Metro Houston’s economic recovery continues to strengthen, as growth spreads among its industries.  Monthly employment has been rising since October 2009, excluding the annual January reduction, and the 12-month decline in employment is scaling back.  During the 12 months ending April 2010, employment decreased by 40,900, a 16% decline.  This compares to the national decline of 1.1%.

The Houston metro unemployment rate declined to 8.4% in April 2010, from an 8.8% cyclical high recorded in January 2010. The national unemployment rate was 9.7% in May 2010, down from a recent peak of 10.1% in October 2009 and from 9.9% in April 2010.

The Houston office market began to stabilize in the 2nd quarter of 2010.  Absorption of office space was relatively flat, as companies continued to sit tight until economic growth strengthens.  Meanwhile, vacancy edged down and asking rents appeared to stabilize.

• Net absorption of office space in the Houston metro totaled negative 41,000 SF in the 2nd quarter of 2010, compared to negative 353,000 SF in the 1st quarter.
• Available sublease space totaled 2.2 million SF in the Houston metro area at mid-year 2010 – down slightly from the 1st quarter.  Sublease space represents 0.9% of the standing inventory.
• The overall office vacancy rate (including sublet space) in the Houston metro declined to 13.6% at mid-year 2010, from 13.8% in the 1st quarter, but is up from 13.1% a year ago.  The direct vacancy rate is 12.7% at mid-year 2010, compared to 12.9% in the 1st quarter and 12.1% a year ago.
• There is 2.5 million SF of office space under construction or renovation in the Houston metro area at mid-year 2010, down from 2.8 million SF in the 1st quarter and 6.2 million SF one year ago.  Space under construction at mid-year is 43% pre-leased, compared to 48% in the 1st quarter and 34% a year ago.
• Office deliveries (including renovations) totaled 158,715 SF in metro Houston during the 2nd quarter of 2010, compared to 1.5 million SF during the 2nd quarter of 2009.  Space delivered in the 2nd quarter of 2010 was 59% leased upon delivery, compared to 46% a year ago.
• Class A office asking rents have risen 2.4% since year-end 2009, bouncing slightly off the market bottom, while Class B asking rents have declined 0.6%.
• We recorded $354 million in office investment sales (for which pricing information could be obtained) in metro Houston in the 1st half of 2010.  Sales totaled $95 million in the 1st half of 2009.

• Net absorption of industrial space in the Houston metro area totaled 2,051,000 SF in the 2nd quarter of 2010, compared to negative 658,000 SF in the 1st quarter.
• The overall Houston metro industrial vacancy rate edged down to 6.0% at mid-year 2010, from 6.2% in the 1st quarter and 6.2% one year ago.  The direct industrial vacancy rate is 5.9% at mid-year 2010, down from 6.0% in the 1st quarter and 6.0% one year ago.
• There is 472,000 SF of industrial space under construction in metro Houston at mid-year 2010.  This compares to 1.5 million SF in the 1st quarter and 3.5 million SF a year ago. Space under construction is 40% pre-leased, compared to 87% in the 1st quarter and 51% one year ago.
• Deliveries totaled 1.3 million SF in Metro Houston in the 2nd quarter of 2010. Industrial space delivered in the 2nd quarter of 2010 was 89% leased upon delivery.
• Industrial asking rents declined approximately 1% in Metro Houston during the 2nd quarter of 2010, compared to 3% in the 1st quarter, as market conditions began to firm.
• The industrial investment sales market quiet in the first half of 2010.

Metro Houston's retail market softened into the 1st half of 2010, due to continued weakness in consumer spending. Vacancy has risen to its highest level since the mid-90's and rents have declined modestly.

• The Retail sector in Metro Houston lost 2,200 jobs over the 12-month period ending in April 2010– a 0.8% decrease.
• Houston’s retail vacancy rate jumped to 15.8% at the end of the 1st quarter 2010, from 15.0% at year-end 2009 and 15.6% a year ago. The current vacancy rate is the highest since the 3rd quarter of 2007.
• Retail rents in Houston averaged $1.61/SF/month in the 1st quarter of 2010, down 1.2% from the prior 12 months.
• The national slowdown in consumer spending hit in late 2008, which is reflected in a sharp decline in retail sales in the Houston metro area in 2009. The most recent data from the Texas Comptroller's Office show that Houston had $75.6 billion in sales in 2009, compared to$88.2 billion in 2008.

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