Demand
Houston office leasing remained resilient through Q3 2026, with year-to-date (YTD) activity reaching 6.8 million square feet (msf), up 5.7% from the same period in 2025. Despite persistent headwinds facing the office sector, quarterly volume moderated to 1.9 msf following a strong start to the year as activity was essentially unchanged year-over-year (YOY), underscoring stable tenant demand.
Class A properties drove the slight YTD improvement, recording 4.2 msf of leasing compared with 3.4 msf during the same period in 2025, with Class A Tier 2 and Tier 3 buildings accounting for most of the activity. The market's ongoing flight to quality was evident in the quarter's largest relocations, with several tenants moving into Class A buildings while simultaneously expanding their footprints. Class B and Class C leasing totaled 2.0 msf and 0.5 msf, respectively.
The West Loop/Galleria submarket recorded the highest leasing activity for the second consecutive quarter at 419,000 square feet (sf), its strongest quarterly volume since Q2 2025. West Houston also posted notable gains, with leasing more than doubling from Q2 in the Katy Freeway East and West Belt submarkets. Meanwhile, the Central Business District captured 5.6% of total leasing activity during the quarter, compared with 13.4% in the previous quarter. Across the market, leasing increased quarter-over-quarter (QOQ) in only seven of the 19 submarkets.
Net absorption totaled negative 290,000 sf in Q3, reversing the occupancy gain recorded in Q2 and bringing the YTD total to negative 772,000 sf. The quarter's negative absorption was partly driven by consolidations and move-outs, resulting in several large blocks of space returning to the market. Notable occupancy losses included Westlake Corporation vacating the entirety of 2801 Post Oak, Chevron's consolidation at 1501 McKinney that resulted in multiple floors being vacated, and MRC Global vacating two floors at 3 Houston Center. These moves contributed to the quarter's occupancy loss.
Supply
No office projects delivered during the quarter, though YTD completions totaled 443,000 sf, exceeding the combined volume delivered in 2024 and 2025. Houston's construction pipeline consists of two projects: Autry Park (110,000 sf) in the Inner Loop, which is fully preleased, and 2811 Kirby (104,000 sf) in Greenway, which remains available for lease. Looking ahead, two additional developments are expected to break ground in Q4 2026: The Arc at The Ion District (196,000 sf) in the Inner Loop and 100 Park Place (253,000 sf) in the West Loop/Galleria. While the construction pipeline has contracted significantly since 2020, these projects, combined with a growing list of proposed developments, suggest developer confidence may be returning and could support a gradual increase in office construction activity.
Overall vacancy ended Q3 at 24.6%, up 10 basis points (bps) from Q2 and 70 bps higher YOY. Despite quarterly fluctuations by submarket, overall vacancy remained relatively stable throughout 2026. Katy Freeway East recorded the market's largest vacancy decline, falling more than 200 bps QOQ to 8.5%, while Central Business District vacancy rose more than 80 bps to 26.9%. Overall vacancy remained lower in Class A properties at 22.7%, compared with 29.4% for Class B.
Sublease availability totaled 4.4 msf (2.2 msf vacant). Total sublease availability represents 2.4% of total inventory, edging up 10 bps from Q2 2026 but remaining below the five-year average of 2.5%. Despite the quarterly increase, sublease space available remained lower both YTD and YOY.
Pricing
The overall average gross asking rent ended Q3 at $32.08 psf, the highest level recorded since 2021. Rent growth was led by Class A properties, which reached $40.76 psf, up 2.2% QOQ and 3.9% YOY, while Class B properties stood at $26.98 psf.
With availability tightening in Class A Tier 1 properties, a portion of tenant demand shifted to other Class A assets, supporting rent growth across the broader segment. Katy Freeway East and the Inner Loop submarkets recorded the highest Class A gross asking rents at $59.59 psf and $57.64 psf, respectively, followed by The Woodlands/Spring ($45.83 psf) and the Central Business District ($45.71 psf).
