Demand
Houston recorded 2.1 million square feet (msf) of leasing activity in Q2 2026. While volume moderated from the prior quarter, first-half leasing reached 4.7 msf, surpassing the 4.4 msf recorded during the same period in 2025 and signaling sustained occupier demand despite continued challenges in the office sector. This performance aligns with Houston's five-year average quarterly leasing volume, highlighting the market's consistent leasing fundamentals over time.
Class A buildings accounted for 62.1% (1.3 msf) of new deal activity, while Class B comprised 31.5% (667,000 square feet (sf)) and Class C represented 6.4% (135,000 sf). Class A properties captured the largest share of leased square footage, reinforcing the market's ongoing flight-to-quality trend as occupiers continue to prioritize newer, amenity-rich assets. Class B properties recorded the highest number of new lease transactions among building classes, a trend that has persisted since Q1 2021.
The West Loop/Galleria submarket posted the highest leasing activity at 337,000 sf, although volume declined from both the prior quarter and one year earlier. Notable leases in the submarket included BBM Holdings' 33,000-sf lease at Central Park One and Riviana Foods' 23,000-sf relocation to San Felipe Plaza from its longtime location at 2777 Allen Parkway. The Central Business District followed with 240,000 sf of leasing activity, and Katy Freeway West recorded 218,000 sf during the quarter.
After three consecutive quarters of negative net absorption, the market recorded 112,000 sf of occupancy gains. The return to positive absorption represented a notable improvement from the 789,000 sf of negative absorption recorded in Q1 and suggests occupancy trends may be stabilizing following several quarters of contraction. Katy Freeway East led the market with 273,000 sf of positive net absorption, driven primarily by move-ins at 990 Town & Country, including Boardwalk Pipeline (143,000 sf) and Willis Johnson (26,000 sf).
Supply
The RO, a 143,000-sf office building in the Greenway submarket, was completed in Q2 2026 and delivered fully leased. Its completion brought year-to-date deliveries to 443,000 sf; however, new supply remains limited relative to historical norms. Development activity remains constrained, with only two office projects currently underway. The limited pipeline reflects developer caution amid elevated vacancy and ample availability across the market. Autry Park, a 110,000-sf office building in the Inner Loop submarket, is fully preleased and scheduled for delivery in Q4 2026. In addition, 2811 Kirby, a mixed-use development in the Greenway submarket that will include 104,000 sf of office space, broke ground during the quarter and is slated for completion in Q4 2027.
Overall vacancy declined to 24.7% in Q2 2026, down 10 basis points (bps) from the previous quarter. Vacancy has remained largely rangebound over the past year as improvements in leasing activity have been offset by tenant consolidations and ongoing space rationalization. Class B properties continued to exhibit higher vacancy (28.7%) than Class A properties (23.9%).
Sublease availability held steady at 2.4% of the total inventory, below the market's five-year average of 2.6%. The largest blocks available included TechnipFMC (325,000 sf) in Katy Freeway West and NOV (197,000 sf) in Southwest. The below-average level of sublease space suggests tenants have largely completed portfolio-rightsizing efforts, limiting excess supply and reducing competitive pressure on direct availabilities.
Pricing
The overall average gross asking rent ended Q2 2026 at $31.99 per square foot (psf), reflecting a 0.7% quarter-over-quarter (QOQ) increase and a 1.2% year-over-year (YOY) gain. Class A rents also increased both QOQ and YOY, reaching $39.91 psf. Katy Freeway East and the Inner Loop recorded the market's highest Class A gross asking rents at $60.03 psf and $54.63 psf, respectively. Class B average gross asking rent ended Q2 2026 at $25.73 psf, up slightly QOQ but down 0.4% YOY. Overall rent performance remained resilient during the quarter, with Class A assets outperforming lower-quality product as occupiers prioritize building quality, amenities, and workplace experience.
