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Houston Office Market Resists Recovery As Multi-Family Gets Better

Overall, Houston’s commercial real estate is on the rebound.


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Photo of One Shell Plaza
Carla Hulsey
Houston’s office market continues to suffer from high vacancies, while the apartment sector is doing better.

Overbuilding that started while times were good before the oil slump has led to high vacancy rates for office space and apartments.

But there are signs things are getting better, at least for Houston's apartment sector.

"Our occupancy is up to about 89 percent, mainly driven by growth of approximately 11,000 units through the first six months of this year," Robert Kramp, director of research and analysis at CBRE in Houston, said. "And we're forecasting 14,000 multi-family units to be occupied by the end of the year."

Retail and industrial real estate are doing well too, as they have throughout the downturn.

But the office market continues to struggle. In the first quarter of this year, subleasing saved that sector from the worst but that's down now too.

"That being said, we expect the office demand cycles to continue to kind of wobble over the next 18, 24 months," Kramp said. "But 2020 we should be on the positive growth projected outlook for the office market."

One reason office is so much slower in its recovery than the apartment market, Kramp said, is that commercial leases are usually for at least five years, which means the industry takes longer to adjust to market changes.

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