Houston Commercial Office Space for Rent

Q4 2025

Houston Commercial Real Estate Market Report

Focus: Q4 2025 Market Trends

Executive Summary

The Houston commercial real estate (CRE) market is demonstrating resilience across several sectors, driven by strong population growth and a stabilizing economic climate, with the unemployment rate dropping to 4.3% as of August 2025 [1]. The market is highly segmented: the Industrial and Office sectors are both working to absorb significant past and current supply, leading to a tenant-favorable environment [1, 6]. Overall investment activity has rebounded sharply across the U.S. in Q3 2025, driven by the multifamily and industrial sectors [7].

TenantBase Proprietary Data [9] highlights the distribution of active tenant demand. Over the last 90 days, Retail/Storefront dominated with 58.98% of all searches, followed by Warehouse at 28.02%, and Office at 13.66% [9].

Office Market

Market Overview

The Houston office market remains defined by high vacancy, though positive absorption in Q3 2025 suggests the beginnings of a stabilization period [1]. The market remains strongly tenant-favorable [1].

  • Vacancy & Availability: The overall vacancy rate rose marginally by only 10 basis points year-over-year, resting at 25.5% in Q3 2025 [1].
  • Net Absorption: Q3 2025 closed with significant positive absorption of 636,813 SF, a marked improvement that brought the year-to-date total to positive 1.2 million SF for 2025 [1]. This performance suggests occupancies may be stabilizing [1].
  • Rental Rates: Average annual full-service asking rental rates rose to a new all-time high of $30.29/SF in Q3 2025, reflecting a 2.3% increase year over year [1]. The widening spread between direct rates ($30.48/SF) and sublease rates ($24.56/SF) is currently $5.92/SF [1].
  • Leasing Activity: Total leasing activity closed Q3 2025 at 3.6 million SF [1]. While the number of deals transacted fell 17.1% year over year, the average lease size increased by 17.3% to 4,571 SF [1].

TenantBase Activity [9]

  • Demand Share: Office accounted for 13.66% of total tenant search volume [9].
  • Lease Term Preference: Tenants primarily seek short-term flexibility [9]:
    • Less than one year: 43.86% of deals.
    • 2-3 Years: 28.07% of deals.
    • 3-5 Years: 14.04% of deals.

Industrial & Warehouse Market

Market Overview

The industrial market is undergoing a rebalance as new supply continues to outpace cooling demand [1]. Despite this, rental rates continue to push to new highs [2].

  • Vacancy & Rent: The vacancy rate rose to 7.4% in Q3 2025, a 60 basis point increase year-over-year [1, 2]. This is the highest level in more than a decade [1]. The average triple net (NNN) rent reached an all-time high of $10.52 per SF in Q3 2025, up 13.0% year over year [1, 2]. Rents have increased 38% over the past five years [2].
  • Demand & Supply: Net absorption in Q3 2025 totaled 1.6 million SF, a moderation from prior elevated levels [1, 2]. Construction deliveries declined to 4.7 million SF in Q3 2025, but the development pipeline remains robust at 20.8 million SF under construction [1, 2].

TenantBase Activity [9]

  • Demand Share: Industrial/Warehouse accounted for 28.02% of total search volume [9].
  • Lease Term Preference: Tenants show a strong preference for shorter commitments [9]:
    • 1-2 Years: 38.71% of deals.
    • 3-5 Years: 30.65% of deals.
    • 2-3 Years: 19.35% of deals.

Retail Market

Market Overview

The Houston retail market remains a steady performer, supported by ongoing population growth and stable consumer activity [3].

  • Vacancy & Availability: The vacancy rate held steady at 5.6% in Q3 2025 [3], unchanged from the prior quarter [3].
  • Net Absorption: Net absorption improved to 821,439 SF in Q3 2025, an increase from 245,000 SF in the prior quarter [3].
  • Rental Rates: Average triple net (NNN) rents measured $20.51 per SF in Q3 2025 [3]. The median asking rate is approximately $22 per year [6].
  • Construction: Construction activity eased to 2.6 million SF underway in Q3 2025, the lowest construction pipeline since 2020 [3].

TenantBase Activity [9]

  • Demand Share: Retail/Storefront activity dominated with 58.98% of total search volume [9].
  • Lease Term Preference: Retail tenants show the greatest stability, favoring mid-term leases [9]:
    • 3-5 Years: 32.73% of deals.
    • 2-3 Years: 21.82% of deals.
    • 5+ Years: 21.82% of deals.
  • Top Locations: The highest volume of interest is concentrated in Houston (downtown/core) at 73 deals, followed by Spring at 12 deals [9].

Multifamily Market

Market Overview

Houston's multifamily market is showing signs of stabilization, expected to outperform peer Texas markets in 2025 [4]. A slowdown in new deliveries combined with steady demand is supporting the market [4].

  • Vacancy & Occupancy: The average occupancy rate declined to 90.5% in 2024 [4]. Occupancy rates in stabilized properties were low at 92.6% as of April 2025 [8].
  • Rents & Concessions: Average effective rent was $1,348 in Q4 2024 [4]. Asking rents were up 0.2% on a trailing three-month basis through May 2025, averaging $1,371 [8]. The market is projected to lead major Texas markets in rent growth in 2025, with a forecast of 2.1% annual increase by Q4 [4].
  • Construction: Unit completions are projected to decrease significantly in 2025 to 9,099 units, down from 23,697 units in 2024 [4]. Multifamily starts also decreased sharply in 2024 [4].

Sources

  1. Newmark: Houston Real Estate Market Reports | Q3 2025
  2. Houston.org: Quarterly Update: Industrial Market | Q3 2025
  3. Houston.org: Quarterly Update: Retail Market | Q3 2025
  4. MMG Real Estate Advisors: 2025 Houston Forecast
  5. Avison Young: Houston Industrial Real Estate Market Reports | Q3 2025
  6. Crexi: Houston Commercial Real Estate Market Opportunities 2025-2026
  7. Altus Group: US Commercial Property Investment & Transactions - Q3 2025
  8. Yardi Matrix: Houston Multifamily Market Report – July 2025
  9. TenantBase Proprietary Market Data (Last 90 Days)

Information in this report is aggregated from various third-party sources and synthesized using artificial intelligence and other research tools. While we believe these sources to be reliable, we cannot guarantee the absolute accuracy or completeness of the data. This report is intended for informational purposes to provide market insight and should be independently verified prior to any use in a real estate transaction or legal commitment.