Houston Office Market Overview – What You’ll Get
This report serves as a comprehensive Houston office market overview. You will find detailed information on every Houston commercial real estate office market and submarket here. Whether you’re a native Houstonian interested in researching the current market, or a company considering relocation to the Houston area, the information below provides a useful summary and starting point.
For the most up to date information on the current market conditions, trends, data like rates and vacancies, and more, check out the Market Research page here.
You can also request a customized market survey prepared to address your specific needs and situation by completing the request form here.
Houston Office Markets
Bellaire Office Submarket
The Bellaire office market is one of Houston’s smaller markets with about 4.95 million square feet of rental space. This represents less than 2% of the overall rental area for office space in the Houston market. This should come as no surprise as the City of Bellaire is sometimes known as the “City of Homes” due to its heavy residential density. Nonetheless there are a number of commercial office buildings in Bellaire. Many of these properties have a focus on medical-use tenants. As shown in the submarket map above, Bellaire straddles the 610 Loop South of US-59 and the Galleria, and extends South to the bottom edge of the loop and S Braeswood.
Of the 4.95 million square feet of office space in Bellaire, Class B properties account for a little more than half. Class A buildings account for another third of the total space in the market, and the remaining 15% is made up of Class C properties.
The Bellaire office market contains about 80 commercial office buildings.
Downtown Houston / CBD
The Downtown Houston “CBD” office market is the city’s largest concentration of office buildings. The area is bounded by I-10 to the North, I-45 to the West, and US-59 to the East. In this market a total of 688 buildings yield 59.6 million square feet of rental space. This accounts for nearly 20% of all rentable square feet of office space in Houston. Much of this space is occupied by corporate Fortune 500 companies, which is typical for any major metropolitan area. Downtown Houston office space runs the most expensive of all markets in the city, with an average annual rate of nearly $38 per square foot.
Over 60% of the Downtown Houston office market consists of Class A buildings. Another 30% of the CBD market is Class B quality, and Class C properties account for the remaining 8-10% of the market.
The Downtown Houston office market has approximately 800k square feet of new construction underway. The most notable building currently under construction is Capitol Tower being developed by Skansa. Of all recent construction deliveries in the market, the most high profile is 609 Main, developed by Hines.
FM1960 (Champions, Highway 249, I-45 North)
The FM1960 office market includes the Champions, Highway 249 and I-45 North submarkets cutting across North Houston. The Champions area is an older, more established environment with many neighborhood style office buildings catering to entrepreneurs and business owners living in the area. Highway 249 is sometimes referred to as Houston’s Technology Corridor thanks to an initiative which began in 2001 to re-brand the area. Firms like HP and Compaq once called the area home, further strengthening this effort. Although HP has joined Exxon in the Springwood Village area near the Woodlands, the 249 area still houses some large firms including Lonestar College and Noble Energy. Building age and quality improves farther north on Highway 249, and many firms have relocated north in recent years from the FM1960 area to newer buildings with proximity to Grand Parkway.
The overall FM1960 market consists of 15 million square feet of rentable office space, which is close to 5% of the Houston office market. This includes 4 million square feet of Class A space (27%). Class B properties account for half of the FM1960 market. Another quarter of the market is made up of Class C buildings.
Greenway Plaza Submarket
The Greenway Plaza market includes the mixed-use development by the same name as well as the neighborhoods of Upper Kirby, West University Place, and a portion of River Oaks. It is the third most expensive office market in Houston with average annual rental rates of $33.11 per square foot. In total there are 274 office buildings consisting of 13 million square feet of space in the Greenway Plaza market. With it’s highly desirable location and amenities, ease of access to highways US59 and the 610 loop, it is no surprise that Greenway Plaza is at the top of many company’s list for office markets.
In Q2 2017 Parkway sold it’s share of ownership in the Greenway Portfolio to TH Real Estate for a reported $512 million.
Over half of the Greenway Plaza market is considered Class A, and a third of the market is Class B. The remaining 10-11% is made up of Class C buildings. This heavy weighting toward Class A properties is expected for such a desirable location, and supports the above-average rental rates charged in this market.
The Greenway Plaza market does not currently have any office properties under construction. The most notable construction delivery in the market of late is the luxury mixed-use development Kirby Collection, developed by Thor Properties. The project includes a tower dedicated to office occupiers, a second tower for residential use, and high-end retail space on the ground level facing Kirby Drive.
Source: Thor Equities; Kirby Collection Mixed-Use Development
Gulf Freeway / Pasadena Submarket
The Gulf Freeway / Pasadena market is one of Houston’s smaller and more affordable office markets. The market covers a large swatch of territory in South Houston spanning from the edges of downtown out to Beltway 8 in the South. I-45 serves as the western boundary and the ship channel is the eastern boundary.
The existing inventory of office buildings in the Gulf Freeway submarket exceeds 600 properties totaling over 7.5 million square feet of rental space. Only one Class A building exists in this market which in part explains the affordability of the area. Just over half the inventory is made up of Class B properties, with another 46% of the buildings being Class C rated.
Katy Freeway East Submarket
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The Katy Freeway East office market borders Beltway 8 to the west, and extends eastward almost to the 610 loop. This portion of the I10 corridor is dominated by a higher mix of older Class B and C office properties. To the north this area runs along Hempstead Road near 290 and Clay Road.
Katy Freeway East includes 50% Class A office buildings which is mostly due to the City Centre and Memorial City areas at southeast corner of Beltway 8 and I10. Another 20% of the market is Class B, and the remainder are Class C buildings.
The Spring Branch district located north from I10 is considered an up and coming area of Houston. Land values have been rising, and there are a number of redevelopment projects planned or underway in the area. Many residential investors have been active in the area for quite some time as well.
Katy Freeway West Submarket
The Katy Freeway West submarket is one of Houston’s largest and most heavily populated office markets. As shown in the map above this market begins on the western boundary of Beltway 8 and extends along I10 well past Highway 6. The Katy Freeway office market includes such recognizable areas as the Energy Corridor and Park Ten. To the east it borders the growing Spring Branch area, and to the South the Westchase Business District.
The Energy Corridor is one of Houston’s better-known office markets. This comes as no surprise given the heavy influence of energy on the city’s economy. Loosely speaking the Energy Corridor can be considered the I10 corridor between Highway 6 and Beltway 8. In this narrow boundary many well-known energy firms can be found. Rental rates in this area tend to be higher than average due to the prestige of the location.
In total, the Katy Freeway West market accounts for nearly 30 million square feet of rentable office space. This makes it Houston’s second largest office market. Over 250 office buildings can be found in the Katy Freeway West area. Nearly 62% of this market consist of Class A office buildings. A third of the market is made up of Class B rated properties, and less than 10% consists of Class C offerings.
Very little new construction is currently underway in the Katy Freeway office market, and there are no notable recent deliveries.
The Park Ten area is situated on the north side of I-10 to the west of Highway 6. This area consists of smaller mid-to-low rise office buildings and flex office properties. The majority of construction in this area delivered between 1978-1982, and some properties are lacking in recent renovations. As a result, many of these properties offer a more affordable alternative to the rates along the Energy Corridor. Throughout the recent oil & gas downturn vacancies in Park Ten have been higher than the Houston average. Several of the properties there have taken the slow market as an opportunity to renovate common areas and improve the general aesthetics.
Katy / Grand Parkway West Submarket
The Katy area is one of Houston’s fastest growing suburbs. In fact the 77494 and 77449 zip codes are some of the fastest growing in the United States. The area demographics are strong, including high household incomes levels. There are a number of well-built and designed master-planned residential communities such as Cinco Ranch here. Additionally, the area is under-going an explosion of retail construction activity to support the increase in population.
The office market in Katy is small by Houston standards at around 6 million square feet. Many of these properties are smaller low-rise properties and single-story professional/medical buildings. As the area continues to grow and expand it is anticipated that larger office construction projects will break ground along I-10.
Infrastructure is often the leading indicator for residential development. With the completion of the Grand Parkway tollroad and the westward extension of the Westpark Tollway, this area is expected to see continued strong population growth. Several new communities are already slated out west of Grand Parkway and north off I-10.
Kingwood / Humble / Lake Houston Area
Includes Northeast Near submarket, Generation Park, 250 Assay St McCord Development
More information coming soon!
Midtown Submarket
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NASA / Clearlake Submarket
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North Belt / Greenspoint Submarket
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Northeast Near Submarket
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North Loop West Submarket
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Northwest Far Submarket
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Northwest Near Submarket
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Post Oak Park Submarket
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Richmond / Fountain View
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Riverway Submarket
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San Felipe / Voss Submarket
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South Houston
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South Main / Texas Medical Center
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Southwest Beltway 8 Submarket
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Southwest Hillcroft Submarket
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Sugar Land / E Fort Bend County
More information coming soon!
Uptown / Galleria Submarket
Sometimes considered Houston’s “second CBD”, the Uptown/Galleria area is a well-known and regarded office market. This area borders the western edge of the 610 loop, US59 to the south, the Riverway area to the North and the San Felipe/Voss submarket to the West. The Uptown/Galleria area boasts a complete lineup of amenities for residents and office tenants alike. This of course includes the Galleria Mall which provides access to over 2 million square feet of shopping and dining options. The area also includes the iconic Williams Tower, which is the highest office tower in the Western Hemisphere located outside a major downtown area.
A whopping 80% of the 17 million square feet in the Uptown/Galleria office market is Class A. Rental rates here are some of the highest across the Houston metropolitan area. Land values are very high in this well-established and affluent area, which has led to a high density and many high-rise buildings. Many office tenants desire a Westheimer or Post Oak address, and that comes at a price.
As a result of high density commercial and residential development, this area also experiences heavy traffic. The Galleria portion of the 610 loop is arguably the worst for traffic conditions. It is not unusual to experience slowdowns and delays traveling through this area at any hour of the day. This has been exacerbated recently by infrastructure projects to revamp the Post Oak exit, a planned major overhaul of the 610 & US59 interchange, and the Boulevard Project.
Despite these concerns the Uptown/Galleria office market is one of Houston’s strongest. Many tenants want to be here, and the fundamentals in this market are strong.
West Belt Submarket
The West Belt submarket straddles the West Beltway 8 section running from Clay Road, through the 290 interchange, and north to the Highway 249 interchange. This is a smaller Houston office market with about 7 million square feet of space. Over two-thirds of W Belt office market consists of Class A properties, and the remainder are considered Class B. With close proximity to the Energy Corridor, the W Belt market is known to have a high number of energy firms. During the most recent oil & gas downturn this market has experienced significant vacancies, rental rate declines, and a glut of sublease space. With incredible accessibility to the freeway system, proximity to the airport and Energy Corridor, and newer inventory, this market will rebound in the near term.
Westchase Business District
The Westchase Business District is located in West Houston near the intersection of Beltway 8 and the Westpark Tollway. The area is run by a management district in charge of branding, attracting new businesses, urban planning initiatives, and more. Over 1,500 businesses occupy space in this area. The area has a large corporate presence led by firms like Phillips 66, Jacobs Engineering, BMC Software, and others.
A significant number of the Westchase area businesses were impacted by the oil & gas downturn. Westchase, given its proximity to the Energy Corridor, has been a popular choice among energy firms in the past. Recently the area has struggled with higher vacancy rates than the Houston area as a whole. Sublease spaces are plentiful, and direct space is near all-time highs.
The commercial office space market in Westchase is now approaching 20 million square feet. There is little active construction underway given the weak office market. Approximately half of the market here is composed of Class A buildings. Another 8 million square feet is comprised of Class B. There are only a handful of Class C properties in Westchase.
The Woodlands Submarket
The Woodlands, Texas is an affluent suburb of Houston. It was originally founded in 1974 by George Mitchell of Mitchell Energy & Development. The city is located about 30 miles north of downtown Houston, and mostly in Montgomery county (north of Harris county). Much of the land and commercial property in The Woodlands is owned by the Howard Hughes Corporation. Accessibility to the area has long been supported solely by I45, but more recently was improved with the completion of the Grand Parkway/99. Grand Parkway is a tollroad which wraps around the Houston metropolitan area, extending from the Woodlands in the North all the way westward and south to the Sugar Land suburb.
The Woodlands is a fast-growing master-planned community. The population here has grown by more than 15% over the last decade. This growth has been largely fueled by successfully attracting a number of high-profile corporate campuses and headquarters to the area. These include Exxon Mobil, Repsol, Chevron Phillips, and Huntsman among others. More than 60,000 employees work in the Woodlands area on a daily basis.
The Woodlands is one of Houston’s strongest performing office markets, and has faired well through the oil & gas downturn. The office market here exceeds 20 million square feet of space and over 600 properties. Nearly 60% of the office market in the Woodlands is Class A, and consequently the average rental rates typically exceed $30 per square foot. The average rental rates here tend to run higher than the Houston market overall.
Certainly the office market in the Woodlands is expected to remain strong with continued growth for the foreseeable future. As a self-sustaining suburban area it offers many firms a true live/work/play environment.
I’m a commercial real estate agent actively working for clients all across the Houston metropolitan area. For more information on the Houston office or industrial market, trends, market stats/data and more, please contact me today.
Email: cmcateer@oxfordcres.com | Direct: 281-724-5818