Houston Office Market Report | Q3 2025

by Coy Davidson | October 8, 2025

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Houston’s office market is showing renewed strength with consecutive quarters of positive absorption and declining vacancy.

The Houston office market continued its upward trend, recording 554,863 square feet of positive absorption in the third quarter, bringing the year-to-date total to 1.1 million square feet — the first sustained positive absorption since 2019. This gain helped offset early-year softness and underscores improving tenant activity.

NET ABSORPTION

More than half of Houston’s submarkets posted positive absorption, with the Central Business District, E Fort Bend Co/Sugar Land, Katy Freeway West/Energy Corridor and the Northwest submarkets leading the way with more than 100,000 square feet each. Frazer’s 150,000-square-foot move into 1410 Gillingham Lane in Sugar Land is noted as the quarter’s largest single absorption. Vacancy continued trending lower, edging down to 27.4% from 27.7% last quarter and the record 28.3% in Q1, and also below the 27.9% of a year ago. Newer, high-quality buildings remain the clear winners: properties delivered since 2015 report vacancy at just 11.9% overall and 9.4% for direct space, underscoring the ongoing flight-to-quality trend. Sublease levels remain stable, with no major impact on broader vacancy.

LEASING ACTIVITY

Leasing activity totaled 2.1 million square feet, slightly below recent averages but still led by strong Class A demand, which captured 65.5% of all deals. The third quarter’s largest transaction was Geico’s 135,000-square-foot renewal at Mason Creek I at 21420 Merchants Way. Other notable deals included SeaDrill, 62,486 square feet in Westway III at 4425 Westway Park, and Tetra Technologies’ 61,966 square feet in the South Tower at 10000 Energy Drive in The Woodlands. Most new leases were under 50,000 square feet, reflecting steady demand for smaller, quality spaces.The West Loop led all submarkets with 238,917 square feet (11.5% of total activity), followed closely by the Katy Freeway West/Energy Corridor at 217,530 square feet (10.4% of total activity).

CONSTRUCTION & RENTS

New development remains limited. One Bridgeland Green, a 49,117-square-foot mass timber office, delivered 80.3% preleased. Three additional projects underway — two already 100% preleased — are slated for 2026 delivery. Asking rents moved higher, with Class A averaging $35.96 PSF, up 8.3% from last quarter, while overall rents climbed to $30.74 PSF, a 6.1% quarterly increase and 2.0% year over year.

OUTLOOK

Houston’s office market continues in recovery mode. Positive net absorption, steady leasing in quality assets and limited new supply are strengthening fundamentals. Sustained leasing momentum through late 2025 and into 2026 will be key to driving continued improvement.