Houston’s office market continues to struggle as U.S. crude prices waiver around $50 per barrel. According to the U.S. Energy Information Administration (EIA), they are expected to stay in this range through 2018. With no indication that prices will rise substantially over the next few years, vacant office space placed on the market by firms in the energy industry will take longer to absorb. Recent news articles indicate that some of the large energy giants reported profits in the second quarter. However, profits were largely driven by lean budgets and staff reductions.

Fortunately, most of the proposed projects that were in the construction pipeline when the oil slump hit were put on hold. Companies such as Bank of America, American Bureau of Shipping and HP, have signed leases in proposed buildings that have either recently begun construction or will begin in the very near future. Once these projects deliver, those companies will vacate their existing space, leaving more than 1.0 million square feet for landlords to backfill.

During the third quarter of 2017, Houston faced one of the worst natural disasters in history. Hurricane Harvey, a Category 4 hurricane, slammed the Texas coast and dumped over 50 inches of rain in parts of Houston. The event caused widespread flooding, destroying homes, businesses and infrastructure. Several large refineries were shut down due to the flooding and off-shore drilling was stopped once the storm entered the Gulf of Mexico. This event stalled business for several weeks, but Houston was resilient and quickly went back to work. This was a temporary set-back for many, but has had permanent ramifications for others. A joint industry survey confirmed that less than 7% of Houston’s office inventory suffered damage. Of that amount, approximately 45% were repaired and back on-line within the first month. Another 30% reported repairs to be completed by the end of the year and the remaining properties were so severely damaged they could not report a time frame for repairs.

According to the U.S. Bureau of Labor Statistics, the Houston MSA created 53,500 jobs (not seasonally adjusted) between August 2016 and August 2017, an annual growth rate of 1.8%.

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