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Q3 2021 | Houston Industrial Market Report

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2021_Q3_Industrial_HERO_1536x1040

Key Takeaways

  • Construction costs increased at a rapid pace
  • Architects and engineers rethink designs due to material shortages
  • Q3 quarterly absorption outpaced first two quarters of 2021 combined
  • Vacancy dropped 90 basis points in Q3
2021_Q3_Industrial_Vacancy Rate    2021_Q3_Industrial_Net Absorption
     
 2021_Q3_Industrial_Under Construction    2021_Q3_Industrial_Lease Rates

 

Houston Highlights

Houston’s Industrial market continued to gain momentum as leasing velocity reached 9.8 million square feet in the third quarter pushing the year-to-date volume to a historical record of 35.4 million square feet. The increase in demand for space continued to spur new development with over 16 million square feet under construction and an additional 47 million square feet proposed or in the final planning stage. Houston’s industrial market recorded 11.6 million square feet of absorption in the third quarter, bringing the year-to-date total to 18.1 million square feet of positive absorption. The vacancy rate decreased 90 basis points over the quarter.

Market Highlights

2021_Q3_Industrial_Market Indicators

Historic Comparison

2021_Q3_Industrial_Historic Comparison

 

Market Fundamentals

2021_Q3_Industrial_Market Fundamentals

The forecast in the above graph is based on a trailing 4-quarter historical average.

 

Executive Summary

Commentary by Chase F. Spence | Senior Vice President

Container Volume and Cost Increases
Houston container ports continue to see rapid volume growth with more than 10% for the 7th consecutive month. This is being driven by increased consumer spending and growth of imported raw materials such as steel. The increase is also a product of the continued backlog of containers at other major ports like Long Beach, California. While the volume of containers continues to grow, so does the cost. Container shipping costs rose impressively by 1,400% as compared to last year. The increased expenditures is making shipping not economically feasible for some low margin raw materials, pushing exporters to need more warehouse space to wait out the storm until shipping costs go down.

Disruptions in Supply Chain Continue
According to Gene Seroka, Executive Director of the Port of Los Angeles, approximately 200,000 shipping containers remain in gridlock off the west coast of California. Adding additional pressure to an already stressed supply chain for consumer goods and raw materials. This backlog continues to limit supply, driving prices of goods higher and higher for the consumer. While some ports have gone to a 24/7 operating schedule, the backlog is not expected to be alleviated until Q1 2022.

Construction Material Cost increases and shortages
Steel, concrete, drywall are all seeing record increases, with some increasing on a weekly basis. Skyrocketing costs and shortages on materials are causing projects to increase in cost and time duration to complete. Steel shortages have led architects and engineers to even redesign structural roof design to meet schedules for completion. Timing for delivery of projects has increased on average 5 months for bulk distribution space due to structural steel package delays.

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  
   TGS Cedar Port DC 1
   East-Southeast Far 1,208,019  0%  Q3 2022 TGS Group  
  Cedar Port Logistics Center - B1   East-Southeast Far 800,405  100%  Q1 2022 Capital Development Partners  
   Empire West Business Park - B4
   Northeast Outliers 666,360  0%  Q3 2022 Stream Realty Partners LP  
  59 Logistics Center    Northeast Hwy 90 509,600  0%  Q4 2021  Hunt Midwest  
  Park 8Ninety Phase V - B1   Southwest Far 440,014  0%  Q4 2021 Trammell Crow Company  
   225 Logistics Park
   East-Southeast Far 403,066  100%  Q1 2022 Vigavi/Clarion  
   Fairway North Logistics Park
   North Hardy Toll Road  392,480  0%  Q4 2021 Lovett Commercial  
  Houston Coldport   Northeast I-10 315,101  0%  Q1 2022 Boomerang Interests LLC  

 

Construction Activity

Houston Industrial Construction
  2021_Q3_Industrial_Construction Activity

2021_Q3_Industrial_SearchResultImage_1024x972

Q3 2021 | Houston Industrial Market Report

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Related Experts

Lisa Bridges

Director of Market Research

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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Chase Spence

Senior Vice President

Houston

Mr. Spence specializes primarily in industrial tenant and buyer representation, property disposition, design/construct, build-to-suit evaluations, development and investment transactions in the Houston area.  He has more than six years of commercial real estate experience in the Industrial sector.

Mr. Spence is self-motivated and determined to take care of his clients however he can. Mr. Spence goes beyond simply brokering real estate transactions by providing resources relating to a variety of real estate needs from professional recommendations to business infrastructure setup to business leads for his client’s companies.

Before joining Colliers, Chase was a broker at Cresa-Houston for four years where he was a consistent top producer.  Prior to entering the real estate industry, Chase worked as a Project Manager in the construction industry in the Central Texas area, Houston and Austin.

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