A	16,077,809	17.6%	2.7%	20.4%	17.6%	$31.81	208,170	326,092	(1,948)	386	0	0
Class B	9,488,751	22.9%	0.5%	23.3%	22.7%	$24.32	88,398	217,765	(11,435)	(301,172)	0	0
Total	25,566,560	19.6%	1.9%	21.5%	19.5%	$27.45	296,568	543,857	(13,383)	(300,786)	0	0
Katy/Grand Parkway West
Class A	1,644,457	19.6%	0.0%	19.6%	20.5%	$34.04	20,750	44,477	13,868	16,990	0	0
Class B	778,693	8.7%	0.0%	8.7%	8.8%	$38.19	4,131	6,019	345	28	0	0
Total	2,423,150	16.1%	0.0%	16.1%	16.7%	$35.38	24,881	50,496	14,213	17,018	0	0
Kingwood/Humble
Class A	270,000	0.0%	0.0%	0.0%	0.0%	N/A	0	0	0	0	0	0
Class B	1,172,156	4.9%	0.6%	5.5%	4.7%	$21.13	2,794	3,814	(2,831)	2,436	0	0
Total	1,442,156	4.0%	0.5%	4.4%	3.8%	$21.13	2,794	3,814	(2,831)	2,436	0	0
NASA/Clear Lake
Class A	1,874,315	13.1%	1.2%	14.3%	8.5%	$29.77	30,848	30,848	(67,369)	(63,364)	0	80,000
Class B	3,371,278	19.5%	0.0%	19.5%	21.7%	$23.31	5,092	86,310	74,664	96,893	0	0
Total	5,245,593	17.2%	0.4%	17.6%	17.0%	$24.60	35,940	117,158	7,295	33,529	0	80,000
North Belt/Greenspoint
Class A	4,487,165	54.3%	0.4%	54.7%	53.8%	$19.03	23,640	45,621	(24,706)	(26,087)	0	0
Class B	6,845,517	33.5%	0.1%	33.6%	34.1%	$15.17	22,649	58,265	37,498	27,272	0	0
Total	11,332,682	41.8%	0.2%	42.0%	41.9%	$17.33	46,289	103,886	12,792	1,185	0	0
North Loop West
Class A	1,474,487	21.0%	0.0%	21.0%	23.5%	$26.39	9,381	96,488	37,521	30,672	0	0
Class B	2,166,921	15.6%	0.3%	15.9%	16.1%	$20.80	40,546	73,342	10,563	59,759	0	0
Total	3,641,408	17.8%	0.2%	17.9%	19.1%	$23.44	49,927	169,830	48,084	90,431	0	0
Northeast
Class A	643,952	0.4%	0.0%	0.4%	0.4%	N/A	0	0	0	0	0	0
Class B	715,899	1.2%	0.0%	1.2%	1.6%	$27.00	2,200	8,948	2,561	9,612	0	0
Total	1,359,851	0.8%	0.0%	0.8%	1.0%	$27.00	2,200	8,948	2,561	9,612	0	0
Northwest
Class A	1,003,410	23.9%	2.0%	26.0%	20.4%	$19.68	10,572	27,795	(47,710)	(16,924)	0	0
Class B	3,799,639	6.5%	0.3%	6.9%	7.2%	$16.94	23,390	57,981	26,335	18,763	0	0
Total	4,803,049	10.2%	0.7%	10.8%	10.0%	$17.98	33,962	85,776	(21,375)	1,839	0	0
Richmond/Fountain View
Class B	731,754	16.0%	0.0%	16.0%	16.0%	$17.45	0	0	0	(9,688)	0	0
Total	731,754	16.0%	0.0%	16.0%	16.0%	$17.45	0	0	0	(9,688)	0	0
San Felipe/Voss
Class A	2,361,796	27.2%	5.2%	32.4%	27.9%	$32.03	102,040	181,831	4,798	(9,855)	0	0
Class B	2,799,376	22.2%	0.4%	22.6%	23.3%	$23.28	24,725	24,725	29,568	53,546	0	0
Total	5,161,172	24.5%	2.6%	27.1%	25.4%	$27.17	126,765	206,556	34,366	43,691	0	0
South
Class A	587,618	6.1%	0.0%	6.1%	6.4%	$27.08	0	0	1,715	1,715	0	0
Class B	540,805	18.4%	0.0%	18.4%	6.4%	$29.95	522	522	(66,012)	(65,406)	0	0
Total	1,128,423	12.1%	0.0%	12.1%	6.4%	$28.60	522	522	(64,297)	(63,691)	0	0
South Main/Medical Center
Class A	250,000	0.0%	0.0%	0.0%	0.0%	N/A	0	0	0	0	0	0
Class B	1,362,745	10.3%	0.4%	10.7%	10.2%	$18.29	15,045	15,479	(1,223)	(15,036)	0	0
Total	1,612,745	8.7%	0.4%	9.1%	8.6%	$23.80	15,045	15,479	(1,223)	(15,036)	0	0
Southeast
Class B	228,543	0.0%	0.0%	0.0%	0.0%	N/A	0	0	0	0	0	0
Total	228,543	0.0%	0.0%	0.0%	0.0%	N/A	0	0	0	0	0	0
Southwest/Beltway 8
Class A	1,070,041	35.0%	0.1%	35.1%	34.5%	$17.75	4,507	8,509	(5,062)	(5,819)	0	0
Class B	7,057,481	19.9%	5.1%	25.0%	19.5%	$21.04	9,277	31,240	(30,902)	(48,700)	0	0
Total	8,127,522	21.9%	4.5%	26.3%	21.5%	$19.93	13,784	39,749	(35,964)	(54,519)	0	0
Southwest Far
Class A	80,536	32.5%	3.5%	35.9%	32.5%	$37.53	0	0	(2,800)	1,736	0	0
Class B	512,457	0.0%	11.2%	11.2%	0.0%	N/A	0	0	0	0	0	0
Total	592,993	4.4%	10.2%	14.6%	4.4%	$37.53	0	0	(2,800)	1,736	0	0
West Belt/Highway 290
Class A	3,471,210	26.1%	3.9%	29.9%	24.9%	$31.77	137,152	188,257	(45,167)	(18,458)	0	0
Class B	2,047,122	25.9%	0.0%	25.9%	30.2%	$24.26	8,520	11,816	87,083	89,530	0	0
Total	5,518,332	26.0%	2.4%	28.5%	26.9%	$28.78	145,672	200,073	41,916	71,072	0	0
West Loop/Galleria
Class A	17,606,203	30.9%	0.8%	31.7%	31.6%	$39.69	250,078	496,005	122,276	194,921	0	0
Class B	6,545,505	35.3%	0.3%	35.7%	34.1%	$28.30	68,182	148,650	(84,807)	(126,724)	0	0
Total	24,151,708	32.1%	0.7%	32.8%	32.2%	$36.18	318,260	644,655	37,469	68,197	0	0
Westchase
Class A	9,471,821	27.5%	0.6%	28.1%	27.1%	$30.04	77,375	180,075	(45,403)	(20,910)	0	0
Class B	7,856,353	23.1%	3.7%	26.8%	23.4%	$20.00	50,899	88,316	19,948	(69,917)	0	0
Total	17,328,174	25.5%	2.0%	27.5%	25.4%	$26.10	128,274	268,391	(25,455)	(90,827)	0	0
Woodlands
Class A	13,432,055	7.3%	1.5%	8.8%	7.6%	$42.92	88,682	272,196	39,429	103,614	0	0
Class B	4,043,714	15.0%	1.6%	16.6%	15.5%	$29.73	27,045	104,470	56,312	435	0	0
Total	17,475,769	9.1%	1.5%	10.6%	9.4%	$39.00	115,727	376,666	95,741	104,049	0	0

MARKET OUTLOOK

STABILITY, SELECTIVITY & LIMITED NEW SUPPLY
Houston's office market is expected to remain relatively stable through the remainder of 2026, supported by resilient asking rents, limited new development, and steady workplace utilization. Direct vacancy held at 22.9% during Q3, while direct asking gross rent remained near recent highs at $31.36 per square foot, reinforcing the market's continued pricing stability despite limited occupancy growth.

Occupancy remains the market's primary challenge. Houston recorded approximately 51,000 square feet of positive net absorption through the first nine months of 2026, effectively flat across the market's approximately 238 million square feet of Class A and Class B inventory. Leasing activity remains active, but tenant decisions continue to be influenced by space efficiency, hybrid work strategies, lease expirations, and opportunities to upgrade into higher-quality buildings.

Limited new construction should remain one of Houston's strongest long-term fundamentals.

Approximately 488,000 square feet is currently under construction, while 2026 YTD deliveries total approximately 662,000 square feet. With speculative development remaining limited, the market has time to work through elevated existing vacancy without significant new supply pressure.

Flight to quality should continue to shape leasing performance, with well-located Class A properties benefiting from tenant preference for modern amenities, workplace experience, and operational efficiency. Older commodity buildings will likely face continued pressure to compete through capital improvements, repositioning, concessions, or alternative strategies.

Overall, Houston's office market remains in a prolonged post-COVID stabilization period rather than a rapid recovery. Stable asking rents, disciplined development, steady workplace utilization, and selective tenant and investor activity should continue defining market conditions heading into 2027.

KEY OPPORTUNITIES & RISKS

Opportunities

+ Limited new construction provides time for existing vacancy to be absorbed.

+ Flight to quality continues supporting well-located, high-quality office assets.

+ Stable asking rents and workplace utilization provide a foundation for longer-term market balance.

Risks

+ Elevated vacancy remains the market's most significant challenge.

+ Limited YTD absorption indicates that meaningful occupancy improvement remains slow.

+ Older commodity properties face increasing pressure from tenant selectivity and capital requirements.

ECONOMIC FUNDAMENTALS REMAIN SUPPORTIVE

Houston's economy remained resilient through Q3 2026, supported by stable employment, moderating inflation, continued energy activity, and steady trade volumes. Total Houston MSA employment measured approximately 3.51 million jobs in August, while the local unemployment rate improved to 4.4%, compared with 4.6% in May.

Inflation also moderated during the quarter, with the Consumer Price Index increasing 3.4% year over year in August, down from 4.2% in May. Easing inflationary pressure, combined with relatively stable labor market conditions, provides a more supportive operating environment for businesses across the region.

Houston's energy sector remained an important economic driver. The U.S. rig count reached 599 in September, while WTI crude oil measured $96.41 per barrel, supporting continued energy-related business activity and investment. Port Houston also maintained steady trade activity, processing 373,756 TEUs in August.

For Houston's office market, stable employment and continued activity across professional services, energy, healthcare, and corporate operations provide an important foundation for tenant demand. However, employment growth alone is unlikely to materially reduce elevated office vacancy without corresponding expansion in occupied space.

PROFESSIONAL SERVICES CONTINUE TO SUPPORT DEMAND

Houston's office-using employment remained positive through September 2026, although growth varied considerably across major sectors. Professional and Business Services employment increased 2.6% year over year to approximately 581,300 jobs, while Education and Health Services increased 1.3% to approximately 476,400 jobs. These sectors remain important components of Houston's office-using employment base and continue to provide support for office demand.

Employment growth was less consistent across other office-oriented sectors. Government employment increased 1.9% to approximately 447,200 jobs, while Financial Activities declined 1.2% to approximately 176,700 jobs. Information employment experienced the largest decline, falling 5.9% to approximately 27,100 jobs. The mixed performance reflects an office economy where growth remains concentrated in select industries.

Overall, Houston's office employment base continues to expand, but at a more moderate and uneven pace following the strong post-pandemic rebound. Continued gains in professional services, healthcare, and government provide support for office demand, while weakness in information and financial activities may limit broader employment-driven absorption.

OFFICE EMPLOYMENT GROWTH NORMALIZES

Houston's office-using employment has transitioned to a more sustainable pace following the strong post-pandemic rebound. After the employment contraction experienced in 2020, Houston recorded strong gains from 2021 through 2023 before growth moderated in 2024, 2025, and 2026.

Houston has generally followed the longer-term employment trends of Texas and the U.S., supported by professional services, healthcare, engineering, energy-related corporate operations, and other office-using industries. The current 1.1% growth in service-providing employment reflects continued expansion across the broader employment base, although individual industries are performing at different rates.

Looking ahead, continued job creation should provide underlying support for Houston's office market. However, employment growth alone is unlikely to materially reduce elevated vacancy. Additional job growth will need to translate into occupied office space before Houston experiences meaningful improvement in overall occupancy.

Houston Citywide Office Market Report

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Market Reports

Greater Houston | Office Market Report Q3 2026

EXECUTIVE SUMMARY

KEY TAKEAWAYS

DIRECT ASKING GROSS RENT VS DIRECT VACANCY RATE

FLIGHT TO QUALITY CONTINUES AS ASKING RENTS HOLD STEADY

NET ABSORPTION VS DIRECT VACANCY RATE

OCCUPANCY RECOVERY & NET ABSORPTION

CONSTRUCTION PIPELINE

LIMITED DEVELOPMENT CONTINUES TO DEFINE HOUSTON'S OFFICE MARKET

QUARTER TREND ANALYSIS

STABILITY DEFINES HOUSTON OFFICE MARKET

SALES OVERVIEW

NOTABLE SALES

MARKET OUTLOOK

KEY OPPORTUNITIES & RISKS

ECONOMIC FUNDAMENTALS REMAIN SUPPORTIVE

PROFESSIONAL SERVICES CONTINUE TO SUPPORT DEMAND

OFFICE EMPLOYMENT GROWTH NORMALIZES

SUBMARKET MAP

OFFICE ADVISORS

RESEARCH TEAM

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Houston Citywide Office Market Report

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