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Q4 2022 | Houston Industrial Market Report

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2022_Q4_Industrial_HERO_1536x1040

 

“Houston currently has more people working than at any time in the City’s history. Texas is the #1 destination for U-Haul (net positive population growth), our medical economy is booming, energy companies are healthy and investing capital and the Port of Houston is breaking records monthly. There are plenty of things to worry about in 2023, but Houston is well positioned to ride out any national or global downturn this year. The industrial market ended a very active year with good momentum and a general slowdown from developers for speculative development other than what was already well underway. The logistics shift to the Gulf of Mexico ports (from the California ports), especially the SE Texas ports, and solid workforce bodes well for another strong year for Industrial properties in Houston. A handful of companies have had growth plans tabled and are putting some blocks of space into the sublease market, but we still expect vacancies near or below 6% for 2023.”
Patrick Duffy | President
   

Key Takeaways

  • Leasing activity increased
  • Positive net absorption
  • Vacancy remained steady 
  • Rental rates continue to increase
  • Construction volume increased
2022_Q4_Industrial_Quad

 

Houston Highlights

Houston’s industrial market remained extremely active during Q4 with leasing velocity over 11.2 million square feet. The increase in demand for space continues to spur new development with 33.6 million square feet under construction and an additional 55.8 million square feet proposed or in the final planning stage. Houston’s industrial market recorded 5.4 million square feet of positive net absorption in the fourth quarter, pushing the year-end 2022 total to 28.9 million square feet. The vacancy rate remained steady at 5.6% over the quarter and decreased from 6.5% annually.

Market Highlights

2022_Q4_Industrial_Market Indicators 

Historic Comparison

2022_Q4_Industrial_Historic Comparison 

 

Market Fundamentals

2022_Q4_Industrial_Market Fundamentals 

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

Recent Transactions

*Colliers Transaction

2022_Q4_Industrial_Recent Transactions1
 2022_Q4_Industrial_Recent Transactions2

 

Executive Summary

Commentary by Ryan Byrd
While the country braces for what seems to be an inevitable slowdown, Houston industrial leasing activity continues to outperform all other asset classes. Year-end 2022 absorption and leasing activity kept pace with the previous years record of 29 million and 48 million square feet, respectively.
 
Rents continue to grow into the new year and there is no end in sight for tenant demand. While our projections show vacancy rates increasing, there is enough current tenant demand and a slight pause in new developments to hold vacancy rates stable. Leasing activity should remain strong through the first half of 2023.

 

The Port of Houston seems to be the main driver, with double-digit container volume growth year-over-year as companies search for more efficient supply chain alternatives. Port Houston has plans to build a third terminal which entails constructing wharves, adding much needed container yard space, and widening and deepening the Houston Ship Channel to make way for larger and increased vessel volume.

When complete, “Project 11” will widen the channel from 530’ to 700’, deepen some segments to 46.5’ and institute other safety and efficiency improvements. Port Houston Chairman Ric Campo notes that the project is expected to yield a $134 million dollar annual economic impact once delivered, which will consequently lead to more jobs and increase container traffic.

Rising interest rates have created a gap between land sellers and developers so we expect a slow down on both investment sales and land sales for new industrial development. There is still a big appetite from users to own their own facilities, thus we have not seen a decline in listing prices from sellers with functional and efficient inventory. As interest rates stabilize, we expect sales volume to increase on both the investor and user side.   

Under Construction

Institutional Inventory - 500,000 SF or Greater
Business Park/Address Submarket RBA % Leased/ Owned Est. Delivery Date Developer/ Owner
NorthPort Logistics Center The Woodlands/ Conroe 1,224,498 0% Q2 2023 Lovett Industrial
TGS Cedar Port - DC 4 East-Southeast Far 1,218,956 0% Q2 2023 TGS Group
I-10 West Trade Center Sugar Land 1,051,080 0% Q1 2023 Hunt Southwest
Interchange 249 - B8 Northwest 908,853 100% Q3 2023 Clarion/Lovett
Kingsland Ranch Logistics Park - B3 Sugar Land 855,610 0% Q2 2023 Falcon/Clarion
Grand Central West - B2 Northwest Outliers 843,360 0% Q1 2023 PinPoint Commercial
Woods Road Business Park - B2 Sugar Land 836,120 0% Q1 2023 Crow Holdings Industrial
 

Construction Activity

Houston Industrial Construction
2022_Q4_Industrial_Construction Activity

 

 

 

2022_Q4_Industrial_Construction by Submarket

 

 


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Q4 2022 | 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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Ryan Byrd

Principal & Director

Houston

Ryan specializes in both Landlord and Tenant representation of industrial space. He has experience in both existing and ground up industrial properties as well as land acquisitions and dispositions. He strives to ensure that his clients exceed their goals and supports all projects from beginning to end.

Ryan joined Colliers in 2013 as an associate on the industrial team. After seven years, Ryan became the youngest Principal in company history. Since joining Colliers, Ryan has completed more than 40 million square feet of industrial transactions and more than 700 acres of land transactions.

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