E Fort Bend - Sugar Land Market Report | Q4 2023

E Fort Bend - Sugar Land Commercial Real Estate Snapshot

?Key Takeaways

• Office vacancy drops along with rents
• Medical office leasing activity climbs
• Industrial supply outpaces demand, construction down
• Retail reports strong leasing activity

?Office Highlights

A total 1.8 MSF of office space is available in the E Fort Bend/Sugar Land office submarket; this includes 1.3 MSF of general-purpose office space and 519,659 SF of medical-office space. The submarket contains 5.9 MSF of general-purpose office inventory with a vacancy rate of 18.8%, which is a drop from 20.3% last quarter and from 21.9% year over year. Net absorption during fourth quarter was 87,150 SF, with an annual total of 92,633 SF, an improvement over 2022’s negative 48,229 SF. The average quoted gross rental rate decreased to $29.95 PSF from $30.09 PSF last quarter but increased from $29.49 year over year. Leasing activity picked up during the second half to bring the annual total to 237,538 SF, which is a 31.6% drop year over year. No office buildings are currently under construction or delivered during 2023.

Medical Office Highlights

The E Fort Bend/Sugar Land medical-office submarket contains 2.2 MSF of medical-office inventory with a current vacancy rate of?17.1%, which is a drop from last quarter’s 17.5% rate but an increase from 12.5% year over year. Net absorption remained positive?with 103,358 SF for the year, an improvement from last year’s negative 4,905 SF. Annual leasing activity totaled 124,958 SF, 8.8% more?than the previous year. The average quoted gross rental rate increased to $29.63 PSF from $27.21 PSF the previous quarter and from?$26.96 PSF year over year. Three medical-office buildings totaling 208,259 square feet are currently under construction, and one?140,800-SF building delivered during 2023.

Industrial Highlights

The Fort Bend/Sugar Land industrial submarket contains 40.2 MSF of industrial space that is 13.6% vacant, decreasing from 14.8%?the prior quarter. The submarket recorded 625,524 SF of net absorption in Q4 with 1.8 MSF for the year. Supply is outpacing demand?with 5.9 MSF feet delivered while the annual net absorption increased marginally from the 1.7 MSF for 2022. Strong leasing activity?was recorded for the last two years, with 3.1 MSF in 2023 and 2.3 MSF in 2022. Construction has decreased significantly with only?three buildings with 897,570 SF underway. The submarket’s two largest leases signed for the year included Distributive Alternatives’?855,610-SF distribution warehouse in Kingsland Ranch Logistics Park and Waaree Technology’s 546,000-SF lease in the Uplands?Twinwood Business Park.

Retail Highlights

The E Fort Bend/Sugar Land submarket contains 11.7 MSF of retail space. The submarket posted negative net absorption of 39,426?SF during Q4 but was positive for the year at 34,326 SF. Annual leasing activity jumped to 313,003 SF from 201,643 SF year over year.?Vacancy rose 30 basis points to 4.1% but fell slightly from Q4 2022’s 4.2%. The average asking rental rate increased to $15.02 PSF from?the previous quarter but dropped from $15.60 PSF year over year. Two small retail properties are currently under construction in the?submarket, and two properties delivered during the year.