NGKF: What’s going on with Houston’s office sublease space?

​HOUSTON – There’s no shortage of sublease office space within the City of Houston, thanks in part to lower oil prices and the prevalence of expansion plans cut short.

Lower oil prices are expected to stick around for some time, prompting questions about the vigor of the sublease market—and its subsequent impact on the market as a whole.

The run-up in available sublease space actually began in 2013, when companies had to factor much higher oil prices into their future plans, and accelerated with the downturn in the energy sector.

By the end of 2015, the amount of available sublease space had increased to 7.7 million sf, up from 4.5 million sf just one year earlier. 

​Looming bankruptcies and an anticipated spike in M&A activity suggest the sublease market has yet to peak.

Houston’s sublease market now accounts for 3.8 percent of total inventory, the highest level on record.

All told, Class A product makes up 77 percent of the sublease market and represents 12.5 percent of all space currently being marketed for lease. 

In other words, the size of the sublease market and potential impact creates an interesting paradigm shift for both landlords and tenants.