Houston Office Market Report | Q4 2025

by Coy Davidson | January 31, 2026

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Why Houston’s Office Market Is Stabilizing Without Big Leases Making Headlines

Houston’s office market regained momentum in 2025, posting 718,989 square feet of positive annual absorption, one of few major U.S. markets to report occupancy gains. Despite a modest 31,398-square-foot decline in the fourth quarter, the year recorded the market’s first annual gain since 2019.

Market Trends

Houston’s office market is showing signs of recovery, recording 718,989 SF of positive net absorption for the year – its first annual gain since 2019.
Fourth-quarter absorption fell by 31,398 SF primarily due to a single major vacancy, although earlier quarterly gains kept the year positive.
Vacancy stabilized at 27.4%, easing off record highs.
Development remained limited, with 89,443 SF delivered in 2025 and three projects under construction and 83.4% preleased.
Leasing activity declined for both the quarter and year, with the annual 10.0M SF down 29.5% from last year and below the prior three-year average of 14.3M SF.
Gross asking rents rose slightly to $30.79 PSF, marking modest quarterly and annual increases.

Historic Comparison

Market Fundamentals

NET ABSORPTION

More than half of the submarkets saw positive quarterly absorption, with west sectors faring the best. The West Loop led with 332,696 square feet, while Westchase and Katy Freeway West/Energy Corridor were the only other submarkets exceeding 100,000 square feet. For the full year, the largest absorption occurred in the West Loop (547,675 SF), West Belt (227,720 SF), and Katy Freeway West/Energy Corridor (204,508 SF).

Fourth-quarter absorption turned negative largely due to one building: the 450,831-square-foot former Marathon headquarters vacancy at 990 Town & County, following its acquisition by ConocoPhillips. This vacancy drove the Katy Freeway East submarket to the year’s deepest net decline but has now rebounded with flight-to-quality momentum. Three new leases totaling 180,786 square feet at the property – by Kimmeridge Energy, Magnolia Oil and UT Austin McCombs School of Business – are scheduled for late 2026 move-ins.

The largest absorptions of the quarter and year were TDECU’s 121,067-square-foot relocation to Central Park One and LyondellBasell’s 318,504-square-foot move to Williams Tower, both contributing to the West Loop’s leading performance.

VACANCY AND LEASING ACTIVITY

Market vacancy remained stable at 27.4%. Demand continues to favor newer, high-quality assets: Class A buildings delivered since 2015 report 13.3% overall vacancy and 10.4% direct vacancy, underscoring the ongoing flight-to-quality trend.

Leasing activity slowed to 1.6 million square feet for the quarter and 10.0 million square feet for the year – the lowest annual total since 2009. The current quarter followed the year’s trend, with strong Class A demand capturing 63.2% of all deals.

Other than LyondellBasell’s lease, only three new transactions of 100,000 square feet or more were signed during the year. Simpson Thacher & Bartlett’s 99,307 square feet in CBD’s 1000 Main was the largest for the fourth quarter. Most new leases reflected steady demand for smaller, quality spaces within limited supply. Sublease availability rose slightly but is being absorbed efficiently in top projects.

During Q4, the CBD led all submarkets with 252,337 square feet (16.1% of total activity), followed closely by the West Loop at 231,431 square feet (14.8%). The same pattern repeated for the year, with the CBD leasing 1.7 million square feet and the West Loop accounting for 1.4 million square feet, with both submarkets representing 29.9% of all leasing activity during 2025.

Construction remains minimal, with just two deliveries totaling 89,443 square feet during 2025. Three additional developments, two fully preleased, are underway for 2026 delivery. Asking rents edged up to $30.79 per square foot, a slight quarterly and annual increase.

Submarket Share of Houston Leasing Activity (SF)

OUTLOOK

Houston’s office market is in a measured recovery, supported by positive absorption and limited new supply. While large leases remain sparse, steady small-and mid-size tenant activity in 2026 is expected to drive continued improvement.