What to Expect in 2026 for Houston’s Office Market

Houston’s office recovery lags behind its northern neighbor Dallas, but it’s still making notable progress as it settles into a new normal after the pandemic.

While annual absorption was negative for 2025, it’s still the highest it’s been in years, according to a fourth quarter report from JLL. Rounding out the year at negative 311,369 square feet, it far exceeded negative 4 million square feet from 2021, and has steadily increased since then. The fourth quarter recorded a negative absorption of 439,859 square feet, breaking the market’s two-quarter stretch of positive absorption.

Vacancies, while still elevated, have decreased to 26.3 percent after peaking at nearly 27 percent in 2024. But, like Dallas, return to work mandates and a narrowing development pipeline have helped the Houston office market perk up.

Submarkets on top

Of the city’s office submarkets, the Galleria performed best in the fourth quarter, JLL reported.

The Galleria logged nearly 200,000 square feet of positive absorption, thanks to Texas Dow Employees Credit Union’s move to 121,000 square feet at the building at 2000 Post Oak Boulevard and Camden Property Trust’s relocation to 104,000 square feet at the building at 2800 Post Oak Boulevard.

The Galleria also came in second in terms of annual net absorption, recording nearly 341,000 square feet of positive office space absorption. The suburbs closest to Houston topped the list with more than 555,000 square feet of absorption for the year. Katy Freeway West, the western part of I-10 stretching from Houston to Katy, came in third on the list. It logged 215,000 square feet of positive absorption by the end of the year.

The Galleria’s high absorption rate marks a win for the submarket that had an elevated vacancy rate of 32 percent at the end of 2025. The retail hotspot has about 22.5 million square feet of office space.

The submarket could expect a boost after being selected for one of the city’s coveted branded condo projects. Deiso Moss announced plans to develop a 44-story hotel and condo tower at 2120 Post Oak Boulevard, as the city races to level up its branded condo offerings.

Office trades

Office building sales inched up in 2025, compared to 2024, to 9.7 million square feet — a slight edge over 2024’s 9.5 million square feet.

Last year, Houston office operators made lemonade out of the city’s glut of old office space. Of the top 10 largest office trades, at least five were distress-related sales, including the biggest office sale of 2025, in which Houston’s largest office complex, Houston Center returned to its lender, AustralianSuper.

Two of the top sales involved buildings eyed for conversion. Chicago-based 3L Real Estate plans to convert One City Center, at 1021 Main Street, into 93 corporate suites for visiting employees and 460 traditional apartments.

The market’s low valuations and excess of old space made way for owner-occupiers to enter the market. These buyers took more than 2 million square feet of vacant space off the Houston office market in 2025, Partners Real Estate reported..

The closest thing to a trophy office trade on the list was the sale of Energy Center I, an Energy Corridor office building at 585 North Dairy Ashford that was built in 2008 and renovated in 2020.

Experts predict trophy trades will ratchet up this year.

“As high quality space and stable ownership increasingly drive tenant decisions, competition for premium properties is expected to intensify throughout 2026,” JLL’s’ report said.