HOUSTON - As oil prices inch back up from a terrible year, and Covid vaccines offer hope that the pandemic will be beaten, Houston's commercial real estate business is far from recovered.
The city has more 200 million square feet of office space, in all shapes and sizes. Now, after the oil busts of 2014, 2020, and the pandemic, a greater percentage of that office space is empty than any other major city in the country.
From a distance, it's tough to see inside Houston's downtown towers. Get a little closer, though, and a visitor might be the only one there. Houston's office-vacancy rate sits at about 25%, leaving some buildings completely empty.
Corporate interior architect Jeffrey Abel says, while business is picking up, the combination of plunging oil prices and pandemic shutdowns gave him a front-row seat to the city's office-space retreat.
"We saw a lot of projects just come to a screeching halt," he says. "Most of our clients decided to 'pause' and see what was going to happen."
Between projects that were halted, and employers who consolidated space or closed-shop, in the face of Covid-restrictions, a Bloomberg study finds Houston tenants vacated more than 3 million square feet of existing office space, last year, while another 3 million square feet is under construction.
"I'm listening to people I really care about and respect, saying 'Houston is going to do well, coming out if this'," says commercial real estate broker Jason Baker of Baker-Katz, "But I definitely think the slowest segment, in the real estate sector, is going to be office space."
Still, there are those in the real estate industry who say, in a town where oil 'busts' turn to 'booms', demand for office space will return.
"The office is where the (work) culture, collaboration, creativity lives," says JLL President Dan Bellow. "It's where the mojo is, and there ain't no mojo in your kitchen."
Bellow says, at the current vacancy rate, there's about three to four years worth of office demand, that may take that long to absorb.
Meantime, while it's bad news for office landlords, the price for available space has tumbled, as well. That means a relative bargain for companies that 'are' looking for space.