Photo: James Nielsen, Houston Chronicle
The office market is bracing for another tough year as the energy industry continues to shrink amid the declining price of oil, which fell this week to its lowest level in more than a year.
“It remains a tenant’s market. I see that continuing,” Lucian Bukowski, executive vice president with CBRE, said Tuesday.
Oil companies, which have been steadily cutting costs and laying off workers, account for more than 30 percent of the local office market, said Bukowski, who represents companies looking for space. Demand for office space is falling in other industries, as well. Leasing activity last year was down 17 percent from the previous year, CBRE data show.
That all amounts to a harsh reality for landlords carrying empty office space. Vacancy market-wide has risen to 19 percent, the highest it’s been in 17 years, Bukowski said. Combined with sublease space, that jumps to 22 percent. Houston ranks among the cities with the highest rates of office vacancy.
Bukowski, speaking at a commercial real estate market briefing, said landlords generally make money when their buildings are 85 percent to 90 percent leased.
Houston has 82 buildings with at least 100,000 square feet of space available. Twice as many buildings have at least 50,000 square feet up for grabs.
That’s why so many property owners are making improvements. Even Williams Tower, one of the city’s most prestigious office buildings, is undergoing a lobby facelift.