July 6, 2017
By: Jeff Venghaus, executive vice president and industrial lead, JLL Houston
Houston is rising as a big-box market thanks to strong population growth and the expansion of e-commerce and consumer goods. This year, the market is set to deliver a record seven warehouse and distribution facilities of greater than 400,000 square feet.
This is the result of a trend that has gradually been gaining momentum over the last several years. Since 2000, 42 buildings of 400,000 square feet or more have been added to the market. Prior to 2000, only 54 buildings of that size even existed in the Houston industrial market. We expect the market to continue on this trajectory as Houston grows and demand for consumer goods increases.
In addition to the warehouse and distribution sector, Houston’s overall industrial market remains healthy as well, with market-wide vacancy at just 5.1 percent. The second quarter saw 602,267 square feet of positive net absorption, a deceivingly low level for the strength of the market.
Muted absorption was largely the result of timing. Large and highly pre-leased deliveries in previous quarters have added to high levels of absorption, and a healthy, pre-leased industrial construction pipeline means the market can expect to see higher levels of positive net absorption in coming quarters. To date, the industrial market has recorded more than 4 million square feet of positive net absorption this year.
The northwest submarket was a standout this quarter with 775,376 square feet in occupancy growth, bringing the submarket to just under 1 million square feet of absorption year to date. Encompassing more than 117 million square feet of industrial product, the northwest boasts a very healthy 4.1 percent vacancy rate.
Looking forward, retail distribution, e-commerce and plastics manufacturing will continue to drive demand for warehouse and distribution space in Houston. Additionally, the Port of Houston and downstream activity on the east side all but ensure ongoing demand for rail-served properties.
CLICK HERE for our full Q2 industrial market insight and statistics.
About the Author
Jeff Venghaus is an Executive Vice President at JLL, where he serves as the leader of JLL Houston’s Industrial Services group. With more than 17 years of experience, Jeff specializes in industrial end-user representation including acquisitions, dispositions, leases, build-to-suit and design-build projects. He has been named a Houston Business Journal Heavy Hitter on seven occasions and was previously named the 2010 Industrial Broker of the Year and 2004 Industrial Rising Star by NAIOP. Connect with Jeff on LinkedIn.