“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
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
Historic Comparison
Market Fundamentals
The forecast in the above graph is based on a trailing 4-quarter historical average.
Recent Transactions
*Colliers Transaction
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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.
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
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