Houston’s office market is showing signs of improvement as it adapts to changes following the pandemic, although its recovery remains slower than that of Dallas. According to a fourth quarter report from JLL, annual absorption for 2025 was negative at 311,369 square feet. Despite being in the red, this figure represents significant progress compared to the negative 4 million square feet recorded in 2021. The last quarter of 2025 saw a negative absorption of 439,859 square feet, ending two consecutive quarters of positive results.
Vacancy rates have also declined slightly. After peaking at nearly 27 percent in 2024, vacancies dropped to 26.3 percent by the end of 2025. JLL attributes some of this improvement to return-to-work mandates and a reduced pipeline for new office developments.
Among Houston’s submarkets, the Galleria performed best during the fourth quarter. It recorded nearly 200,000 square feet of positive absorption, bolstered by 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 office at 2800 Post Oak Boulevard. For annual net absorption, the Galleria ranked second with almost 341,000 square feet taken up over the year. Suburban areas closest to Houston led all submarkets with more than 555,000 square feet absorbed in total for the year; Katy Freeway West followed with an additional gain of about 215,000 square feet.
Despite these gains, the Galleria ended the year with a vacancy rate of around 32 percent across its approximately 22.5 million square feet of office space. Prospects for further improvement may be on the horizon after Deiso Moss announced plans for a new branded condo project: a proposed 44-story hotel and condominium tower at 2120 Post Oak Boulevard.
Office building sales in Houston edged up slightly in 2025 compared to the previous year—totaling about 9.7 million square feet versus roughly 9.5 million in 2024. Many transactions involved older or distressed properties; five out of ten top deals were distress-related sales including Houston Center—the city’s largest office complex—which reverted to lender AustralianSuper.
Some buildings changed hands with conversion plans underway. Chicago-based firm 3L Real Estate intends to turn One City Center at 1021 Main Street into corporate suites and apartments—93 suites for visiting employees and another estimated at around four hundred sixty traditional units.
Lower valuations and an abundance of outdated space have enabled owner-occupiers to acquire properties directly from vacant inventory; Partners Real Estate reported that such buyers took more than two million square feet off the market during the past year.
The most prominent conventional sale among major trades was Energy Center I—a property built in Houston’s Energy Corridor in 2008 and renovated twelve years later.
Looking ahead into next year, industry analysts anticipate increased activity involving high-quality assets known as trophy trades: “As high quality space and stable ownership increasingly drive tenant decisions, competition for premium properties is expected to intensify throughout 2026,” according to JLL’s report.
