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Q2 2021 | Houston Industrial Market Report

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2021_Q1_Industrial_Skyline_1536x1040

The second quarter of ’21 saw a return to more “normal”
absorption 
numbers after a sluggish Q1 and suggests we will see vacancy
rates 
start to recover by Q4 or early ’22. Momentum in the
industrial 
sector remains strong overall

Patrick Duffy | President

Key Takeaways

  • Tour activity robust
  • Leasing activity increases, up 30% from Q1
  • Absorption increases and remains positive
  • Vacancy drops 10 basis points
  • Construction activity increases slightly over the quarter, but
    down on an annual basis

2021_Q2_Industrial_Vacancy Rates_Net Absorption

2021_Q2_Industrial_Under Construction_Lease Rate

 

Houston Highlights

Houston’s Industrial market continues to gain momentum as leasing velocity reaches almost 12 million square feet, up 30% from Q1 2021. Notable leases include Wolseley’s lease of 750K SF at Empire West, Living Spaces’ lease of 685K SF at Air 59 Logistics Center, Webstaurant’s lease of 645K SF at Cedar Port Logistics, Goodman’s lease of 494K SF at Sam Houston Distribution Center and FedEx’s lease of 535K SF at Park 505. With consumer confidence approaching pre-pandemic levels, we expect to see strong leasing activity for the near-term.

 

2021_Q2_Industrial_Market Indicators

 

2021_Q2_Industrial_Market Graph

 

Executive Summary

Commentary by Zachary Taylor | Senior Vice President

Strong leasing activity in Q2 mirrors a more optimistic outlook on the economy and overall recovery from the COVID crisis. Governor Abbot issued an Executive Order in March removing all COVID-related operating limits on businesses. In addition, President Biden issued a third economic stimulus package in March that has pumped more money into the economy. We are now at a point where retail spending has surpassed pre-COVID levels. E-commerce, automobile sales and building materials have been the biggest beneficiaries of consumer spending—all five of the largest leases signed in Q2 fall into one of these three categories.

The COVID crisis disrupted the supply chain, but the surge in retail spending has compounded the problem. Container ports all over the country are experiencing increased volumes of TEU’s leading to longer wait times and surging shipping costs. According to Sea-Intelligence ApS, only 40% of container ships were on time arriving at ports with average delays stretching to more than six days. The cost of moving a 40 foot container from China to the U.S. West Coast ports averaged over $5,500 in Q2 according to the Freightos Baltic Index, up 34% since the start of the year and 228% higher than the same period last year. Container activity at the Port of Houston jumped 25% in April, 30% in May and 39% in June.

The increase in construction pricing has caused several new speculative development projects to be put on hold. This temporary pause in new construction combined with solid leasing activity should lead to lower vacancy rates toward the end of the year and into Q1 2022. In addition, cap rate compression continues to gain momentum as institutional investors seek to capitalize on growth in warehousing and e-commerce. Overall, Houston continues to show strong market fundamentals and is poised to produce strong numbers through the end of the year.

Under Construction

Institutional Inventory - 250,000 SF or Greater

 

  Business Park/Address     Submarket  RBA  % Leased/Owned  Est. Delivery Date Developer/Owner   
   Weiser Business Park
   Northwest Hwy 6  up to 1.5M  0%  Q1 2022  Trammell Crow Company  
   The Uplands Twinwood DC 1
   Sugar Land 737,630  0%  Q3 2021 Clay Development  
  Weatherford Farms - B 2
   Hwy 59/Hwy 90 568,084   0%  Q3 2021 Crow Holdings Industrial   
   59 Logistics Center
   Northeast Hwy 90  509,600  0%  Q3 2021  Hunt Midwest  
   Jordan Ranch Distribution Center
   Sugar Land  498,231  100%  Q3 2021  Phelan Development Company  
   Fairway North Logistics Park
   North Hardy Toll Road  392,480  0%  Q1 2022  Lovett Commercial  
   Nova Logistics Park
   Sugar Land  326,812  50%  Q3 2021  Lovett Commercial  
   Houston Coldport
   Northeast I-10  315,101  0%  Q1 2022 Boomerang Interests LLC   
   South Belt Central Business Park
   South Hwy 35  305,016  0%  Q2 2021  Investment & Development Ventures LLC  
   Seton Lake Logistics Center
   Hwy 290/Tomball Pky
 255,704  0%  Q3 2021  Trammell Crow Company  

 

Construction Activity

Houston Industrial Construction
  2021_Q2_Industrial_Construction Activity

2021_Q2_Industrial_SearchResultImage_1024x972

Q2 2021 | Houston Industrial Market Report

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Related Experts

Lisa Bridges

Director of Market Research | Houston

Houston

Lisa joined Colliers in 2010 as Director of Market Research and has 37 years of commercial real estate experience. Lisa initiates proactive market research projects to further the business goals of the company. She writes and prepares 29 market reports annually, including quarterly reports on Houston's retail, office, industrial and healthcare properties.  Further, she prepares statistical ownership reports for various clients as well as an annual Houston Economic Overview. Lisa also creates PowerPoint market presentations, trade journal articles, and other marketing materials supporting the company's business endeavors. She works with senior management in planning the company's marketing strategy and public relations support for local and national conferences, luncheon meetings, recruitment programs, and special events.  Lisa works closely with the company's brokers to develop effective custom market research material specific to existing and potential clients.

Lisa serves on the Colliers Editorial Board, the Colliers U.S. Research Council, and is a recipient of the Colliers Researcher of the Year Award.

Lisa earned the Commercial Property Research Certification (CPRC) from Colliers University.  CPRC is the first and only accreditation for commercial real estate research professionals. It offers a professional development path to increase strategic and tactical expertise in marketing/research, knowledge of the industry and capabilities with commercial real estate tools.

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Zack Taylor

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Zack Taylor joined Colliers in March 2021 as Senior Vice President. Zack specializes in the sale and leasing of industrial real estate with a particular focus in southeast Houston and other markets along the Gulf Coast. He has experience working with local, national, and international clients on their various real estate needs including site selection, tenant representation, building acquisitions/dispositions and build-to-suit projects. Zack’s analytical approach to real estate allows him to successfully evaluate and execute a broad range of complex transactions.

Zack has nine years of experience in commercial real estate acting as a trusted advisor. Zack has worked with industrial users, developers, and investors on a variety of transactions totaling more than 3 million square feet of lease/sale transactions and hundreds of acres of land totaling more than $200 million in transaction volume.

Zack is a native Houstonian and enjoys spending time in the outdoors with his wife, Alexandra, and two boys, Owen and Benjamin.

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