Vacancy and availability. As of mid-May 2020, overall vacancy is up 110 basis points at 21.9% and availability is up 30 basis points at 26.3%, compared to this time last year. The Houston office market has recorded 6.0 million sq. ft. of leasing activity—which is comprised of both new leases and renewals—while net absorption (move-ins minus move-outs) is at negative 499,000 sq. ft.—involving negative 940,000 sq. ft. of direct space and positive 441,000 sq. ft. of sublease space. Aramco’s 253,422-sq.-ft. sublease expired at Two Allen Center in the first quarter as that space rolled over to direct, contributing to the negative absorption tally.

Positive leasing news for energy companies. During the coronavirus (COVID-19) pandemic, energy company Venture Global LNG, a liquefied natural gas firm, signed a 12-year lease and doubled its footprint in 5 Houston Center at 1401 McKinney St. in downtown Houston. Venture Global will occupy 58,514 sq. ft. in the office tower, taking the top two floors of the 27-story building once the expansion is completed. The company signed the lease before oil prices crashed in early March, not announcing the expansion until May. Energy companies have been jolted by the oil price war and falling demand during COVID-19. In reaction to the downturn, numerous companies have put a hold on hiring, laid off workers and cut capital spending budgets.

Houston economic indicators. Houston data for March have begun to show the effects of efforts to contain COVID-19. The Federal Reserve Bank of Dallas reported that employment contracted, the business-cycle index slowed, leading indicators were broadly negative, and the unemployment rate rose sharply. In addition, weekly initial claims for unemployment insurance in April remained elevated, with statistics painting a sobering picture of possible further declines ahead.

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