Downtown Houston Office Story - 2024 Market Analysis by Downtown Houston+

Downtown Office Story

The 2025 Downtown Houston Office Story is dedicated to Stewart Robinson, founder of this legacy report.

Stewart was deeply committed to the success of Downtown Houston, serving for 19 years on the Board of Directors for the Houston Downtown Management District and as a founding member of the Houston Office Leasing Brokers Association.

His passion for the beauty and vitality of the district helped shape cherished public spaces like Allen’s Landing, Buffalo Bayou and Tranquility Park.

2024

MARKET ANALYSIS

Inventory Analysis

Downtown Houston+’s Office Story measures the 12-month Downtown competitive leasing cycle.

• A unique Downtown Houston survey that includes:

• All marketed space

• Large available blocks and full floors

• Tenants by industry

• Sublease space on the market and by tenant

• Multi-floor tenants

• Large transactions and tenants new to Downtown

• Surveyed buildings organized into three distinct tiers to reveal trends among Downtown’s top office towers, including renovated and newly constructed properties

• Proprietary and longitudinal: Downtown Houston+’s Office Story is in its 41st year; started in 1985 by Stewart O. Robinson, President, SOR Real Estate Advisors, LLC

• Downtown Houston + Office Story

• Survey conducted January–March 2025, covering all 2024 leasing activity

• Approximately 32 million SF surveyed

• 39 office buildings included

• More than 2.2 million SF of Downtown leasing during 2024

• Represents 59% of Downtown office inventory

• Each property was placed into a Tier on a caseby-case basis, but generally:

• Tier I space is top of the line, Class A properties

• Tier II space is lower Class A properties

• Tier III space is generally Class B properties

Surveyed Buildings

Summary of Survey Data

Historical / Future Building Deliveries Timeline

2024 MARKET ANALYSIS

Marketed Space

Overview

• In 2024, the market for direct space tightened by 117K square feet.

• Marketed sublease space increased year-over-year, from 613K square feet in 2023 to 783K square feet in 2024.

• Available sublease space was fairly evenly distributed across all three tiers.

• Tier Breakdown:

• Tier I: The market tightened by 303K square feet, with most buildings reducing their marketed space compared to 2023. Texas Tower led this trend, accounting for roughly 60% of the overall tightening in Tier I.

• Tier II: The market loosened by 200K square feet. While some buildings reduced their marketed space, many saw increases year-over-year.

• Tier III: The market tightened slightly by 13.7K square feet. Despite varied performance across individual buildings, Tier III overall experienced greater stability in 2024.

• The tightening in Tier I was driven in part by increased leasing activity at Texas Tower, though most Tier I properties also reduced marketed space.

• Many Tier II properties continued an upward trend in marketed space.

• Marketed space in Tier III varied by property, reflecting mixed performance across the tier.

Historical Direct Marketed Space

Covid-19 Pandemic Energy Commodity Price Crunch

Recession

Wreck’ + Enron Bankruptcy

Historical Sublease Full Floor Blocks

Full Floor Sublease Blocks

Marketed Space

TAKEAWAYS

• Tier I continued to perform well in attracting tenants, while Tier II was the only tier to experience an overall increase in available space.

• Although Tier II loosened by 200K square feet in 2024, this was a much slower pace than the nearly one million square feet added the previous year.

• A major tenant expansion in Tier III was the primary driver behind its overall tightening.

• One large sublease block totaling four floors was introduced in Tier I, while Tier III added two substantial sublease blocks totaling eight floors.

by Bonfire Photo

Photo

2024 MARKET ANALYSIS

Leasing Analysis

Overview

• Leasing activity rose moderately by 8% year-over-year, totaling 2.26 million square feet— though still approximately 33% below 2022 levels.

• The total square footage of new leases declined by about 22%, even as the number of new lease agreements increased by 14% compared to 2023.

• Expansion activity surged by 79%, while renewal activity increased 19%, both measured by square footage.

Tier Breakdown

• Tier I: Strong leasing across all categories, with expansion activity showing the most significant year-over-year growth.

• Tier II: Fewer new lease signings, but a notable rise in renewals.

• Tier III: Significant growth in both new leases and expansions, largely due to a low baseline of activity in the prior year.

Tier I

Leases by Size (Tier II)

Leases by Size (Tier III)

Leasing Analysis

TAKEAWAYS

• Increased expansion activity in Tier I suggests growing business confidence and may signal a slowdown in the “right-sizing” trend observed in recent years.

• While top-tier assets remained the preferred choice for new leases, companies seeking cost savings increasingly opted to renew leases in Tier II properties.

• Following subdued leasing activity in 2023, Tier III experienced greater stability in 2024, with more new leases and expansions signed.

• The rise in larger lease agreements is mainly driven by more expansions and strong Tier I leasing — reflecting improved corporate clarity on long-term space needs post-pandemic.

• The “flight to quality” trend continued in 2024, with Tier I capturing nearly half of all leasing activity and more than 50% of all expansions.

Photo

Brandon Martin

2024 MARKET ANALYSIS

Occupier Analysis

Overview

• FIRE and Legal tenants prefer Tier I space overall, accounting for 65% of all occupied Tier I space.

• Energy companies occupy the widest variety of property tiers.

• In 2024, Downtown saw an increase in the share of energy companies, while the proportion of FIRE tenants declined. Energy tenants now make up about 46% of Downtown’s leased space.

• New tenants in Downtown continue to predominantly choose Tier II spaces.

Note: FIRE = Finance, Insurance, and Real Estate

Proportion of Total Space Occupied by Industry per Year

Occupier Analysis

TAKEAWAYS

• In 2024, energy companies expanded their presence and showed flexibility in space type, helping Tier II stabilize and reversing the loosening trend in Tier III.

• A diverse mix of energy tenants—from Fortune 100 firms to cost-conscious startups—drove broader leasing activity across property tiers and stronger performance in non-trophy assets.

• Competition for Tier I space remained intense, leading new-to-Downtown tenants to favor Tier II, which also offer significant rental savings compared to Tier I.

• In 2024, 20 companies established a Downtown presence for the first time.

Photo

Leonid Furmansky

2024 MARKET ANALYSIS

Appendix

Survey Background

• Now in its 41st year, this survey provides unique insight into the current competitive Downtown office leasing environment through analysis of primary data.

• Findings support building owners, leasing agents, and investors in making informed business decisions.

• Surveyed buildings have proven ability to compete for tenants within Downtown’s premier office market, organized into three tiers (I, II & III). It is intended to complement, not replace, traditional market surveys conducted by brokers, owners or thirdparty firms.

Survey

Definitions

• Office Inventory: Total office space in all Downtown buildings regardless of building class or survey tier.

• Survey Universe: Downtown’s premier office buildings classified as Tier I, II & III in this Report.

• Owner-Occupied: Buildings fully owned and/or occupied by the owner; includes Chevron’s 1500 Louisiana and 1400 Smith; Hilcorp’s 1111 Travis and Partnership Tower (701 Avenida De Las Americas).

• Energy: Exploration and production (E&P), pipeline, mining, utility, chemical and service providers.

• Legal: Law firms and legal service providers.

• FIRE: Finance, insurance and real estate.

• Other: Professional and business services, information technology, public administration, retail.

• Leased Space: All leased spaced regardless of occupancy status.

• Actively Marketed and/or Available Space: Marketed office space regardless of occupancy and lease status.

• Availability Rate: Direct space currently marketed divided by total amount of surveyed space.

• Leasing Activity: Signed leases during the survey year regardless of scheduled occupancy status and includes direct, sublease, renewals and pre-leasing activity.

• Absorption: Total annual survey change of square feet marketed regardless of occupancy.

Cassie Hoeprich Director of Planning & Economic Development

cassie.hoeprich@downtownhouston.org

Research & Economic Development Coordinator brendan.harrison@downtownhouston.org downtownhouston.org 1221 McKinney Street, Suite 4250 Houston, TX 77010