HOUSTON – Houston’s industrial space landscape is changing. One of the city’s strongest real estate sectors, it is being buffeted by a number of forces. E-commerce is changing the logistics and need for warehouses. Amazon has two fulfillment centers under development in the Houston area. And Amazon Fresh is going to move in with retail grocery sales. At the same time, the east side’s petrochemical corridor is spurring demand for distribution space. And Houston is gaining a reputation as a distribution center. To help put these changes into perspective, Realty News Report spoke to one of the city’s major movers and shakers in the industrial sector — Robert Clay, president of Clay Development & Construction.
Realty News Report: What will be the impact of e-commerce on Houston’s commercial real estate industry?
Robert Clay: You are already seeing it with Amazon and others coming in. It would seem that if brick and mortar is going to e-commerce then, from a real estate perspective, retail loses and industrial wins.
Realty News Report: Dallas used to be the distribution leader of Texas. But Houston in gaining prominence. Retailers seem to be taking a different approach to handling logistics and warehousing of consumer goods, in the Houston area. What’s going on?
Robert Clay: To be honest, I never totally understood why Dallas is so much more of a distribution hub than Houston. We have basically the same population and yet, Dallas is around TWICE the size of Houston! My opinion is that instead of five major markets around the US, there are now 10 less-major markets and Houston is one of those.
Realty News Report: Clay Development recently developed two buildings totaling 1 million square feet near the Port of Houston and leased them to the IKEA furniture firm. Those buildings were sold to a Canadian investment firm. Can you tell us more about this significant deal?
Robert Clay: We had planned a 1.5 million square-foot park and were getting under way when the IKEA deal surfaced. We only had one other competitor for the deal and ended up winning it. These type deals — proposed, but not completed buildings — happen more times than people think, maybe 20 percent. The Canadian investment firm was also significant. I think this was one of the first significant investments from Canada in Houston. There have been several more in the last three months. I think we’ll see more.
Realty News Report: Six new chemical plants at the Port of Houston will be increasing the supply of plastic pellets by an estimated 20 percent. What impact will this have on the industrial real estate market in Houston?
Robert Clay: More pellets equal more pellet storage. We have seen a large number of new players in the distribution space and I suspect there will be more coming.
Realty News Report: Your firm recently broke ground on two speculative industrial buildings totaling 334,360 square feet at the Energy Commerce Business Park in Pasadena. What gave you the confidence to go forward with this project?
Robert Clay: We have done well on Phase I of this project and are working on several large deals already for Phase II. This submarket (and the Northwest market, which we have a 300,000 square feet spec starting also) has seen good absorption and we believe it will continue.