October 1, 2026
See how vacancy affects income, risk, financing, and commercial property value.
Vacancy is more than an empty suite. It changes the income a property produces, the expenses an owner must absorb, and the risk a buyer or lender assigns to the asset.
Houston Office Vacancy Is Repricing Assets
The latest Colliers market report placed Houston's overall office vacancy at 27.7%, with vacancy in the central business district at 32.1%. The market is also highly divided: tenants continue to favor newer Class A buildings, while older or less competitive properties can face longer lease-up periods, larger concessions, and greater improvement costs.
Greenway Plaza illustrates how occupancy can affect pricing. The 4.5-million-square-foot campus, once valued at roughly $1 billion, changed hands through the assumption of about $416.2 million in debt plus $15 million in cash while it was approximately 57% occupied. One transaction does not establish the value of every office building, but it shows why buyers and lenders focus on in-place income, lease-up costs, capital needs, and the time required to stabilize an asset.
Sources: Colliers Houston Office Market Report and Houston Chronicle's Greenway Plaza coverage
Vacancy Reduces Effective Rental Income
A property may have strong asking rents on paper, but vacant space does not generate rent. Effective gross income reflects what the property is actually collecting after vacancy and credit loss.
That lower income flows directly into the property's net operating income.
Owners Often Absorb More Expenses
When space is vacant, the landlord may carry utilities, maintenance, insurance, taxes, marketing, leasing commissions, and tenant-improvement costs without a tenant contribution.
Those expenses can make the financial effect of vacancy larger than the missing rent alone.
Vacancy Can Change the Cap Rate Conversation
A stabilized property with durable tenants may command a different valuation than a similar property with substantial vacancy. Buyers may require a higher return to compensate for lease-up risk and uncertain timing.
The income approach therefore depends on both current income and realistic assumptions about stabilization.
Financing Can Become Harder
Lenders review occupancy, leases, tenant quality, and debt-service coverage. Higher vacancy can weaken the property's ability to support debt and may reduce proceeds or change loan terms.
Owners planning a refinance should address lease expirations and vacancy well before the loan process begins.
Frequently Asked Questions
Does all vacancy hurt value equally?
Can future lease-up increase value?
Should buyers underwrite current or projected occupancy?
The Bottom Line
Vacancy affects income, expenses, financing, and perceived risk at the same time. Owners and buyers should model the full financial effect rather than treating vacant space as a simple percentage.
Related Reading
Houston Association of Realtors
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