3Q 2018 Houston Industrial Market Brief

Market Brief...

Houston

INDUSTRIAL

3Q18 Property Pictured Above: The Pines Business Park, 612 Spring Hill Drive, Spring, Texas

HOUSTON INDUSTRIAL MARKET BRIEF 3Q 2018

MESSAGE FROM HOLT

As we celebrate our 25th year in business, we are extremely honored to work with each of you. We attribute our success to you, our clients, for providing us the opportunity to earn your business and your trust.

We have the best professionals in the real estate industry, skillfully trained and ready to provide exemplary service to our clients at all times.

Our company was founded on integrity and market knowledge—and these same principles are incorporated into a set of core Values that are the cornerstone of our business today.

Thank you for your loyalty and for entrusting Holt Lunsford Commercial with your real estate needs. As we celebrate the past and look forward to the future with great enthusiasm, we remain highly committed to you, our valued clients.

Holt Lunsford, Founder & CEO

3

HOUSTON INDUSTRIAL MARKET BRIEF 3Q 2018

TABLE OF CONTENTS 1. HOUSTON INDUSTRIAL SUBMARKETS

1 2 3

2. OVERALL HOUSTON MARKET

A. Industrial Trends & Transactions

B. Facts and Figures

2. SUBMARKET INTELLIGENCE

A. Far West & Katy

B. C. D. E. F. G.

Northwest Houston North Houston Near East Houston Port Area South Houston Southwest Houston

5

HOUSTON HLC SUBMARKET COVERAGE

TOMBALL PRAIRIE VIEW SPRING

GEORGE BUSH INTERCONTINENTAL AIRPORT

CYPRESS

HUMBLE

LAKE HOUSTON

NORTH 52,875,526 SF

NORTHWEST 130,489,845 SF

MONT BELVIEU

NEAR EAST 47,457,468 SF KATY

BROOKSHIRE

HOUSTON

SOUTHWEST 45,099,564 SF

FAR WEST/KATY 15,742,313 SF

CBD SHIP CHANNEL

GALLERIA

PORT AREA 56,283,291 SF

BAY TOWN

PASADENA

MEDICAL CENTER

LA PORTE

SOUTH 38,991,815 SF

SUGAR LAND

ELLINGTON AIRPORT

RICHMOND MISSOURI CITY

6

HOBBY AIRPORT

TRINITY BAY

HLC tracks statistics, facts, and figures for industrial and flex buildings over 25,000 SF within the submarket boundaries detailed in this report.

PEARLAND

HLC HOU

INDUSTRIAL TRENDS & TRANSACTIONS

INDUSTRIAL MARKET EXPERTS

HLC OUTLOOK The industrial real estate market in Houston saw total vacancy increase in the third quarter, largely due to a number of new speculative developments coming online with no tenants in place. New speculative construction continues to be the big story in Houston, with almost every submarket seeing new bulk warehouses either breaking ground or completed during the third quarter.

As Houston’s regional population continues to increase, more areas will become open to these new developments. As an example, we are starting to see new industrial construction in Katy along the Grand Parkway, as well as in Far East Houston along East Beltway 8—both areas that have not historically been hotbeds for distribution warehouses.

KELLY LANDWERMEYER

JOHN KRUSE

Managing Principal klandwermeyer@hlhouston.com 713.602.3762

Market Director jkruse@hlhouston.com 713.602.3756

Despite the vacancy rate increasing slightly in the third quarter, demand is strong, and the overall industrial market continues to experience strong fundamentals overall. More tenants are seeking out newer buildings with features such as 30 footplus clear heights, larger truck aprons, and ample outside storage and developers are catering to these requirements.

TRENDS & TRANSACTIONS • The Northwest, North, and Port submarkets are seeing the majority of Houston’s new industrial construction, with the North submarket seeing a large uptick in activity during the third quarter • Bulk warehouse construction in Houston is showing no signs of slowing down anytime soon • Houston’s population growth and low cost of living will necessitate the need for more e-commerce and “last mile” distribution facilities in the coming years Absorption

BRAD SEGRETO

CRAIG BEAN

Market Associate bsegreto@hlhouston.com 713.602.3758

Market Associate cbean@hlhouston.com 713.602.3752

vs. Prev. Qtr

vs. 12 Mths Ago

1,607,886

726,394

2,805,231

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.7%

5.2%

5.3%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

4,354,499

4,935,282

5,278,853

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

9,518,057

11,073,302

6,052,207

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

4,119,537

1,546,269

1,543,729

7

HLC HOU FACTS & FIGURES

Market

Existing Inventory

Vacancy

OVERALL HOU

6.0%

5,000,000

4,000,000 5.5% 3,000,000

5.0%

2,000,000

1,000,000 4.5%

# Bldgs.

Total RBA

Direct SF

Total SF

Vac. %

125

15,742,313

1,124,232

1,131,030

7.2%

1,662

130,489,845

9,091,082

9,563,710

7.3%

North

632

52,875,526

3,152,413

3,432,303

6.5%

Near East

509

47,457,468

1,418,460

1,447,155

3.0%

0

4.0%

Far West/Katy Northwest

-1,000,000 Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Absorption

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Deliveries

Q3 18

Vacancy

VACANCY - OVERALL HOU

7.0%

5.7% 6.0% 5.5%

Port Area

392

56,283,291

2,719,447

2,886,447

5.1%

South

513

38,991,815

1,641,668

1,669,766

4.3%

Southwest

633

45,099,564

2,437,066

2,560,322

5.7%

4,466

386,939,822

21,584,368

22,690,733

5.7%

5.0%

4.5% 4.4%

4.0%

3.0%

2.0%

1.0%

Totals

0.2%

0.1%

0.0% Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Direct

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Sublet

Q3 18

Total

ABSORPTION - OVERALL HOU 9,000,000 8,000,000

YTD Net Absorption

YTD Deliveries

Under Construction SF

YTD Leasing Activity

Far West/Katy

2,139,575

1,689,785

610,320

686,799

Northwest

305,966

1,661,089

2,424,722

5,446,313

1,676,650

714,200

2,765,321

2,559,924

Near East

43,051

0

0

1,501,797

Port Area

2,952,291

4,049,474

2,738,069

931,986

South

(288,263)

65,020

0

576,624

252,317

0

979,625

1,600,056

7,081,587

8,179,568

9,518,057

13,303,499

Market

7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0

North

-1,000,000 Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Total Net

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Leasing Activity

CONSTRUCTION - OVERALL HOU 12,000,000

10,000,000

Southwest Totals

8,000,000

6,000,000

4,000,000

Source: CoStar

2,000,000

0 Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Delivered Inventory

8

HLC tracks statistics, facts, and figures for industrial and flex buildings over 25,000 SF within the submarket boundaries detailed in this report.

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Under Construction

Q2 18

Q3 18

SUBMARKET INTELLIGENCE FAR WEST & KATY

HLC OUTLOOK The Far West/Katy industrial submarket follows along Interstate 10 and stretches from Highway 6 out to Brookshire and up and down the newly developed Grand Parkway. The submarket continues to benefit from population growth in West Houston, Richmond, Katy, and surrounding communities. Additionally, the submarket’s location along Interstate 10 and proximity to San Antonio and Austin (the seventh and eleventh largest U.S. cities, respectively) make it an attractive location for new regional e-commerce distribution hubs.

KATY

BROOKSHIRE

15,742,313 SF

Absorption

Construction has been steadily increasing in this submarket in recent years and we expect that trend to continue. During the third quarter, multiple new speculative developments were announced. Hines announced the future development of Pintail Crossing Business Park, a 150-acre master-planned business park to be sandwiched between the already-existing Amazon and Igloo distribution centers. Additionally, Clay Development & Construction plans to break ground soon on Pederson Distribution Park, beginning with a 622,000 SF cross-dock warehouse that is expected to deliver in the summer of 2019. When completed, the 106-acre Pederson Distribution Park will be able to accommodate up to 1 million SF of industrial product.

vs. Prev. Qtr 93,577

105,558

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

7.2%

3.1%

6.4%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

65,994

557,788

83,987

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

610,320

1,194,665

1,016,000

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

673,785

With almost all new development occurring along the I-10 corridor, the question that remains to be answered is whether we will begin to see new industrial development migrate north along the Grand Parkway (Highway 99) in the near future.

vs. 12 Mths Ago

27,816

-

NEW DEVELOPMENTS • High Point West - 1039 Schlipf Road – 89,440 SF

by MARS Properties/Estimated delivery 1Q 2019

• Mason Ranch Building 2 - 2240 N Mason Road -

171,750

VITAL STATS 12.0%

Property Photo: Mason Ranch, JLL

1,325,000

11.0%

282,880 SF by Exeter Property Group/Estimated delivery November 2018/Pre-leased by Veritas • West Ten Phase II Building 3 – 28420 West Ten Boulevard – 238,000 SF by Transwestern/ Estimated delivery 1Q 2019

1,125,000

10.0% 9.0%

925,000

8.0% 725,000

7.0% 6.0%

525,000

5.0% 325,000

4.0% 3.0%

125,000

2.0% 1.0%

LARGE EXISTING VACANCIES • 1325 S Creek Drive (Park 10 Distribution Center) – 76,138 SF

• 15740 Park Row (Business Center at Park Ten) – 36,600 SF

-75,000 Q3 15

Q4 15

Q1 16

Q2 16

Absorption

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Vacancy Source: CoStar

9

SUBMARKET INTELLIGENCE NORTHWEST HOUSTON

SPRING

HLC OUTLOOK HUMBLE

GEORGE BUSH INTERCONTINENTAL AIRPORT CYPRESS

130,489,845 SF

KATY

New speculative construction continues to occur in Northwest Houston, although land constraints are increasingly becoming a factor for developers to consider. Almost all the land along Beltway 8 has been developed and affordable infill locations are becoming harder to locate.

HOUSTON

Absorption

vs. Prev. Qtr

(245,278)

(1,007,479)

297,895

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.4%

6.9%

5.1%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

The vacancy rate for the Northwest submarket was 6.4% at the close of the third quarter, which is down from the previous quarter. Looking forward, we expect absorption to remain strong as the submarket will continue to benefit from the growing population in communities such as Cypress-Fairbanks, Tomball and Katy.

vs. 12 Mths Ago

5,446,313

1,428,325

1,660,658

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,424,722

2,889,858

1,234,661

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,661,089

525,119

DEALS ON THE MARKET • Alamo Crossing (four building industrial park) – 1,047,797 SF

• 9647 W Wingfoot Road (Equity Industrial Partners portfolio) – 437,525 SF • 8100 Kempwood Drive – 219,489 SF

-

NEW DEVELOPMENTS • Fallbrook Pines Business Park Buildings 5 & 6

VITAL STATS

7.0%

1,500,000

6.0%

1,000,000

500,000 5.0%

0 4.0% -500,000

3.0%

-1,000,000 Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Vacancy Source: CoStar

10

The Northwest submarket is generally considered the most desirable submarket in greater Houston. Geographically located north of Interstate 10, along the 290 and West Beltway 8 corridors, the submarket offers somewhat of a “Main and Main” location for industrial tenants. With easy access to a large population base, the submarket is ideal for e-commerce and “last mile” businesses, as well as businesses that service household needs such as plumbing and building supply companies.

(Trammel Crow/Clarion Partners) – 660,000 SF; 4Q 2018 estimated completion • AIV, Inc. build-to-suit (22806 NW Lake Drive) – 320,000 SF; 1Q 2019 estimated completion • Highland Grove Business Park (Crow Holdings) – 458,280 SF; 2Q 2019 estimated completion • West Little York Distribution Center (IDI Logistics) – 153,188 SF; 2Q 2019 estimated completion

LARGE EXISTING VACANCIES • 10700 Telge Road – 400,328 SF • 6535 Guhn Road – 253,838 SF • 9700 W Gulf Bank Road – 245,319 SF • 6315 West by Northwest Boulevard – 201,600 SF • 10901 Tanner Road – 195,951 SF • 6410 Langfield Road Building D – 154,661 SF • 3480 W 11th Street – 154,600 SF Property Photo: Clay Campbell Distribution Center, HLC

SUBMARKET INTELLIGENCE NORTH HOUSTON

TOMBALL

HLC OUTLOOK

SPRING

GEORGE BUSH INTERCONTINENTAL AIRPORT

The North submarket—defined largely as the area between Veterans Memorial Drive and Highway 59/Interstate 69— provides a strategic location for companies looking for convenient access to George Bush Intercontinental Airport, as well as three of Houston’s critical thoroughfares: Interstate 45, Beltway 8, and Highway 59/Interstate 69.

HUMBLE

LAKE HOUSTON

This submarket has been one of the fastest growing submarkets in recent years, growing by about 30 percent since 2010.

Strong demand has driven fundamentals through the supply wave, and the vacancy rate has recently been well below the historical average.

52,875,526 SF

A number of new developments have broken ground in the last few months including Liberty Property Trust’s 656,116 SF build-to-suit for Conn’s, expected to deliver in the second quarter of 2019. Another new development is Archway Properties’ 685,400 SF spec building in Parc Air 59, also expected to deliver during 2Q 2019. Perhaps most interesting, Clay Development & Construction recently announced plans to develop a 214,000 SF cross-dock warehouse along the East Belt. Dubbed Sheldon Business Park, the new development will be located at the intersection of Beltway 8 and N Lake Houston Parkway, a location that has not seen any distribution warehouse construction to this point. Moving forward, we expect to see more speculative construction in the area, especially considering the interest Generation Park, a masterplanned business park still in its infancy, has garnered nearby.

HOUSTON

Absorption

vs. Prev. Qtr

529,475

426,440

vs. 12 Mths Ago 78,590

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.5%

7.7%

10.9%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

660,980

959,351

1,315,646

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,765,321

2,439,140

855,000

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

43,200

766,000

120,000

Boulevard) – 225,360 SF

VITAL STATS

12.0%

DEALS ON THE MARKET • Airtex Distribution Center (300 W Airtex

1,500,000 1,300,000

11.0%

1,100,000 900,000

10.0%

700,000 9.0%

500,000 300,000

8.0%

100,000 -100,000

7.0%

-300,000 6.0%

-500,000 Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Vacancy Source: CoStar

NEW DEVELOPMENTS • Parc Air 59 (Jackson Shaw) – 340,000 SF; 4Q 2018 estimated completion

• Park Air 59 (Archway Properties) – 685,400 SF; 2Q 2019 estimated completion

• Sheldon Business Park (Clay Development & Construction) – 214,300 SF; 2Q 2019 estimated completion

LARGE EXISTING VACANCIES • 600 Fallbrook Drive – 500,400 SF • Interwood South Parkway. – 296,600 SF • 971 N Sam Houston Parkway E – 251,220 SF • 16736 E Hardy Road – 130,200 SF

• Grocers Supply Distribution Center (Liberty Property Trust) – 727,600 SF; Q2 2019 estimated completion • Point North Three (Duke Realty) – 337,700 SF; 4Q 2018 estimated completion • Interstate Commerce Center (Hillwood / Copeland Commercial) – 333,600 SF; 1Q 2019 estimated completion • Conn’s Distribution Center (Liberty Property Trust) – 656,116 SF; 2Q 2019 estimated completion

Property Photo: 15920 International Plaza Drive, CoStar

11

SUBMARKET INTELLIGENCE NEAR EAST HOUSTON

HLC OUTLOOK Geographically, the Near East submarket borders downtown Houston and runs east, ending outside of Loop 610. It enjoys excellent freeway access via Interstate 10, Highway 59 and Loop 610. The submarket has a robust active rail infrastructure, which is used to serve the many plants and refineries along the Gulf Coast. Historically, a number of third-party logistics companies (3PL) have called the Near East submarket home, and we continue to see requirements for 3PLs on this side of town.

47,457,468 SF HOUSTON

The Near East submarket is home to a large amount product built in the 1970s and 1980s, making it one of the oldest industrial hubs in the metro region. There has been little new construction in this submarket over the last 20 years and the typical tenant here has historically been more price-sensitive relative to other parts of Houston; for this reason, justifying new-construction rents has been a challenge. However, multiple new industrial projects appear to be on the horizon.

Phelan Bennett Development recently revealed plans to construct a 175,000 SF front-load warehouse on land adjacent to the Anheuser-Busch brewery just west of Loop 610. The facility will feature ESFR sprinklers and a 32’ clear height, features not typically seen within this submarket. Additionally, a handful of other developers have quietly been acquiring land within the submarket and we anticipate more new construction will be announced as the calendar turns to 2019.

SHIP CHANNEL

PASADENA

MEDICAL CENTER

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

54,422

(170,579)

157,839

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

3.0%

3.4%

3.0%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

704,869

448,170

364,945

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

-

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

-

VITAL STATS

5.0%

500,000 400,000

4.0%

300,000 200,000

3.0%

100,000 0

2.0%

-100,000 -200,000

1.0%

-300,000 -400,000

0.0%

-500,000 Q3 15

Q4 15

Q1 16

Absorption

12

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Vacancy Source: CoStar

2017 and the beginning of 2018 were defined by negative absorption. This was driven by a downsizing across the pipe and fitting industry and several other large users shuttering their Houston operations or relocating to self-owned real estate outside of the submarket. However, leasing activity has increased substantially over the last few months.

NEW DEVELOPMENTS • Near East Distribution Center – 175,938 SF LARGE EXISTING VACANCIES • 3401 Navigation Boulevard – 238,011 SF • 221 Portwall Street – 162,178 SF • 4732 Darien Street – 118,578 SF • 4849 Homestead Road – 102,680 SF • 9040 Railwood Drive – 80,000 SF • 7350 Roundhouse Lane – 69,680 SF

Property Photo: 2005 Turning Basin Suite 626, HLC

SUBMARKET INTELLIGENCE PORT AREA

MONT BELVIEU

The Port submarket provides convenient access to Interstate 45, Highway 225, Highway 146, and Interstate 10 east to Baytown. This network of highways allows for quick access to and from both the Barbours Cut container terminal and the Bayport container terminal, where almost all foreign inbound shipments of goods come into the Houston market.

HOUSTON BAY TOWN

56,283,291 SF

HLC OUTLOOK

SHIP CHANNEL

GALLERIA

Over the last decade, the Port submarket has emerged as one of the strongest submarkets in Houston with a surge in speculative development and strong absorption. This can be attributed to several factors, including its strategic location near the Port of Houston, proximity to Gulf Coast plants and refineries, and the extensive multi-modal transportation infrastructure in the area, including an extensive rail network.

PASADENA

MEDICAL CENTER

LA PORTE HOBBY AIRPORT

ELLINGTON AIRPORT

Rent growth has been positive for much of the current cycle, creating a strong appetite for institutional investment within the submarket. New speculative developments have been announced frequently over the last two years and the construction shows no signs of slowing anytime soon.

TRINITY BAY

PEARLAND

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

889,245

513,694

693,326

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.1%

2.6%

5.0%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

212,112

75,106

561,947

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,738,069

4,348,554

3,090,758

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,564,682

311,650

404,479

VITAL STATS

8.0%

NEW DEVELOPMENTS • Port 10 Logistics Center (two cross-dock buildings)

3,000,000

7.0%

2,500,000

6.0%

2,000,000

5.0% 1,500,000 4.0% 1,000,000 3.0% 500,000

2.0%

0

1.0% 0.0%

-500,000 Q1 16

Q2 16

Q3 16

Absorption

Q4 16

Q1 17

Q2 17

Q3 17

Deliveries

Q4 17

Q1 18

Q2 18

Q3 18

Vacancy Source: CoStar

– 485,000 and 295,000 SF respectively; 4Q 2018 estimated completion • Thompson 10 Logistics Center (one cross-dock and one rear load) – 260,000 and 130,000 SF respectively; 1Q 2019 estimated completion • Ameriport Industrial Park Buildings 9 and 10 – 337,040 and 306,240 SF respectively; 1Q 2019 estimated completion • Carson Bayport 3 – 207,000 SF; 4Q 2018 estimated completion • Bayport South Business Park Building 3 – 500,000 SF; 1Q 2019 estimated completion • Victory Commerce Center – 349,000 SF; 1Q 2019 estimated completion • Bayport North Logistics Center I and II – 102,863 and 233,190 SF respectively; 2Q 2019 estimated completion • Underwood Port Logistics Center – 404,160 SF; 1Q 2019 estimated completion • Cedar Port Distribution Park Building 4 – 349,440 SF; 2Q 2019 estimated completion

DEALS ON THE MARKET • Bayport Logistics Park (Kuraray BTS) – 562,000 SF • Bayport South Business Park – 258,000 SF • Beltway Green/Park 225 – 121,520 SF LARGE EXISTING VACANCIES • 1302 Wharton Weems Blvd (Port Crossing Commerce Center) – 600,360 SF

• Port 10 Logistics Center Building 1 – 294,323 SF • 4311 Malone Drive – 207,425 SF • 1706 S 16th Street – 157,200 SF • 359 Old Underwood Rd (Independence Logistics Park) – 150,000 SF • 1814 Highway 146 S (Port Crossing Commerce Center) – 104,838 SF • 9311 Bay Area Boulevar (Bay Area Business Park) – 104,300 SF • 10025 Porter Road (Independence Logistics Park) – 94,556 SF

13

SUBMARKET INTELLIGENCE SOUTH HOUSTON

HOUSTON

HLC OUTLOOK

SHIP CHANNEL

GALLERIA

PASADENA

MEDICAL CENTER

HOBBY AIRPORT

38,991,815 SF

ELLINGTON AIRPORT

The South submarket benefits from its proximity to Houston’s Medical Center just south of downtown and is defined by a high volume of flex buildings designed to service the wide range of healthcare providers within the Medical Center.

Geographically, the submarket stretches from just north of Loop 610 south to Beltway 8.

Large portions of this area have not been developed yet, making this submarket the least land-constrained in the Houston market. However, due to the lack of population growth relative to the Northwest or Far West submarkets, there has not been a strong demand for new development in this area. That could change as other areas of Houston run out of developable land and population growth accelerates in communities such as Pearland and Missouri City.

MISSOURI CITY PEARLAND

Absorption

vs. Prev. Qtr

(91,632)

(182,766)

(109,994)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.3%

4.0%

3.1%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

234,446

99,201

201,465

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

98,113

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

DEALS ON THE MARKET • Texas Technology Park/Kirby Corporate Centre –

vs. 12 Mths Ago

38,500

569,661 SF • Southport Building 7 (Crosby 35 & South Loop E offering) – 110,037 SF

LARGE EXISTING VACANCIES • 750 Almeda Genoa Road – 125,000 SF • 3203 S Sam Houston Parkway E (South Point

-

Business Park) – 108,000 SF

• 8201-8211 La Porte Freeway – 99,652 square feet • 3440 S Sam Houston Parkway E (288 Business

VITAL STATS

5.0%

200,000 150,000

4.0% 100,000 50,000

3.0%

0 2.0%

-50,000 -100,000

1.0% -150,000 0.0%

-200,000 Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Vacancy Source: CoStar

14

Center) – 72,070 SF • 6603 Kirbyville Street – 63,182 SF

Property Photo: 11502 S Main, HLC

SUBMARKET INTELLIGENCE SOUTHWEST HOUSTON

HOUSTON

HLC OUTLOOK

45,099,564 SF GALLERIA

MEDICAL CENTER

The business-friendly local governments in Fort Bend County and available Triple Freeport Tax Exemption are two big reasons why industrial developers continue to be bullish on the Southwest submarket. Furthermore, the labor demographics in the area are excellent and rapid population growth is expected to continue in communities like Sugar Land and Richmond.

SUGAR LAND

RICHMOND

MISSOURI CITY

Absorption

vs. Prev. Qtr

DEALS ON THE MARKET • 700-766 Industrial Boulevard (South by Southwest)

vs. 12 Mths Ago

259,272

(26,140)

180,991

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.7%

6.4%

6.3%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

466,749

624,815

485,831

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

979,625

550,000

-

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

The Southwest submarket continues to expand with new speculative developments and build-to-suit projects moving along steadily during the third quarter. The frenzy of activity within the submarket is nothing new, as the last few years have seen robust development along Beltway 8 in Missouri City and the surrounding neighborhoods. Among the projects expected to kick-off soon is Phase 2 of Trammell Crow’s Park 8Ninety located at the intersection of Beltway 8 and Highway 90.

-

– 90,525 SF

NEW DEVELOPMENTS • Southwest Commerce Center (611 S Cravens Road) – 477,355 SF; 1Q 2019 estimated completion

• Boulevard Oaks Business Park (four building park) – 429,625 SF; 1Q 2019 estimated completion

112,500

VITAL STATS 7.0%

1,200,000 1,000,000

6.0%

800,000

5.0%

Property Photo: 521 Highway 90A, CoStar

LARGE EXISTING VACANCIES • 12200 Parc Crest Drive – 105,300 SF • 12315 Parc Crest Drive – 66,626 SF • 10650 W Airport Blvd – 66,626 SF • 13423 S Gessner Road – 58,240 SF

600,000 4.0% 400,000 3.0% 200,000 2.0%

0

1.0%

-200,000

0.0%

-400,000 Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Vacancy Source: CoStar

15

DALLAS

5950 Berkshire Lane Suite 900 Dallas, Texas 75225 T 972.241.8300 F 972.241.7955

FORT WORTH

300 Throckmorton Street Suite 550 Fort Worth, Texas 76102 T 817.710.1110 F 817.810.9017

www.holtlunsford.com

HOUSTON

11757 Katy Freeway Suite 250 Houston, Texas 77079 T 713.850.8500 F 713.850.8550