Houston’s Industrial Market Remains Healthy

by CoyDavidson on April 30, 2013

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Houston Industrial Market Research – Q1 2013

Houston’s industrial market remains one of the ten healthiest U.S. industrial markets because of its low vacancy, stable rental rates and positive absorption. Houston posted 1.3M SF of positive net absorption in the first quarter, slightly less than the previous quarter.  Leasing activity reached 3.3M SF in the first quarter, the same amount as the previous quarter.  Houston’s average industrial vacancy rate remained at 5.0%, between quarters, due to 1.1M SF of new inventory deliveries. The overall average quoted industrial rental rate increased from $5.59 to $5.62 per SF NNN between quarters, and increased by 2.0% on a year-over-year basis from $5.51 per SF NNN at the end of 2012.

Houston’s lack of available industrial inventory has spurred demand for new product.  Developers have responded and currently have 2.7M SF under construction.  Much of the increased activity has been driven by build-to-suit projects for companies expanding in or relocating to the Houston market; however, there are now more spec developments (1.7M SF) than build-to-suit projects. As Houston’s available industrial inventory shrinks, we believe the  increasing demand for new product will continue to spur both build-to-suit and spec development.

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The Houston metropolitan area added 118,700 jobs between February 2012 and February 2013, an astounding annual increase of 4.5% over the prior year’s job growth.  Further, Houston’s unemployment fell to 6.3% from 7.3% one year ago, which bolstered annual Houston area home sales by 17.1%. With continued expansion in the energy industry and a strong housing market, Houston’s economy is expected to remain healthy in both the near and long-term.

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