Houston’s office market continues to show signs of recovery, although it remains behind Dallas in its rebound following the pandemic. According to a fourth quarter report from JLL, annual net absorption for 2025 was negative at 311,369 square feet. However, this figure represents a significant improvement compared to the negative 4 million square feet recorded in 2021. The fourth quarter saw a reversal with negative absorption of 439,859 square feet, ending two consecutive quarters of positive absorption.
Vacancy rates have declined slightly to 26.3 percent after reaching nearly 27 percent in 2024. Return-to-work policies and reduced new development have contributed to these improvements.
Among Houston’s office submarkets, the Galleria stood out in the fourth quarter. It recorded almost 200,000 square feet of positive absorption due to Texas Dow Employees Credit Union moving into a 121,000-square-foot space at 2000 Post Oak Boulevard and Camden Property Trust relocating to a 104,000-square-foot space at 2800 Post Oak Boulevard. For the year as a whole, the Galleria had nearly 341,000 square feet of positive net absorption, second only to Houston’s nearby suburbs, which led with over 555,000 square feet absorbed. Katy Freeway West followed with 215,000 square feet.
Despite these gains, the Galleria’s vacancy rate remained high at 32 percent by year-end across its approximately 22.5 million square feet of office space. The submarket could benefit further from Deiso Moss’s plan to develop a new branded condo and hotel tower at 2120 Post Oak Boulevard.
Office building sales rose modestly in Houston during 2025 compared to the previous year—totaling about 9.7 million square feet versus 9.5 million in 2024. At least half of the top ten largest transactions were distress-related sales; notably, Houston Center—the city’s largest office complex—was returned to its lender AustralianSuper.
Conversions are becoming more common as well: Chicago-based firm 3L Real Estate intends to transform One City Center into corporate suites and traditional apartments.
Owner-occupiers made use of low valuations and surplus outdated office space by purchasing over two million square feet that had been vacant during the year.
The sale of Energy Center I—a property built in 2008 and renovated in 2020—stood out among traditional trophy trades last year.
JLL expects competition for premium properties will intensify going forward: “As high quality space and stable ownership increasingly drive tenant decisions, competition for premium properties is expected to intensify throughout 2026,” according to its report.
