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
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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
Historic Comparison
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
