It’s no secret that sublease space has flooded Houston’s office market amid the oil slump— NAI Partners tallies 7.6 million square feet of it, with about 3 million square feet of it coming out of west Houston submarkets, which have a high percentage of the city’s oil and gas tenants.Traditionally, sublease space makes the market more competitive and benefits tenants, who use the increased options to negotiate a better deal. But this time around, it’s not just the quantity of sublease space that has west Houston landlords nervous, it’s the quality of that space.Jon Silberman, managing partner of NAI Partners’ Houston office, said about 700,000 square feet of the sublease space in west Houston is essentially good as new — space taken in brand-new buildings in 2013 or 2014 that companies took in excess of their current requirements, with hopes of growing into it.
And all of a sudden — and it was sudden — some of those companies hadn’t even moved in yet. If a company leased 10 floors, they maybe built out seven, and had three floors for expansion as they needed them,” Silberman said. “Well, oil tanks, business slows, and they don’t need the three floors of expansion. They may not need the original space they built out.”