- May 1, 2024
The Exciting Outlook of Houston Industrial Market Report
Kind Reader, Houston’s industrial market is seeing a significant boost in the first quarter of 2021 according to the Houston Industrial Market Report. The report highlights how the market has experienced an increase in leasing activity and construction, along with a decrease in overall vacancy rates. These promising trends indicate a recovering and strengthening industrial market in the Houston region.
Houston industrial real estate market overview
Houston’s industrial real estate market offers a wide range of opportunities for businesses. As one of the country’s leading industrial markets, it is a key contributor to the city’s economy. In fact, Houston has some of the country’s largest industrial parks and manufacturing facilities. These properties range from large distribution facilities to smaller warehouse spaces. According to the National Association of Industrial and Office Properties (NAIOP), the Houston industrial real estate market is among the strongest in the country.
The Impact of COVID-19 on Houston’s Industrial Real Estate Market
The coronavirus pandemic has impacted all sectors of commercial real estate, including industrial. Despite a slight slowdown in activity in the early months of the pandemic, the Houston industrial market has shown resilience. Demand for large, high-quality spaces has remained strong, while e-commerce and logistics companies have increased their footprint in the market. The pandemic has also highlighted the importance of supply chain resilience and accelerated demand for last-mile delivery facilities.
Current trends in Houston’s industrial real estate market
Despite the challenges brought on by COVID-19, the Houston industrial real estate market has continued to grow. Here are some of the current trends:
E-commerce and logistics companies continue to drive demand for industrial space
The rise of e-commerce has had a significant impact on the industrial real estate market. As consumers continue to shift towards online shopping, companies have had to adapt their supply chain operations to keep up with demand. This has led to an increased need for distribution and fulfillment centers, as well as last-mile delivery facilities. Additionally, third-party logistics providers are expanding their footprint in the market to meet the needs of their clients.
Low vacancy rates and high rental rates
The demand for industrial space has driven down vacancy rates in Houston’s industrial market to record lows. As of Q2 2021, the overall vacancy rate was 5.6%, while the vacancy rate for warehouse/distribution space was only 4.6%. This high demand has also led to an increase in rental rates. According to CBRE, the average asking rental rate for industrial space in Houston was $7.03 per square foot.
Houston Industrial Market Overview
Before diving deeper into the Houston industrial market report, let’s first take an overview of the market conditions. Houston is one of the top industrial markets in the United States and the fourth largest city in the country. With over 35 million square feet of industrial space under construction, the market is constantly growing, and numerous companies are looking to expand their operations in the region. According to CBRE, Houston’s industrial vacancy rate stands at 4.8%, which is below the national average of 5.2%, indicating robust demand and tight market conditions. In this section, we will look at some of the key factors that have contributed to the growth of the Houston industrial market.
Port of Houston
The Port of Houston is one of the busiest ports in the United States and a significant driver of the Houston economy. The port has a total capacity of 2.7 million TEUs (twenty-foot equivalent units) and 785,024 square feet of warehouse and office space. It is a major gateway for international trade and handles a significant amount of cargo, including chemicals, petroleum products, and steel. The port’s strategic location, along with its extensive rail and road infrastructure, makes it a preferred location for companies looking to set up their distribution centers in the region.
Job Growth
Houston’s economy has been robust over the years, and job growth has been a significant driver of the industrial market. According to the Greater Houston Partnership, Houston added 70,800 jobs in 2019, representing a 2.3% increase from the previous year. Many sectors have seen job growth, including manufacturing, healthcare, and professional services. The strong job market has translated to an increased demand for industrial space as companies look to expand their operations and accommodate a growing workforce.
| No | Information |
|---|---|
| 1 | Available industrial space in Houston |
| 2 | Houston’s industrial vacancy rate |
| 3 | Top industries in the Houston industrial market |
| 4 | Recent notable industrial lease/sale transactions in Houston |
| 5 | Expected changes in Houston’s industrial market in the near future |
Houston Industrial Market Overview
The Houston industrial market has shown steady growth in recent years, driven by the region’s strong economy and favorable demographics. As one of the largest industrial markets in the country, Houston boasts over 600 million square feet of industrial space. The market is supported by a diverse mix of industries, including petrochemicals, energy, transportation, and logistics. According to a recent report by CBRE, Houston’s industrial vacancy rate was 5.3% in Q4 2020, down from 5.4% in Q3 2020. The report also noted that demand for industrial space in Houston remained strong despite the COVID-19 pandemic.
Impact of COVID-19 on Houston’s Industrial Market
The COVID-19 pandemic has had a mixed impact on Houston’s industrial market. While some industries such as energy experienced disruptions, other industries such as e-commerce saw a surge in demand for warehouse and distribution space. According to a recent report by NAI Partners, Houston’s industrial market saw 13.4 million square feet of leasing activity in 2020, down from 18.3 million square feet in 2019. However, the report also noted that demand for industrial space in Houston remained positive and that leasing activity picked up in Q4 2020.
Houston Industrial Market Forecast
The outlook for Houston’s industrial market remains positive, with experts predicting continued growth in the coming years. According to a report by Cushman & Wakefield, Houston’s industrial market is likely to see increased demand for e-commerce facilities and cold storage space, as well as continued interest from logistics companies. The report also noted that Houston’s location and infrastructure make it an attractive market for distribution and manufacturing companies. Additionally, the expansion of the Port of Houston and the ongoing development of the Houston Spaceport are expected to drive further economic growth in the region.
The Growth Indicators of Houston Industrial Market Report
The Houston industrial market report indicates a promising future in the industry, as different indicators show significant growth in the sector. One of the significant indicators is the steady rise in the industrial demand. The city’s port, railways, and highways offer easy access to various markets, attracting investors to the region. Another significant indicator is the increasing number of construction projects as a result of this demand.
The Significant Growth Indicators of Houston Industrial Market
The Houston industrial market report indicates that the industrial sector of the city is experiencing significant growth due to various indicators. The following are the significant growth indicators:
- The industrial demand in Houston is increasing steadily, attracting investors to the region. The strategic location of the city’s port, railways, and highways offers easy access to various markets.
- The construction industry in Houston is among the top contributors to the region’s economy. As a result of the increasing demand for industrial space, more construction projects are underway, contributing significantly to the industry’s growth.
- The number of deals and sales in the Houston industrial market is showing an upward trend, indicating growth in the sector.
- The Houston industrial market is witnessing a rise in the number of companies relocating to the region. This is due to the strategic location, growing population, and pro-business environment in the city.
The Investment Opportunities in Houston Industrial Market
The growth indicators of the Houston industrial market indicate the sector is promising, making it an ideal option for potential investors. The following are opportunities in the Houston industrial market that investors can exploit:
- Investing in the construction industry: the increasing demand for industrial space is creating a unique opportunity for investors. Investing in construction projects is attractive prospects for many investors.
- Investing in property development: the growing population of Houston presents an opportunity to invest in property development in the city.
- Investing in logistics companies: the location of Houston city presents opportunities for investors to invest in different logistics companies. Moreover, the increasing number of companies relocating to the region comes with an increase in logistics activities.
Trends in Houston Industrial Market Report
As Houston’s population and logistics infrastructure continue to grow, the city’s industrial real estate market has seen some major trends. Here are the top trends we are seeing in the Houston Industrial market report:
Rise in E-commerce demand for logistics facilities
With the rising demand for e-commerce, logistics and delivery centers have become a vital asset in the industrial real estate industry. E-commerce sales in the US have increased from $72 billion in 2002 to $791 billion in 2020, according to the US Census Bureau, and Houston is no exception to this trend. As a result, developers are looking towards Houston to find the necessary land for constructing logistics centers, in part due to the city’s strong transportation infrastructure and lack of zoning that would otherwise limit development.
Adaption of green energy practices
Houston industrial properties are seeing more sustainable energy practices such as renewable energy sources, energy-efficient lighting, and smart buildings. This is due to a combination of environmental concern, industry standards, and reduced energy costs makes it beneficial for building owners, leasing tenants, and property managers. As companies are seeking sustainable solutions for their investments, this trend is likely to continue.
Changes in the Demand for Space
There has been an increasing demand for industrial spaces with more amenities, such as higher ceilings, wider truck aprons and increased parking provision, as tenants are now using their industrial spaces as showrooms due to its close proximity to customers and vendors. The demand for office space within industrial facilities has also become a key feature since companies require more space for staff, operations and administrative work.
Increase in Foreign Investment and Development
Houston’s strategic location and economic opportunities make the city a prime target for Foreign Investment and Development. As Houston stands as one of the largest petrochemical production cities in the world, foreign businesses, and investors unanimously see Houston as their gateway to the rest of the United States. A significant percentage of Houston’s industrial real estate investment comes from international investors, particularly those from Japan, China, and Canada, which underlines the fact that Houston is not just a major hub in the US, but in the world as well.
Reshoring Manufacturing
The COVID-19 pandemic has created significant supply chain disruptions, delays, and rising transportation costs, causing many companies to reshore their manufacturing processes, especially those relying on overseas suppliers. As a result, manufacturers are increasingly looking towards Houston as a location for their industries, which will further boost the Houston Industrial Market. In addition, Houston’s availability of skilled labor, lower production costs, and access to transportation infrastructure all factor into the city’s appeal as a site for reshored manufacturing activities.
Increased Automation
The rising cost of labor has been a factor behind the increasing trend towards automation. As Houston Industrial industry businesses are facing labor shortages, increased automation means that companies can keep productions low-cost while still being highly efficient. These efforts help maintain production amid labor shortages, low labor quality. As such, more businesses are investing in automation such as robotics and artificial intelligence to enhance their industrial businesses’ productivity.
Shift Toward Dual-Purpose Spaces
The rise of online shopping and with the pandemic’s influence, retailers have adapted to new consumer preferences. Instead of using their industrial spaces for storage only, they have turned their spaces into dual-purpose facilities, including showroom spaces and distribution centers as an alternative to consumers in need of same-day delivery. This trend reverses the former approach of creating separate retail and industrial spaces and has become the norm in the Houston Industrial market.
Top Submarkets for Houston Industrial Market Report
As stated earlier, 2020 was an impressive year for the Houston industrial market, and this trend continued into 2021. The market is dominated by several submarkets that have proven to be the most popular driving forces of the industry.
The North Submarket
The north submarket holds steady as one of Houston’s most sought-out areas, and it saw the most direct leasing activity with more than 2.7 million square feet absorbed in the first quarter of 2021. The area has a wide variety of properties, from small distribution spaces to massive, sophisticated warehouses and assembly facilities. Some of the most significant deals in the area include Amazon’s lease for seven new buildings, totaling 2.38 million square feet.
The Southeast Submarket
Another booming submarket in Houston’s industrial sector is the southeast region. This area is close to the Port of Houston, providing easy access to waterways for businesses that require shipping services. Additionally, the southeast submarket is home to the largest refinery complex in the US, which accounts for a large share of area employment. In the first quarter of 2021, the area saw an absorption of over 2 million square feet.
Impact of COVID-19 on Houston’s Industrial Sector
The COVID-19 pandemic significantly affected most industries, and the Houston industrial market was not immune. However, despite a difficult year, the market saw positive developments as we stepped into 2021. The pandemic caused uncertainty in the market, with many businesses hitting the pause button. However, some adapted or even thrived during the pandemic.
Decreased Demand from Oil and Gas Industries
The pandemic had an adverse impact on the oil and gas industry, and this automatically translated to a decrease in their overall demand for industrial spaces. This lack of demand led to over-supply in some oil-insulated regions of the city, including the northeast submarket.
Increased Demand for E-commerce Operations
Despite the negative impact of the pandemic, some Houston industrial market segments experienced increased demand during the pandemic as e-commerce boomed. Companies needed more space to store products, and this translated into increasing demand for warehouses and distribution centers. The north submarket, with its substantial new lease deals, benefitted significantly from this trend.
Rental Rates
The rental rates in the Houston industrial market report vary greatly depending on the location, type of property, and size of the space. Average rental rates for industrial properties in the Houston area range from $0.20 per square foot to $0.65 per square foot, per month. This is still considered affordable compared to other major markets across the country.
Location
Location is one of the most important factors that determine rental rates in the Houston industrial market report. Properties located near major highways or in high-traffic areas tend to command higher rental rates compared to those located in less active areas.
Type of Property
The type of industrial property is another factor that affects rental rates in the Houston industrial market report. For example, newer properties with state-of-the-art amenities will typically be more expensive than older properties that require renovation work.
Occupancy Rates
The occupancy rates of industrial properties in the Houston area have remained relatively steady in recent years, with an average occupancy rate of around 90%. This shows that there is strong demand for industrial spaces in the Houston market.
Types of Tenants
The types of tenants can strongly affect occupancy rates in the Houston industrial market report. For example, properties that are leased to tenants in industries that are experiencing strong growth will have higher occupancy rates compared to properties leased to tenants in declining industries.
Competitive Analysis
An analysis of the competition can also affect occupancy rates in the Houston industrial market report. Properties that are located in areas with a high number of industrial properties will face more competition when trying to lease space.
Frequently Asked Questions – Houston Industrial Market Report
Find answers to common questions and concerns about Houston’s industrial real estate market.
1. What is Houston’s industrial market report?
The Houston industrial market report is a comprehensive annual survey of the Houston industrial real estate market.
2. Why is the report important?
The report provides data and analysis on the current state of the industrial real estate market, including trends and forecasts for future activity.
3. Who produces the report?
The report is produced by commercial real estate services firms, which collect and analyze data on the Houston industrial real estate market.
4. How accurate is the information in the report?
The information in the report is collected through various sources and analyzed by experts in the field. While there may be variations in individual results, the overall trends are considered accurate and reliable.
5. What types of properties are included in the report?
The report covers a variety of industrial properties, including manufacturing, distribution, and research and development facilities.
6. How does the report define industrial space?
The report defines industrial space as any property used for manufacturing, assembling, warehousing, distribution, or research and development activities.
7. What are some examples of industrial properties in Houston?
Examples of industrial properties in Houston include manufacturing plants, distribution centers, and research and development facilities.
8. How is the industrial market performing in Houston?
The report will provide up-to-date information on how the industrial market in Houston is performing, including vacancy rates, rental rates, and absorption rates.
9. What are some of the factors affecting the industrial market in Houston?
The industrial market in Houston can be influenced by a number of factors, including economic conditions, population growth, and changes in technology and industry.
10. How has the COVID-19 pandemic affected the Houston industrial market?
The report will include analysis of how the pandemic has affected the industrial market in Houston, including changes in demand for industrial space and shifts in industry trends.
11. How do I access the report?
The Houston industrial market report is typically available for purchase or download online through the commercial real estate services firms that produce it.
12. Is there a cost to access the report?
Yes, there is usually a cost associated with accessing the report, either for purchase or download.
13. Can I access previous years’ reports?
Previous years’ industrial market reports may be available for purchase or download from the commercial real estate services firms that produce them.
14. How can I use the report to make informed decisions about industrial real estate in Houston?
The report can help individuals and companies make informed decisions about buying, selling, leasing or investing in industrial properties in Houston, as well as providing insight into overall market conditions.
15. How often is the report updated?
The report is typically updated annually, although interim reports or updates may be available if significant changes occur in the industrial real estate market in Houston.
16. Do I need to be an expert in industrial real estate to use the report?
The report is designed to be accessible to a wide range of users, including those without extensive knowledge of industrial real estate.
17. Can I use the report to compare Houston’s industrial market to other cities?
The report may provide some data that could be used to compare Houston’s industrial market to other cities, but comparative data is not its primary focus.
18. What are some of the key takeaways from the report?
The key takeaways from the report will vary depending on individual interests and needs, but may include overall market trends, changes in demand and supply, and shifts in industry trends.
19. Who should read the report?
The report can be useful to a wide range of stakeholders, including real estate professionals, investors, developers, and policymakers.
20. Can the report help me forecast future market conditions?
The report can provide data and analysis on current trends and may offer some insight into future market conditions, but it cannot predict the future with certainty.
21. What if I have questions about the report?
Individuals with questions about the report can contact the commercial real estate services firms that produce it for assistance.
22. Are there other sources of information about Houston’s industrial market?
There may be other sources of information about Houston’s industrial market, including local business and real estate publications, industry associations, and government agencies.
23. How can I stay up-to-date on changes in Houston’s industrial market?
Individuals can stay up-to-date on changes in Houston’s industrial market by regularly checking industry news and updates, attending industry conferences and events, and networking with other real estate professionals.
24. Can I use the report to make decisions about buying or selling industrial properties in Houston?
The report may provide useful information for making decisions about buying or selling industrial properties in Houston, but individuals should also consult with real estate professionals and conduct their own due diligence before making any decisions.
25. What should I do if I have concerns or anxiety about the industrial real estate market in Houston?
Individuals with concerns or anxiety about the industrial real estate market in Houston may benefit from speaking with a real estate professional or seeking out additional information about market conditions and trends.
For a comprehensive report on the Houston industrial market, check out GBTHolding’s insights and analysis of trends in the area.
Takeaways from Houston’s Booming Industrial Market
Kind Reader, we hope you found this report on Houston’s industrial market insightful and informative. As you can see, the city’s industrial sector continues to thrive due to its strategic location, strong workforce and accommodating business environment. We encourage you to stay updated on the latest news and trends in Houston’s dynamic economy by visiting our website regularly. Thank you for reading and we look forward to seeing you again soon!