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10/07/25
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This report provided by real estate services firm Avison Young
Houston’s office market is beginning to see a noticeable shift in the city’s landscape, with positive momentum spreading across asset classes and a resurgence in investment activity. This is the general takeaway from Avison Young’s recent Third Quarter 2025 Office Market Report for Houston.
Houston recorded nearly 600k sf of positive net absorption in the third quarter, bringing the year-to-date total to approximately 1.1 msf. While trophy buildings have led absorption gains this year, the flight to quality trend is beginning to taper, as available space in trophy buildings is diminishing. As a result, a flight to value paradigm is emerging and benefiting Class A and B assets with recent renovations.
“This quarter’s data signals a maturing recovery,” said Wade Bowlin, Principal and Managing Director at Avison Young. “We’re seeing a more balanced demand across asset classes and a renewed confidence in Houston’s long-term office market fundamentals.”
Leasing activity totaled 2.5 msf, with small- to mid-sized leases under 10k sf making up 40% of transactions year-to-date. Larger leases over 50k sf have declined significantly, comprising just 22.4% of activity. As high-quality space becomes increasingly scarce, tenants are opting to renew on a much more frequent basis rather than relocate.
"Tenants are becoming more strategic in their decisions,” stated Anthony Squillante, Principal and office tenant representation specialist at Avison Young. “With fewer premier options available, we’re seeing a shift toward early renewals and a growing interest in well-located, value-driven buildings that offer flexibility and upgraded amenities. It’s no longer just about prestige—it’s about performance and practicality."
The investment sales market has surged, with $2.2 bil in office assets traded over the past 12 months—marking a five-year high. Private buyers and owner-users are capitalizing on discounted pricing, while institutional-quality assets are beginning to re-enter the market. Notably, Hines’ acquisition of the fully leased Montrose Collective for $137.6 mil set a new record at $727 per sf.
Houston’s office visitation recovery has outpaced the national average, reaching 62.3% of pre-pandemic levels as of August 2025. The city ranks third among Tier 1 markets, trailing only Manhattan and Washington, D.C., driven by increased return-to-office mandates.
Despite a slowdown in job growth, Houston’s economic fundamentals remain stable. Over the past 12 months, Houston created 27,500 jobs, below the 10-year pre-pandemic average of 57,600. The unemployment rate rose to 5.0%, reflecting an expanding labor force.
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