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Market Brief...

Houston

INDUSTRIAL

3Q19 Property Pictured Above: Easport Industrial Park | Houston, Texas 77032


HOUSTON INDUSTRIAL MARKET BRIEF 3Q 2019

WHY HLC’S HOUSTON INDUSTRIAL REPORT IS DIFFERENT At HLC, we believe that customer service and professional expertise are two of the cornerstones to delivering great service to our clients in the real estate industry. And in real estate, professional expertise is achieved largely by having excellent market knowledge. This month, you will receive several reports focusing on Houston’s industrial real estate. These reports will be filled with data and statistics, but will these numbers be the right numbers? Our market report stands apart because we track and analyze the data unlike most others. Our report contains only data and statistics for institutional-grade, dock-high and semi-dock buildings. Additionally, our report only tracks concrete tilt-wall and masonry buildings, which means all metal construction has been removed from our data set. While grade-level, metal, and manufacturing buildings play an important role in Houston’s industrial market, we believe they should be tracked separately from typical institutional-grade distribution warehouses. Another significant feature that sets our report apart is our submarket boundaries. We noticed that most of the standard submarket definitions used in CoStar and other market reports are not consistent with how the submarkets actually behave. For example, in East Houston, Interstate 10 serves as the boundary between the NE and SE submarkets in most other reports; but there are dozens of buildings that directly compete on both sides of the freeway. We believe submarkets should show a complete picture of the surrounding competitive set, so we created our own based not on arbitrary physical boundaries like roads or neighborhoods, but on which buildings actually compete against each other within a specific region of the Houston market. We hope you enjoy reading our report and find the information useful. If you have any questions, please don’t hesitate to call or email a member of our team.

Sincerely, The HLC Houston Industrial Team

3


HOUSTON INDUSTRIAL MARKET BRIEF 3Q 2019

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

FAR NORTH 1,637,034 SF

SPRING

GEORGE BUSH INTERCONTINENTAL AIRPORT

CYPRESS

HUMBLE

NORTH 33,454,011 SF

LAKE HOUSTON

NORTHWEST 75,771,257 SF MONT BELVIEU

NEAR EAST 20,248,785 SF BROOKSHIRE

KATY

HOUSTON

SOUTHWEST 25,496,581 SF

FAR WEST/KATY 12,947,727 SF

PORT AREA 41,169,542 SF

CBD 1,533,443 SF

BAY TOWN

SHIP CHANNEL

GALLERIA

MEDICAL CENTER

PASADENA LA PORTE HOBBY AIRPORT

SOUTH 21,289,790 SF

SUGAR LAND

ELLINGTON AIRPORT

RICHMOND

6

MISSOURI CITY

TRINITY BAY

HLC tracks statistics, facts, and figures for institutional-grade industrial and flex warehouses within the submarkets detailed above. PEARLAND


HLC HOU

INDUSTRIAL TRENDS & TRANSACTIONS HLC OUTLOOK

INDUSTRIAL MARKET EXPERTS

3Q 2019 saw market-wide vacancy increase to 9.6%. Vacancy has not been this high in Houston since 3Q 2011. It should be noted, however, that between 2009 and 2011 the vacancy rate generally stayed above 10% market-wide. So, we don’t see a reason to panic just yet. However, we will need strong absorption numbers in 4Q to prevent vacancy from reaching the double-digit mark by the end of the year. Most of the increase in vacancy can be attributed to delivery of new construction outpacing absorption. Houston continues to see a historically high amount of speculative construction with the majority occurring in the North and Port submarkets. The Northwest and Southwest submarkets are third and fourth respectively in square footage under construction at the close of 3Q. Annual net absorption for distribution space has averaged around 6 to 8M SF per year going back to 2012. With year-to-date net absorption standing at 4,754,961 SF at the close of 3Q, Houston will need a strong 4Q in order to outpace the historical average.

TRENDS & TRANSACTIONS KELLY LANDWERMEYER

JOHN KRUSE

Managing Principal klandwermeyer@hlhouston.com 713.602.3762

Market Director jkruse@hlhouston.com 713.602.3756

• The North, Port, Northwest, and Southwest submarkets are seeing the majority of Houston’s new industrial construction with the North and Port submarkets leading the way. • With all the new product set to be delivered this year, absorption will be a key indicator to gauge the overall health of the market. • The Near East submarket had a good third quarter, experiencing positive absorption for the first time in the last three quarters. • Willowbend Business Park, a 654,352 SF light industrial and flex project, was purchased by High Street Realty from DRA Advisors in August. • 18140 Kickapoo Road, a 479,806 SF distribution building in Waller, was purchased by Sealy & Co. from Broad-Ocean Motor.

Absorption

CRAIG BEAN Market Associate cbean@hlhouston.com 713.602.3752

vs. Prev. Qtr

vs. 12 Mths Ago

1,082,464

2,104,784

2,899,681

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

9.6%

8.7%

7.4%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

4,587,173

4,447,937

7,209,548

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

18,066,866

18,641,227

10,484,926

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

3,587,210

5,405,012

4,360,623

7


HLC HOU FACTS & FIGURES

OVERALL HOU

10.0%

6,000,000

9.5% 5,000,000

9.0% 8.5%

4,000,000

8.0% 7.5%

3,000,000

7.0% 2,000,000

6.5% 6.0%

1,000,000

5.5% 5.0%

Market

Existing Inventory

0

4.5%

Vacancy

(1,000,000)

4.0%

# Bldgs.

Total RBA

Direct SF

Total SF

Vac. %

Far West/Katy

67

12,947,727

713,906

758,723

5.9%

Northwest

792

75,771,257

7,980,419

8,596,551

11.3%

North

292

33,454,011

3,808,735

4,026,639

12.0%

Near East

168

20,248,785

1,206,215

1,338,261

6.6%

Port

144

41,169,542

2,892,452

3,166,869

7.7%

South

224

21,289,790

1,487,047

1,523,297

7.2%

Southwest

255

25,496,581

2,168,092

2,282,675

9.0%

Far North

21

1,637,034

161,320

191,320

11.7%

CBD

23

1,533,443

207,819

207,819

13.6%

Totals

1,986

233,548,170

20,626,005

22,092,154

9.6%

3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Absorption

2Q 18

3Q 18

4Q 18

1Q 19

2Q 19

Deliveries

3Q 19

Vacancy

VACANCY - OVERALL HOU 12.0%

7.6%

9.6%

10.0%

9.0%

8.0%

7.1%

6.0%

4.0%

2.0% 0.5%

0.6% 0.0%

3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Direct

2Q 18

3Q 18

4Q 18

1Q 19

Sublet

2Q 19

3Q 19

Total

ABSORPTION - OVERALL HOU 8,000,000 7,000,000 6,000,000

YTD Net Absorption

YTD Deliveries

Under Construction SF

YTD Leasing Activity

Far West/Katy

86,344

221,394

1,082,550

684,218

Northwest

181,083

2,113,044

3,608,910

4,851,753

North

1,609,009

3,534,123

5,227,530

2,167,684

Near East

(140,539)

0

702,295

1,412,244

Port

3,089,354

3,928,641

4,308,424

1,355,146

South

(428,786)

0

0

631,713

25,000,000

Southwest

338,969

1,683,377

3,137,157

902,258

20,000,000

Far North

9,527

0

0

22,905

15,000,000

CBD

10,000

0

0

84,151

10,000,000

Totals

4,754,961

11,480,579

18,066,866

12,112,072

5,000,000

Market

5,000,000 4,000,000 3,000,000

Source: CoStar

2,000,000 1,000,000 0 3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

2Q 18

Total Net

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

Leasing Activity

CONSTRUCTION - OVERALL HOU

0 3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

Delivered Inventory

8

1Q 18

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Under Construction

2Q 19

3Q 19


SUBMARKET INTELLIGENCE FAR WEST & KATY

VITAL STATS 14.0%

KATY

BROOKSHIRE

13.0%

1,300,000

12.0% 1,100,000

11.0%

12,947,727 SF

10.0%

900,000

9.0% 8.0%

700,000

7.0% 500,000

6.0% 5.0%

300,000

4.0%

HLC OUTLOOK HLC’s 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 benefits from rapid population growth in West Houston, Katy, and the 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 centers. Prominent tenants and users in this submarket include Medline, Goya Foods, Rooms-to-Go, Amazon, Costco, Academy Sports, and Igloo. Vacancy decreased slightly from 6.1% to 5.9% in 3Q. Vacancy is expected to increase with delivery of new developments currently under construction. It will be important to watch whether the larger tenants and users in this submarket decided on a build-to-suit to accommodate future growth versus leasing additional space in speculative buildings.

NEW DEVELOPMENTS • • • •

Costco (Owner Occupied) – 548,519 SF Clay 99 – a 433,200 SF project with Duke Realty Grand Parkway Commerce Center – a 371,900 SF project with First Industrial Cane Island Business Center – a 277,400 SF project with Insite Realty & Principal

LARGE EXISTING VACANCIES • 28429 West Ten Boulevard – 238K SF • 1039 Schlipf Road – 89,440 SF • 22370 Merchants Way – 45,835 SF

3.0%

100,000

2.0% 1.0%

(100,000) 3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Absorption

Absorption

2Q 18

3Q 18

4Q 18

1Q 19

Deliveries

vs. Prev. Qtr

2Q 19

3Q 19

Vacancy

vs. 12 Mths Ago

32,630

22,234

(23,459)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.9%

6.1%

7.8%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

552,342

97,919

274,573

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,082,550

1,082,550

742,274

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

89,440

673,785 Source: CoStar

9


SUBMARKET INTELLIGENCE NORTHWEST HOUSTON

SPRING

GEORGE BUSH INTERCONTINENTAL AIRPORT

VITAL STATS

12.0%

HUMBLE

CYPRESS

1,100,000

11.0% 10.0%

75,771,257 SF

600,000

9.0% 100,000

8.0% 7.0%

-400,000

6.0% 5.0%

-900,000

4.0% 3.0%

-1,400,000 3Q 16

4Q 1Q 2Q 16 17 17 Absorption

Absorption

3Q 17

4Q 17

1Q 2Q 18 18 Deliveries

vs. Prev. Qtr

3Q 18

4Q 18

1Q 19

2Q 3Q 19 19 Vacancy

vs. 12 Mths Ago

485,608

(455,660)

364,026

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

11.3%

11.4%

9.7%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,734,075

1,768,460

2,160,147

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

3,608,910

3,275,327

1,906,706

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

484,441

584,530

942,333 Source: CoStar

10

KATY

HOUSTON

HLC OUTLOOK With more than 75M SF of existing product, HLC’s Northwest industrial submarket is far and away the largest of the seven major submarkets HLC tracks in Houston. Geographically located north of Interstate 10, along the Highway 290 and West Sam Houston Parkway corridors, the submarket offers somewhat of a “main and main” location for industrial tenants. With easy access to a large population base, it is ideal for e-commerce and last-mile delivery businesses, as well as businesses that service household needs such as plumbing, flooring, cabinet, and other various building supply-related items. The vacancy rate in the submarket currently sites at 11.3%. If we were to include non-institutional product in our analysis (i.e. metal manufacturing buildings), that number would decrease significantly. But there is no question that there are large blocks of vacancy within the institutional-quality industrial data set in Northwest Houston right now and that is what is causing the high vacancy factor. With a number of large lease deals in the market currently, we expect absorption to outperform the historical average in 4Q, which will be needed in order to keep up with the 3.6M SF of new construction currently in the pipeline.

NEW DEVELOPMENTS • Grand National Business Park – a 1,286,740 SF project with Hines • Sam Houston Distribution Center – a 833,720 SF project with Transwestern • 249 Business Park – a 806,360 SF project with Panattoni • 290 Northwest Business Center – a 136,651 SF project with Molto Properties

LARGE EXISTING VACANCIES • • • •

9800 Derrington Road – 368,467 SF 4414 Hollister Road – 234,215 SF 10610 Telge Road – 203,060 SF 12202 Cutten Road – 194,602 SF


SUBMARKET INTELLIGENCE NORTH HOUSTON

TOMBALL

SPRING

GEORGE BUSH INTERCONTINENTAL AIRPORT

VITAL STATS

HUMBLE

LAKE HOUSTON

17 .0% 16.0%

33,454,011 SF

1,600,000

15.0% 14.0%

HOUSTON

13.0%

1,100,000

12.0% 11.0%

HLC OUTLOOK HLC’s North industrial submarket is currently home to approximately 33.5M SF of existing product and just over 5M SF of product under construction/capitalized.

600,000

10.0% 9.0% 100,000

8.0% 7.0%

(400,000)

6.0% 3Q 16

Year-to-date net absorption has been positive in the North submarket at more than 1.6M SF at the close of 3Q. However, vacancy has crept up into double digits due to the supply of new construction coming online. During 3Q, there was approximately 1.4M SFof new product delivered. Almost half of that total was one project, Air 59 Logistics Center – a 685,400 SF building with USAA, which had yet to be leased at the close of 3Q.

NEW DEVELOPMENTS • Air 59 Logistics Center – a 685,400 SF building with Archway Property, Ridgeline, and USAA • Layne Crossing – a 529,034 SF building with Crow Holdings • Cypress Preserve Logistics Center – a 515,780 SF building with Davis Commercial Development • Ella Logistics Center – a 504,595 SF building with Hines • Reeds Landing Business Park – a 363,182 SF building with Exeter Property Group

LARGE EXISTING VACANCIES • • • •

Air 59 Logistics Center – 685,400 SF 8221 Volta Drive (Point North Three) – 337,700 SF 121 Esplanade Boulevard – 244,550 SF 10484 Greens Crossing Boulevard – 239,814 SF

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Absorption

Absorption

2Q 18

3Q 18

4Q 18

1Q 19

Deliveries

vs. Prev. Qtr

2Q 19

3Q 19

Vacancy

vs. 12 Mths Ago

17,542

1,622,237

490,020

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

12.0%

8.3%

7.7%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

664,411

661,277

1,699,313

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

5,227,530

5,984,945

1,718,900

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,387,714

1,826,714

Source: CoStar

11


SUBMARKET INTELLIGENCE NEAR EAST HOUSTON

VITAL STATS

20,248,785 SF

8.0%

300,000

7.0%

HOUSTON

200,000

6.0% SHIP CHANNEL

100,000

5.0% 4.0%

0 PASADENA

MEDICAL CENTER

3.0%

(100,000)

2.0% (200,000)

1.0% 0.0%

(300,000) 3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Absorption

Absorption

2Q 18

3Q 18

4Q 18

1Q 19

2Q 19

Deliveries

vs. Prev. Qtr

3Q 19

Vacancy

vs. 12 Mths Ago

106,546

(198,315)

(143,680)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.6%

7.1%

6.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

373,904

854,237

848,415

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

702,295

702,295

-

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

Source: CoStar

12

HLC OUTLOOK The majority of institutional-grade product in HLC’s Near East submarket was constructed during the 1970’s and 1980’s. With limited new construction since that time, average product age in this submarket is one of the oldest in Houston. Historically, this was the lowest priced submarkets in Houston and attracted price-sensitive users accordingly. In particular, this submarket appealed to third-party logistics companies. Because this submarket also featured widespread rail infrastructure and proximity to the Port, it was the preferred submarket for plastic resin repackagers, though that has diminished in recent years in favor of the Port submarket. This submarket has undergone significant changes over the past several years. Due to tight market conditions with vacancy rates under 3%, second generation rents increased to historically high levels. While still a value option for tenants, the discount compared to other Houston submarkets and to new construction is significantly less than what it has been. This has led to a number of tenants, particularly those Port related, to leave the Near East submarket in favor of the Port submarket. Though rents for the newer product in the Port submarket are higher, those costs are offset by lower drayage expenses. Submarket vacancy stood at a mere 3.3% only three years ago. During the subsequent 12 quarters, the submarket has posted positive absorption only four times, with the remaining eight quarters registering negative absorption. This submarket registered positive absorption during 3Q, resulting in a reduction of the vacancy rate to 6.6%. There are two new developments under construction which will add 702,295 SF of product. This, combined with current vacancies and anticipated move-outs, such as Conn’s (353,910 SF), will provide headwinds for this submarket in the short run.

NEW DEVELOPMENTS • Houston Tradeport – a 526,094 SF project with NorthPoint Development • Near East Distribution Center – a 176,201 SF project with Phelan-Bennett Development and Nuveen

LARGE EXISTING VACANCIES • • • • •

8705 Citypark Loop – 191,569 SF 200 Portwall – 140K SF 8786 Wallisville – 137,368 SF 1040 Lockwood – 118,849 SF 8503 Citypark Loop – 114K SF


SUBMARKET INTELLIGENCE PORT AREA

MONT BELVIEU

HOUSTON

41,169,542 SF

VITAL STATS

BAY TOWN

SHIP CHANNEL

GALLERIA

10.0%

PASADENA

MEDICAL CENTER

3,000,000

LA PORTE

9.0%

HOBBY AIRPORT

2,500,000

8.0% ELLINGTON AIRPORT TRINITY BAY

PEARLAND

6.0%

HLC OUTLOOK

The submarket is youthful compared to other submarkets with much of the stock constructed in the last 15 years propelled by the opening of the Bayport Container Terminal. Drivers for this submarket include third party logistics providers (plastic resin repackagers in particular), downstream energy service providers, and retail (ex. Walmart, Home Depot, Ikea). The vacancy rate increased substantially during 3Q to 7.7% as deliveries continued to outpace absorption. This is the highest vacancy rate over the past three years. The robust new development pipeline in this submarket will continue to provide headwinds on vacancy in the near term. The availability rate (currently vacant plus product under construction) is well above 10%.

• Bay Area Business Park Phase III – a 1.3M SF project with Principal • Cedar Port Logistics – a 644K SF project with Avera & AEW • Bayport South – a 642K SF project with Panattoni / Met Life • Cedar Port Phase III – a 352K SF project with Clay Development

1,500,000

5.0%

HLC’s Port industrial submarket is strategically located in close proximity to the Port of Houston’s container terminals, extensive network of refineries and downstream chemical plants, and a widespread multi-modal transportation infrastructure including rail. The submarket allows for quick access to both the Barbours Cut and the Bayport container terminals where inbound and outbound container shipments enter or exit the Houston market.

NEW DEVELOPMENTS

2,000,000

7.0%

LARGE EXISTING VACANCIES • 4600 Underwood Road – 402,648 SF • 2851 E Pasadena Boulevard – 349,050 SF • 13031 Bay Area Boulevard – 296,400 SF • 4121 Malone Drive – 274,479 SF • 1770 East Freeway – 260,148 SF

1,000,000

4.0% 3.0%

500,000

2.0% 0

1.0% 0.0%

(500,000) 3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Absorption

Absorption

2Q 18

Deliveries

vs. Prev. Qtr

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

Vacancy

vs. 12 Mths Ago

271,046

1,453,829

1,581,293

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

7.7%

5.9%

4.0%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

344,496

478,222

740,486

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

4,308,424

4,689,253

4,101,441

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,088,707

1,847,604

2,189,969 Source: CoStar

13


SUBMARKET INTELLIGENCE SOUTH HOUSTON

HOUSTON SHIP CHANNEL

GALLERIA

VITAL STATS

PASADENA

MEDICAL CENTER

8.0%

200,000

21,289,790 SF

100,000 6.0%

HOBBY AIRPORT

0 ELLINGTON AIRPORT

(100,000) 4.0%

2.0%

(400,000) 3Q 16

Absorption

4Q 1Q 2Q 16 17 17 Absorption

3Q 17

4Q 17

1Q 2Q 18 18 Deliveries

vs. Prev. Qtr

3Q 18

4Q 18

1Q 19

2Q 3Q 19 19 Vacancy

vs. 12 Mths Ago

27,831

(360,313)

(128,044)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

7.2%

7.4%

4.6%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

358,879

146,294

691,846

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

-

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

Source: CoStar

14

PEARLAND

(200,000) (300,000)

-

MISSOURI CITY

HLC OUTLOOK HLC’s South industrial 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 a wide range of health care providers. Geographically, the submarket stretches from just north of Loop 610 S to Beltway 8. With just over 20M SF of product, this submarket is the third smallest of the seven major submarkets HLC tracks in Houston. Large portions of this area have not been developed yet, making this submarket potentially the least land constrained. However, due to the lack of population growth relative to the western submarkets, there has not been a strong demand for new development in this area. At the close of 3Q 2019, vacancy was 7.2% percent, a slight decrease from the previous quarter. Absorption for 3Q 2019 was positive at 27,831 SF.

LARGE EXISTING VACANCIES • 411 Brisbane Street – 345,100 SF • 750 Almeda Genoa – 230,882 SF • 5055 South Loop Freeway – 223,400 SF • 3110 Corder Street – 109,500 SF • 5901 Griggs – 101,707 SF • 7449 E Orem Drive – 100K SF


SUBMARKET INTELLIGENCE SOUTHWEST HOUSTON

HOUSTON

24,686,083 SF GALLERIA

VITAL STATS

MEDICAL CENTER

10.0%

1,200,000

9.0% SUGAR LAND

1,000,000

8.0% 800,000

7.0% RICHMOND

MISSOURI CITY

6.0%

600,000

5.0%

HLC OUTLOOK

400,000

4.0%

HLC’s Southwest industrial submarket encompasses most of Southwest Houston outside of Loop 610, stretching from the Westchase area to the north, all the way south to the cities of Stafford and Sugar Land located in Fort Bend County. The submarket has seen steady growth in new construction over the last several years and it continues to increase with new speculative projects breaking ground during 1Q, 2Q, and 3Q along the Sam Houston Parkway. The business-friendly local governments in Fort Bend County and available Triple Freeport Tax Exemption are two big reasons why we’ve seen so much activity in the Southwest submarket. Furthermore, the labor demographics in the area are excellent and rapid population growth, which has been the norm for over a decade in Fort Bend County, is expected to continue in this region.

3.0%

200,000

2.0% 0

1.0% 0.0%

(200,000) 3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Absorption

Absorption

2Q 18

Deliveries

vs. Prev. Qtr

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

Vacancy

vs. 12 Mths Ago

Vacancy was 9% percent at the close of 3Q. The significant increase in vacancy from 2Q is largely due to 1,683,377 SF of new construction deliveries during 2Q and 3Q. The storyline to watch will be how much of this new construction supply will be absorbed in the coming quarters.

176,518

85,019

837,565

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

9.0%

7.4%

5.9%

NEW DEVELOPMENTS

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

• Waypoint Business Park – a 708,944 SF project with 4M Investments and Clarion • Southwest Commerce Center – a 477,355 SF project with Transwestern Investment Group • City Park Logistics Center – a 438,202 SF project with Logistics Property Co. • Stafford Crossing – a 334,200 SF project with Transwestern and AEW

• Sugar Land Distribution Center – a 315,892 SF project with Johnson Development

LARGE EXISTING VACANCIES • • • •

611 Cravens Road – 477,355 SF 1111-1113 Gillingham – 266,663 SF 631 Buffalo Lakes Drive – 196,769 SF 13323 South Gessner Road – 141,440 SF

264,257

357,265

751,837

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

3,137,157

3,057,857

1,106,980

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

626,348

1,057,029

554,536 Source: CoStar

15


DALLAS

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

FORT WORTH

1200 Summit Avenue Suite 300 Fort Worth, Texas 76102 T 817.710.1110 F 817.810.9017

www.holtlunsford.com

HOUSTON

11451 Katy Freeway Suite 300 Houston, Texas 77079 T 713.850.8500 F 713.850.8550

Profile for Holt Lunsford Commercial

3Q 2019 Houston Industrial Market Brief  

Read about current deals in the market, trends & transactions, and submarkets from our experts!

3Q 2019 Houston Industrial Market Brief  

Read about current deals in the market, trends & transactions, and submarkets from our experts!