Tenant requirements drive new status quo for Houston industrial market

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April 5, 2018

By: Jeff Venghaus, executive vice president and industrial lead, JLL Houston

big box distribution space

Tenant requirements for high-quality, big box distribution space continue to drive change in Houston’s industrial market.

Approximately 6.7 million square feet of industrial space is under construction across the metro. This represents a significant uptick from the 3.8 million square feet of space under construction at the start of 2017. Affirming the ongoing evolution of Houston’s industrial market, all of the top five largest construction projects are greater than 500,000 square feet in size.

Current projects represent a mix of build-to-suit and speculative developments, but sub-five-percent vacancy is driving more speculative construction than in the past. In 2016 and early 2017, speculative construction made up about 45 percent of new construction. That number has increased to 70 percent in the last two quarters.

Thanks to tight vacancy and tenants’ desire for large, higher-quality spaces we can expect the construction pipeline to grow even more this year.

Houston’s ‘big three’ industrial submarkets dominated in the first quarter. The northwest, southeast and north together accounted for more than 77 percent of leasing activity and more than 90 percent of construction activity. Nine of the top 10 projects under construction fall into one of these three submarkets.

Fundamentals remain fairly strong and various types of tenants are actively in the market for space. Moreover, stability in the price of oil and strong job creation could mean further growth for the industrial market this year.

View our full Q1 2018 industrial market report here.

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 18 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

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