Latest report shows industrial market firing on all cylinders

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Oct. 1, 2018

By: Jeff Venghaus, executive vice president and industrial lead

north submarketHouston’s industrial market is firing on all cylinders, as both tenants and landlords expand their positions in the market.

Tenants are opting for newer product and requiring larger spaces. In fact, 58 percent of third quarter leases were either a relocation or expansion within the market. The average lease size in Houston has increased for the last three quarters. And over the same period, the average construction date of buildings leased has been newer each quarter. Major occupiers in particular are looking to new supply, with eight of the third quarter’s 11 largest deals in new construction space.

For the second quarter in a row the north and northwest submarkets captured the lion’s share of tenant demand, accounting for 66.7 percent of total deal volume. Home to six of Houston’s 10 largest continuous blocks of industrial space, these submarkets should continue capturing leasing demand going forward.

The North submarket has been the biggest benefactor of demand for new construction industrial buildings. The submarket had a market-high total vacancy rate of 9.6 percent two years ago. Today, it sits at 6.2 percent.

Sustained tenant demand caused industrial construction to balloon over the last several quarters. After reaching a fever pitch of 10.6 million square feet of industrial construction, the market delivered 3.8 million square feet of new industrial space in the third quarter. The construction pipeline now sits at 8.3 million square feet.

Year-to-date, the market has added 7.8 million square feet of industrial deliveries, 73.3 percent of which were preleased at completion.

As demand and supply continue to increase in lockstep, the industrial market can expect robust activity from all participants in the period ahead.

View our full Q3 2018 industrial market report.

 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