Houston s Industrial Market Adds 2.5M SF of New Inventory In First Half of 2013 Vacancy Remains at 5.0% Houston

Size: px

Start display at page:

Download "Houston s Industrial Market Adds 2.5M SF of New Inventory In First Half of 2013 Vacancy Remains at 5.0% Houston"

Valentine Nigel Bridges
5 years ago
Views:

Q2 2013 INDUSTRIAL MARKET HOUSTON INDUSTRIAL MARKET RESEARCH & FORECAST REPORT Houston s Industrial Market Adds 2.5M SF of New Inventory In First Half of 2013 Remains at 5.

1M SF UNDER CONSTRUCTION 2.7M 4.3M JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted) Houston s industrial market remains one of the top ten healthiest U.S. industrial markets because of its low vacancy, stable rental rates, and positive absorption.

Houston s average industrial vacancy rate increased from 5.0% to 5.1% between quarters, but decreased by 30 basis points over the past year.

72 per SF NNN in second quarter 2012. Houston s lack of available industrial inventory has spurred demand for new product. Developers have responded and currently have 4.3M SF under construction.

1 Q INDUSTRIAL MARKET HOUSTON INDUSTRIAL MARKET RESEARCH & FORECAST REPORT Houston s Industrial Market Adds 2.5M SF of New Inventory In First Half of 2013 Remains at 5.0% Houston HOUSTON INDUSTRIAL MARKET INDICATORS Q Q CITYWIDE NET ABSORPTION (SF) 2.4M 336K CITYWIDE AVERAGE VACANCY 5.4% 5.1% CITYWIDE AVERAGE RENTAL RATE $5.49 $5.72 SF DELIVERED 1.1M 1.1M SF UNDER CONSTRUCTION 2.7M 4.3M JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted) Houston s industrial market remains one of the top ten healthiest U.S. industrial markets because of its low vacancy, stable rental rates, and positive absorption. Houston posted 336,000 SF of positive net absorption in the second quarter, bringing yeartodate net absorption to 2.6M SF. Industrial leasing activity reached 3.3M SF, mostly due to large renewals. Houston s average industrial vacancy rate increased from 5.0% to 5.1% between quarters, but decreased by 30 basis points over the past year. The citywide average quoted industrial rental rate increased by only one cent to $5.72 per SF NNN between quarters, and increased by 4.2% on a yearoveryear basis from $5.49 to $5.72 per SF NNN in second quarter Houston s lack of available industrial inventory has spurred demand for new product. Developers have responded and currently have 4.3M SF under construction. Some of the increased activity has been driven by buildtosuit projects for companies expanding in or relocating to the Houston market; however, most of the space under construction is in spec developments (4.0M SF). As Houston s available industrial inventory shrinks, we believe the increasing demand for new product will continue to spur both buildtosuit and spec development. The Houston metropolitan area added 91,600 jobs in the year ending May 2013, an annual increase of 3.4% over the prior year s job growth. Further, Houston s unemployment fell to 6.4% from 6.8% one year ago, while Houston area home sales increased significantly, growing by 28.0% over the year. With continued expansion in the energy industry, Houston s economy is expected to remain healthy for both the near and longterm. ABSORPTION, NEW SUPPLY & VACANCY RATES UNEMPLOYMENT 5/12 5/13 HOUSTON 6.8% 6.4% TEXAS 6.8% 6.5% U.S. 7.9% 7.3% JOB GROWTH ANNUAL CHANGE # OF JOBS ADDED HOUSTON 3.4% 91.6K TEXAS 2.7% 297.9K U.S. 1.2% 1.7M 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , ,000 8% 7% 6% 5% 4% 3% 2% Absorption New Supply

2 & Availability Although 1.0M SF of new inventory delivered during the second quarter, Houston s industrial vacancy rate only increased from 5.0% to 5.1% between quarters. The average industrial vacancy rate decreased by 30 basis points from 5.4% reported in the second quarter At the end of the second quarter, Houston had 24.5M SF of vacant industrial space citywide, 700K SF more than the previous quarter. Among the major industrial corridors, the Southeast Corridor has the largest amount of vacant space with 5.2M SF (6.7% vacancy), followed by the North Corridor with 4.7M SF vacant (6.4% vacancy), the Northwest Corridor with 4.4M SF vacant (3.4% vacancy), and the Southwest Corridor with 3.7M SF vacant (5.8% vacancy). Houston s industrial construction pipeline had 4.3M SF of projects underway at the end of the second quarter, including 4.0M SF of spec development. The largest project under construction is a 3building, 611,000SF spec distribution warehouse complex located in North Houston at Imperial Valley Dr. and FM 1960, near George Bush Intercontinental Airport. A list of additional buildings currently under construction can be found on Page 4 of this report. The largest buildtosuit project in the pipeline is a 181,900SF office/warehouse located on Central Green Boulevard in North Houston. GAC Energy & Marine Services will occupy the building which will be completed in third quarter Rental s Houston s citywide average quoted industrial rental rate for all product types increased from $5.71 to $5.72 per SF NNN in the second quarter, and increased by 4.2% on a yearoveryear basis from $5.49 per SF NNN. By property type, the average quoted NNN rental rates are as follows: $5.38 per SF for Distribution space; $4.44 per SF for Bulk Logistics space; $8.10 per SF for Flex/Service space; with Tech/R&D space averaging $10.77 per SF. Absorption & Demand Houston s industrial market posted 336,000 SF of positive net absorption in the second quarter, bringing the 2013 yeartodate total to 2.6M SF of positive net absorption. The Northwest and Inner Loop Corridor submarkets outperformed all others in the second quarter, posting the largest positive net quarterly absorption of 408K SF and 248K SF respectively. There were several major tenant moveins contributing to net absorption gains in the second quarter, including Deep Down, Inc. (215,000 SF); Mattress One (46,800 SF); Office Pavilion (44,000 SF); Aluminum Screen Manufacturers, Inc. (40,600 SF); and Utilitech Power Products, LLC ( 16,960 SF). Leasing Houston s industrial leasing activity reached 3.2M SF in the second quarter. A list of select second quarter industrial lease transactions are included in the table below. Q Top Industrial Leases Building Name/Address Submarket SF Tenant Lease Date 6400 Hollister Northw est Near 222,000 Krausz Houston One, LLC 1,2 Jun Beaumont Hw y Northeast Hw y ,000 Deep Dow n, Inc. Jun Hightw ay 225 EastSE Far 210,000 Jacobson Warehouse Co 2 Jun13 88 Jensen Dr Bldg B CBD 124,810 DSI Logistics 2 Apr Citypark Loop Northeast Hw y ,000 Exel 2 Apr W Crosstimbers Northw est Near 91,860 Crosstimbers AB Mayfield, LLC 1,2 May Air Center Blvd North Hardy Toll Rd 64,800 Crane Worldw ide Apr W Litlle York Rd Bldg 2 Northw est Inner Loop 44,000 Office Pavilion Apr E I10 Fw y Southeast Outer Loop 40,000 Rock Wool Manufacturing Company 2 Apr Bluff Point Dr North Fw y/tomball Pky 39,278 The New dell Company 3 Apr Mesa Northeast Hw y 90 39,058 T&B Master Logistics Apr West Little York Northw est 36,000 Freudenberg Oil & Gas Jun New Decade Dr EastSE Far 32,000 Furmanite America, Inc Apr13 Eastport 6 Southeast Outer Loop 31,165 Blickman, Inc. 2 May Rogerdale Southw est Outer Loop 28,846 Blue Line Foodservice Distribution Apr13 Willow bend Distribution Center Southw est Far 26,453 Pfillo, LLC Apr13 1 Colliers International transaction 2 Renewal 3 Expansion COLLIERS INTERNATIONAL P. 2

Sales Activity Q2 2013 Total Volume: $410.6M No. of Properties: 91 Total SF: 10.9M Average $/SF: $58 Average Cap : 8.

Two of the sales transactions that occurred in Q2 2013 are summarized at right. Sources: Real Capital Analytics; CoStar Comps TA Associates sold the 1.

3 Sales Activity Q Total Volume: $410.6M No. of Properties: 91 Total SF: 10.9M Average $/SF: $58 Average Cap : 8.1% Houston industrial sales activity remained steady between quarters with 91 property sales recorded in Q2 2013, compared to 90 in Q Two of the sales transactions that occurred in Q are summarized at right. Sources: Real Capital Analytics; CoStar Comps TA Associates sold the 1.1M SF, 6 building City Park East Industrial Portfolio to CenterPoint Properties for $42.6M or $40 per SF. The bulk industrial space, located in the Northeast Industrial Submarket, is railserved and 100% leased to Exel Logistics. Northstar Commercial Partners sold a 201,500SF Class B industrial warehouse to STAG Industrial Management for $13.6M or $67 per SF. The property was 100% leased by CTS on a triple net lease with approximately 8.5 years remaining on the lease term. The property traded at an 8.25% cap rate. Houston Industrial Market Summary Market Rentable Area Direct Direct Houston Industrial Market Statistical Summary 2nd Quarter 2013 Sublet Sublet Total Total 2Q13 Net Absorption YTD 2013 Net Absorption 2Q13 Completions YTD 2013 Completions SF Under Construction Greater Houston Total 478,412,510 23,587, % 529, % 24,517, % 336,116 2,599,666 1,058,764 2,542,228 4,259,723 CBDNW Inner Loop 11,661, , % 22, % 658, % 92, ,896 Downtown 31,715,138 1,870, % 0.0% 1,870, % 169,920 (14,492) North Inner Loop 5,068, , % 0.0% 451, % SW Inner Loop 7,791, , % 0.0% 123, % (14,544) 10,546 Total Inner Loop 56,236,745 3,081, % 22, % 3,103, % 248,024 96,950 North Fwy/Tomball Pky 15,696,110 1,372, % 10, % 1,382, % (195,160) 80,357 44, , ,742 North Hardy Toll Rd 26,018,056 1,559, % 44, % 1,603, % (88,400) 78, , ,637 1,823,971 North Outer Loop 18,051,301 1,089, % 0.0% 1,089, % 104,038 (3,733) 98,391 98, ,391 The Woodlands/Conroe 13,827, , % 0.0% 647, % 56, ,943 74,901 94,901 20,432 Total North Corridor 73,593,221 4,669, % 54, % 4,723, % (123,041) 263, ,264 1,137,201 2,158,536 Northeast Hwy 321 1,238,145 27, % 0.0% 27, % (18,240) (18,240) Northeast Hwy 90 16,042, , % 129, % 406, % (4,973) 51,227 20,000 Northeast I10 3,634, , % 0.0% 136, % (16,647) 13,622 21,000 Northeast Inner Loop 11,561, , % 0.0% 558, % (50,499) 177,501 Total Northeast Corridor 32,476,395 1,000, % 129, % 1,129, % (90,359) 224,110 41,000 Hwy 290/Tomball Pky 15,106, , % 0.0% 809, % (139,611) (13,400) 20,000 94, ,175 Northwest Hwy 6 4,134, , % 0.0% 111, % (15,100) 8,824 Northwest Inner Loop 58,682,885 1,944, % 96, % 2,040, % 349, , ,000 Northwest Near 16,471, , % 61, % 733, % 21,482 24,421 18,000 18, ,840 Northwest Outlier 13,354, , % 0.0% 363, % 111, , , ,749 West Outer Loop 22,837, , % 6, % 319, % 80, ,076 22,500 58,250 25,000 Total Northwest Corridor 130,587,272 4,213, % 163, % 4,377, % 408,322 1,437,476 60, ,584 1,576,764 South Highway 35 30,570,223 1,058, % 23, % 1,082, % (1,499) 92,794 10,672 83,000 South Inner Loop 13,132, , % 0.0% 786, % (60,124) (111,673) Total South Corridor 43,702,498 1,844, % 23, % 1,868, % (61,623) (18,879) 10,672 83,000 East I10 Outer Loop 13,494, , % 0.0% 195, % (74,000) (79,600) EastSE Far 46,010,653 4,417, % 14, % 4,431, % 52, , , ,462 SE Outer Loop 19,171, , % 0.0% 609, % (88,245) (236,652) Total Southeast Corridor 78,676,564 5,222, % 14, % 5,236, % (109,416) (23,420) 292, ,462 Highway 59/Highway 90 21,563, , % 50, % 874, % 77, , , ,000 Southwest Far 10,345, , % 0.0% 809, % 72,148 87,767 45,961 Southwest Outer Loop 12,654, , % 4, % 790, % (13,670) 105,537 Fort Bend County/Sugar Land 18,576,354 1,135, % 68, % 1,204, % (71,946) 153,138 30,000 60,000 30,000 Total Southwest Corridor 63,139,815 3,555, % 123, % 3,678, % 64, , , ,000 75,961 COLLIERS INTERNATIONAL P. 3

4 Q Industrial Under Construction 30,000 SF or greater % Pre Estimated Submarket Building Address RBA Leased Developer Delivery Building Description North Hardy Toll Rd Imperial Valley FM , % Sowell Interest Imperial Dec13 Spec Warehouse/ Distribution Northwest Outliers I10 & Highway , % Cushman & Wakefield Sep13 Spec Warehouse/Distribution Northwest Near 7310 Langfield Bldg , % Avera Companies Jul13 Spec Distribution Warehouse North Hardy Toll Rd 110 Airtex Dr 267, % DCT Industrial Trust Aug13 Spec Office/Warehouse North Hardy Toll Rd 8310 Humble Westfield Rd 240, % Duke Realty Sep13 Spec Office/Warehouse EastSoutheast Far 3750 Highway , % The Carson Companies Sep13 Spec Distribution Warehouse North Hardy Toll Rd Central Green Blvd 181, % Liberty Property Trust Sep13 BTS Office/Warehouse for GAC Energy & Marine Services North Hardy Toll Rd 500 Northpark Central Dr 174, % Prologis Inc. Jul13 Spec Office/Warehouse North Hardy Toll Rd 500 Northpark Central Dr 174, % Prologis Inc. Jul13 Spec Office/Warehouse North Hardy Toll Rd Heathrow Forest Pky 121, % Wolff Properties Aug13 BTS Office/Manufacturing/ Distribution for Suhm Spring Works, Inc. Northwest Outliers Park Row Dr 121, % Transwestern Sep13 Spec Office/Warehouse EastSoutheast Far 3700 Highway , % The Carson Companies Sep13 Spec Office/Warehouse North Hardy Toll Rd 4730 Consulate Plaza Dr 101, % EastGroup Properties Aug13 Spec Office/Warehouse North Fwy/Tomball Pky Spring Plaza Dr 83, % Unknown Jul13 BTS Distribution Truck Terminal Northwest Outliers Park Row Rd 79, % Transwestern Sep13 Spec Office/Warehouse Northwest Inner Loop 1315 W Sam Houston Pky N Bldg 70, % Caldwell Companies Jul13 Spec Warehouse Distribution Northwest Outliers Merchants Way 67, % InSite Commercial Real Estate Sep13 Spec Office/Warehouse North Fwy/Tomball Pky 1050 Greens Pky 67, % Liberty Property Trust Dec13 Spec Office/Warehouse Northwest Outliers Park Row Dr 64, % Transwestern Sep13 Spec Office/Warehouse EastSoutheast Far 3800 Highway , % The Carson Companies Sep13 Spec craneserved Office/Warehouse Northwest Outliers 1550 Westborough Dr 56, % Lin & Sons Enterprises Inc. Dec13 Spec Office/Warehouse North Hardy Toll Rd 4741 World Houston Pky 56, % EastGroup Properties Aug13 Spec Office/Warehouse South Hwy Mowery Rd Bldg A 53, % Colliers International Jul13 Spec Office/Warehouse North Hardy Toll Rd 4740 Consulate Plaza Dr 50, % EastGroup Properties Aug13 BTS Office/Warehouse Northwest Outliers Merchants Way 45, % InSite Commercial Real Estate Sep13 Spec Office/Warehouse North Hardy Toll Rd 4721 World Houston Pky 45, % EastGroup Properties Sep13 Spec Office/Warehouse Northwest Outliers Park Row Dr 45, % Transwestern Sep13 Spec Office/Warehouse North Fwy/Tomball Pky 7047 W Greens Rd 40, % Clay Development Nov13 Spec Office/Warehouse Northwest Inner Loop 1315 W Sam Houston Pky N Bldg 2 40, % Caldwell Companies Jul13 Spec Warehouse Distribution Northwest Inner Loop 1315 W Sam Houston Pky N Bldg 3 40, % Caldwell Companies Jul13 Spec Warehouse Distribution South Hwy Saber Power Ln 30, % TXI Operations Dec13 Spec Office/Warehouse Q Industrial Deliveries 25,000 SF or greater Submarket Cluster Submarket Building Address RBA % Leased Developer Delivered Southwest Corridor Ind Hwy 59/Hwy S Cravens Rd 475, % Ben E. Keith Foods Jun13 North Corridor Ind North Hardy Toll Rd 100 Northpark Central Dr Bldg , % ProLogis Jun13 North Corridor Ind North Hardy Toll Rd 250 Century Plaza Dr 91, % Avera Companies Jun13 North Corridor Ind Woodlands/Conroe 4001 Technology Forest Blvd 74, % Stream Realty Partners, L.P. Jun13 North Corridor Ind North Outer Loop Vickery Dr 41, % Clay Development & Construction Jun13 Southwest Corridor Ind Southwest Far 1145 Highway 90 A 38, % Jacob Realty Group Jun13 North Corridor Ind North Hardy Toll Rd 1368 E Richey Rd 33, % Northwinds Commercial Jun13 North Corridor Ind North Outer Loop 4641 Kennedy Commerce Dr 31, % Clay Development & Construction Jun13 Southwest Corridor Ind Fort Bend Co/Sugar Land FM , % Moody Rambin Interests May13 North Corridor Ind North Fwy/Tomball Pky Ind 6811 Willowbrook Park Dr 26, % Capital Commercial Investments, May13 North Corridor Ind North Outer Loop 6010 Dwyer Dr 25, % Nobel House Real Estate Jun13 North Corridor Ind North Outer Loop 4615 Kennedy Commerce Dr 25, % Clay Development & Construction Jun13 COLLIERS INTERNATIONAL P. 4

The Colliers Advantage Enterprising Culture Colliers International is a leader in global real estate services, defined by our spirit of enterprise.

When you choose to work with Colliers, you choose to work with the best. In addition to being highly skilled experts in their field, our people are passionate about what they do.

This is evident throughout our platform from Colliers University, our proprietary education and professional development platform, to our client engagement strategy that encourages crossfunctional

5 The Colliers Advantage Enterprising Culture Colliers International is a leader in global real estate services, defined by our spirit of enterprise. Through a culture of service excellence and a shared sense of initiative, we integrate the resources of real estate specialists worldwide to accelerate the success of our partners. When you choose to work with Colliers, you choose to work with the best. In addition to being highly skilled experts in their field, our people are passionate about what they do. And they know we are invested in their success just as much as we are in our clients success. This is evident throughout our platform from Colliers University, our proprietary education and professional development platform, to our client engagement strategy that encourages crossfunctional service integration, to our culture of caring. We connect through a shared set of values that shape a collaborative environment throughout our organization that is unsurpassed in the industry. That s why we attract top recruits and have one of the highest retention rates in the industry. Colliers International has also been recognized as one of the best places to work by top business organizations in many of our markets across the globe. Colliers International offers a comprehensive portfolio of real estate services to occupiers, owners and investors on a local, regional, national and international basis. LISA R. BRIDGES Director of Market Research Houston Direct Fax lisa.bridges@colliers.com COLLIERS INTERNATIONAL 1223 W. Loop South Suite 900 Houston, Texas Main Accelerating success. COLLIERS INTERNATIONAL P. 5

Houston s industrial market added 11.2M SF of new inventory and absorbed 9M SF in 2018

Research & Forecast Report HOUSTON INDUSTRIAL Houston s industrial market added 11.2M SF of new inventory and absorbed 9M SF in 2018 Lisa Bridges Director of Market Research Houston Houston s industrial