Strong Second Quarter Pushes Houston’s Mid-Year Industrial Leasing Activity to 6.7M SF
Houston’s industrial market remains one of the top ten healthiest U.S. Industrial Markets with low vacancy, stable rental rates and positive absorption. Houston posted 1.8 MSF of positive net absorption in the second quarter pushing the year-to-date total to 3.0 MSF. Leasing activity reached 3.8 MSF in the second quarter pushing the mid-year total to 6.7 MSF. Houston’s average industrial vacancy rate decreased from 5.3% to 5.1% in the second quarter. The overall average quoted industrial rental rate decreased from $5.51 to $5.50 per SF NNN between quarters, but increased by 3.0% on a year-over-year basis from $5.34 per SF NNN.
Houston’s lack of available industrial inventory has spurred demand for new product. Developers have responded to the demand and currently have over 2.3 MSF under construction. Much of the increased activity has been driven by build-to-suit projects for companies expanding in and relocating to the Houston market; however, there is now more spec development, 1.4 MSF, than build-to-suit at this time. As Houston’s available industrial inventory shrinks, we believe the demand for new projects will continue to increase, both for build-to-suit and spec development.
The Houston metropolitan area added 88,000 jobs between May 2011 and May 2012, an annual increase of 3.4%. Unemployment fell to 6.9% from 8.1% one year ago. Houston area home sales increased by 23.8% compared to May 2011 sales. With continued expansion in the energy industry and a strong housing market, Houston’s economy is expected to remain healthy for both the near and long-term.