Texas office market faces transformation amid post-pandemic recovery

COLLEGE STATION, Tex. (Texas Real Estate Research Center) – Recent findings from the Texas Real Estate Research Center at Texas A&M University (TRERC) indicate the Texas office market is undergoing significant changes as it adapts to the post-pandemic landscape.

“Despite a substantial increase in office-using employment, data show office attendance remains at approximately two-thirds of pre-COVID levels,” says Daniel Oney, Ph.D., TRERC’s director of research.

Since the 2020 lockdown, Texas has seen a growth of half a million office-using jobs. However, this growth has not translated into significant office space absorption.

“Historically, markets like Austin and Dallas saw tenants adding around 200 square feet for each new office-using job, with Houston’s energy-rich office economy being even more generous,” Oney says. “Post-COVID, all major markets have seen much lower absorption rates.”

Oney says tenants are actively evaluating their leases in anticipation of future needs.

“Brokerages and data vendors like CoStar estimate that only half of the leases negotiated before 2020 have come up for renewal, indicating that the full impact of new workplace policies is yet to be seen,” he said.

Firms are showing a preference for premium, newer buildings that offer numerous amenities and solid sustainability ratings. This trend is evident in the positive net absorption seen in A+ buildings, which are primarily those built in the last five years in the highest-rent submarkets.

The financial consequences of this are playing out differently across Texas’ major markets.

As the office market continues to sort itself, differences in local job growth, industry mix, and the unique legacies of each market’s office stock will influence the outcome.

For more on this, read Oney’s new Commercial Roundup column, “Premium Office Buildings Shake Off COVID Slump.”

ABOUT TRERC 
The Texas Real Estate Research Center at Texas A&M University (TRERC) is the nation’s largest publicly funded organization devoted to real estate research. Created by the state legislature in 1971 to meet the data and knowledge sharing needs of many audiences, including the real estate industry, instructors, researchers, legislators, and the public, the Center creates public content, including digital and print documents, publications, and multiple format videos that are available at the Center’s website. Subscribe to TRERC news releases and other publications here.