A positive outlook for industrial development is not limited to Houston’s Southeast submarket—it is evident across the entire Houston Metro area. The significant volume of industrial products currently under construction reflects several market-level and national trends.
Although oil prices declined over the past year, Houston added the third-highest number of jobs among major MSAs in 2018, demonstrating that the region’s economic health is no longer as heavily dependent on the energy sector as in previous years. Unsurprisingly, this job growth directly contributed to population growth throughout the metro area.
Rising population numbers, combined with the rapid expansion of e-commerce, have increased demand for final-mile logistics and distribution facilities. At the same time, population growth has driven land prices upward. However, with interest rates remaining relatively low, developers are choosing to build now in anticipation of Houston’s long-term growth projections.
Vacancy Rates
The overall industrial vacancy rate in the Houston market rose slightly to 5.8% at the end of Q1 2019, up from 5.6% at the end of Q4 2018 and Q3 2018, and 5.4% at the end of Q2 2018.
1. Flex industrial properties reported a vacancy rate of 9.7% in Q1 2019, compared to 9.2% in Q4 2018, 8.9% in Q3 2018, and 9.1% in Q2 2018.
2. Warehouse properties posted a vacancy rate of 5.5% in Q1 2019, up from 5.3% in both Q4 and Q3 2018, and 5.1% in Q2 2018.
Rental Rates
According to CoStar, the average asking rental rate for industrial space in the Houston market reached $7.44 per square foot per year at the end of Q1 2019. This represented a 1% increase from Q4 2018, when rates averaged $7.39 per square foot.
1. Flex space averaged $10.04 per square foot
2. Warehouse space averaged $7.05 per square foot
Absorption Activity
Net absorption across the Houston industrial market remained positive, totaling 2,000,490 square feet in Q1 2019, although this figure was slightly lower than the 2,416,742 square feet absorbed in Q4 2018. For comparison:
1. Q3 2018 recorded 2,972,855 square feet of positive absorption
2. Q2 2018 recorded 957,709 square feet of positive absorption
Notable tenant moves in 2019 included:
1. Home Depot, occupying 770,640 square feet at Grand National Business Park
2. Plantgistix, leasing 337,040 square feet at 5623 Ameriport Parkway in Baytown
3. Norlyn Enterprises, moving into 134,900 square feet at 9800 Derrington Road
Positive absorption activity was strongest in the North, Inner Loop, South, and Southwest Corridors. Meanwhile, the delivery of new inventory in the Northwest Corridor resulted in negative net absorption for that submarket.
1. The flex market recorded negative absorption of 120,275 square feet in Q1 2019, an improvement over the negative 136,144 square feet in Q4 2018.
2. The warehouse market remained strong, posting 2,120,765 square feet of positive absorption in Q1 2019, following similarly strong activity in prior quarters.
Looking to Start a Business in Houston?
Businesses evolve constantly, and staying informed on market trends is one of the best ways to identify new opportunities. If you haven’t launched a business yet, Houston’s expanding industrial and logistics market may offer the inspiration you need. While financial constraints often hold entrepreneurs back, alternatives are available. With the right vision and decent credit, Small Business Loans and No Documentation Loans can help you move forward.
With over 10 years of consulting experience, Unsecured Finances specializes in helping clients secure:
1. Unsecured Business Loans
2. Start-Up Business Specialty Loans
3. Unsecured No-Doc Stated Income Loans
4. Business Lines of Credit ranging from $10,000 to $500,000, with no assets required
Apply on our website to find out if you qualify, or call today for a free consultation: 1-888-294-2584
