Q4 2014 The Woodlands Research & Forecast Report
The Woodlands Office Market
The Woodlands submarket, one of Houston’s top office submarkets, continues to expand as newly constructed office space is leased. The Woodlands office submarket contributed 33.1% or 2,069,739 SF to Houston’s year-end 2014 total positive net absorption; impressive since the submarket has only a 5.2% share of Houston’s total office inventory. Even without the 1.5M SF absorbed by ExxonMobil and Southwestern Energy, the submarket’s positive net absorption was still higher than all other submarkets with the exception of the Katy Freeway and CBD submarkets.
Class A vacancy in The Woodlands submarket decreased 160 basis points from 9.5% in Q3 2014 to 7.9% and Class B vacancy increased 30 basis points from 8.8% in Q3 2014 to 9.1%.
The average quoted Class A rental rate remained steady between quarters at $35.79 per SF while the Class B average quoted rental rate decreased 2.9% from $25.00 per SF to $24.28 per SF. Office development is progressing rapidly at Hughes Landing on Lake Woodlands. One and Two Hughes Landing are completed and leased and Three Hughes Landing, currently under construction, is projected to deliver in Q4 2015.
Houston’s office investment sales market is benefiting from the foreign capital that is pouring into the U.S. According to a recent survey by the Association of Foreign Investors in Real Estate (AFIRE), Houston ranked #3 in the top five U.S. cities for foreign investors.
The Houston metropolitan area created 120,600 jobs between October 2013 and October 2014, an annual increase of 4.3% over the prior year’s job growth. Sectors creating most of the jobs contributing to the annual increase include mining and logging, construction, transportation, warehousing and utilities, and health care and social assistance. Houston’s unemployment rate fell to 4.7% from 5.9% one year ago.
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