Houston’s office market continues to recover from the pandemic, though at a slower pace than Dallas. According to a fourth quarter report from JLL, the city ended 2025 with negative annual absorption of 311,369 square feet. This is an improvement compared to the negative 4 million square feet recorded in 2021. The fourth quarter saw a return to negative absorption with 439,859 square feet, ending two consecutive quarters of positive absorption.
Vacancy rates have declined slightly, dropping to 26.3 percent after reaching nearly 27 percent in 2024. Factors such as return-to-work mandates and reduced new development have contributed to this gradual recovery.
Among Houston’s office submarkets, the Galleria performed best in the fourth quarter. Texas Dow Employees Credit Union moved into 121,000 square feet at 2000 Post Oak Boulevard, and Camden Property Trust relocated to 104,000 square feet at 2800 Post Oak Boulevard. These moves helped the Galleria achieve nearly 200,000 square feet of positive absorption for the quarter and almost 341,000 square feet for the year.
Suburban areas near Houston led all submarkets with more than 555,000 square feet of positive annual absorption. Katy Freeway West ranked third with a total of 215,000 square feet by year-end.
Despite these gains, the Galleria’s vacancy rate remained high at 32 percent at the end of last year. The area contains about 22.5 million square feet of office space and may see further activity following Deiso Moss’s announcement of plans for a new branded condo project—a proposed 44-story hotel and condo tower at 2120 Post Oak Boulevard.
Office building sales increased slightly in Houston during 2025 compared to the previous year: total sales reached approximately 9.7 million square feet versus about 9.5 million in 2024. At least half of the top ten largest transactions were distress-related sales; this includes Houston Center returning to its lender AustralianSuper.
Conversions are also underway: Chicago-based firm 3L Real Estate plans to convert One City Center into corporate suites and apartments.
Owner-occupiers took advantage of low prices and surplus older buildings by acquiring over two million square feet of vacant space last year.
The sale of Energy Center I—an office building built in 2008 and renovated in 2020—was one notable transaction considered close to a “trophy” trade among recent deals.
Looking ahead, experts anticipate more competition for premium properties this year: “As high quality space and stable ownership increasingly drive tenant decisions, competition for premium properties is expected to intensify throughout 2026,” JLL’s report stated.
