HOUSTON (Marcus & Millichap) – Houston was the last major metro to enter the recession, which should mitigate the effects of job losses on the office market for much of this year, according to a second-quarter Office Research Report by Marcus & Millichap.
The metro traditionally is late to economic booms and recessions, which helped to sustain employment growth in 2008.
“Office investment opportunities are prevalent in Houston, which should keep deal flow healthier than the national average and support a significantly lower price correction,” says Brent Smith, regional manager of the Houston office of Marcus & Millichap.
Among the most significant aspects of the report:
- Companies in Houston are expected to cut payrolls by 55,000 positions this year, a 2.1 percent decline in overall employment.
- Construction is accelerating to 3.7 million sf this year, compared with 3.4 million sf last year. Despite the increase, the number of new projects that break ground in the second half of the year is expected to decline as construction loans evaporate.
- As the local economy weakens, office vacancy is projected to finish 2009 at 14.9 percent, a 220 basis point rise from year-end 2008 and the highest rate since mid-2006.
- Although rent growth in Houston has been the strongest in the country over the past year, job losses are beginning to weigh on the sector. As a result, asking rents are forecast to slip to $23.31 per sf by year end while effective rents retreat to $19.81 per sf, annual declines of 3.1 percent and 4.1 percent, respectively.