Big Box is a Big Deal in Houston Warehouse Scene

HOUSTON – (By Dale King, Realty News Report) – Houston is a key player in the “big box” business, also known as the warehouse industry, according to a new study by real estate services firm CBRE.

Houston’s logistics market is one of the most desirable investment targets in the South-Central region of the U.S. for both domestic institutional capital and foreign investors, said the report, which was released and discussed during a recent CBRE company webinar. “Annual sales volume totaled $1.2 billion in 2018, $900 million in 2019 and $1.7 billion in 2020,” CBRE reported.

Construction Boom

In 2020, more than 12 million SF of new warehouse development was completed in Houston, one of the heaviest  warehouse construction  locations in the nation.

As to Houston, the city’s “pro-business environment, favorable real estate conditions and nation-leading growth continue to drive its thriving industrial market,” said Peter Mainguy,  senior managing partner at CBRE.

Peter Mainguy

He added: “Houston has an undeniable track record of resiliency, with consistent population and job growth despite challenging economic downturns, natural disasters and an ongoing pandemic.

Mainguy also said recent demand for space “has been led by e-commerce, logistics and building supply companies.”

The construction surge contributed to a rising vacancy rate. As a result, the direct vacancy rate in Houston increased to 7.4 percent. Transaction volume totaled 4.4 million SF in 2020, up by 6.8 percent year-over-year.

The CBRE study, entitled “North American Industrial Big Box Report and Outlook,” says this hemisphere’s industrial and logistics market “had its strongest year on record in 2020 despite a pandemic that caused a severe economic downtown.”

“Occupiers moved into facilities in droves to serve a rapidly growing online consumer base and increased their safety stock to avoid inventory disruptions that plagued the past year.”

The report notes in particular: “All sizes and types of industrial real estate performed well in 2020, but none more so than the big-box industry.”

CBRE’s research report offers an in-depth overview of supply-and-demand fundamentals, demographics, logistics drivers, labor and location in the top 22 markets in North America. Two Texas metros, Houston and the Dallas-Fort Worth region, are on that list.

By definition, says the report, “an industrial big-box facility is a warehouse/distribution center of 200,000 SF or larger. All types of occupiers increased their presence in big-box facilities last year to serve growing populations, to be near expanding logistics hubs and to take advantage of new government incentive programs.”

Houston seems to prove the concept that centralization matters. “More than seven million people live within 50 miles of the market core, with 9.7 percent expected growth over the next five years.”

The Houston Workforce

“Nearly 26 million people live within 250 miles, [of Houston’s municipal core] with expected growth of 7.9 percent. The 18-to-34 age group comprises 35 percent of the population.”

According to CBRE’s Labor Analytics, Houston’s warehouse labor force of 92,437 is expected to grow by 10 percent in the next decade, “providing ample available labor for the burgeoning big-box market.”  Despite the actual and anticipated growth, the average wage for non-supervisory personnel is 3.4 percent lower than the national average.

The report states that Houston “offers an impressive array of distribution channels. It’s central location makes it easy to reach both coasts within hours. The Port of Houston is the largest container port on the Gulf Coast and has been instrumental in the city’s development of international trade.”

The Houston market is also home to the nation’s largest petrochemical complex and the second largest in the world. Carrier services on all major trade lines link Houston to all international markets. The shipping channel also intersects a very busy barge traffic lane, the Gulf Intracoastal Waterway.

The report also cites Houston’s “extensive highway system which is well integrated with the airport system, for deep-water seaports and the mainline railroads.”

The city is also at the crossroads of Interstate Highways 10, 45 and 69.  I-69 is known as the “NAFTA superhighway” which links Canada, the U.S. industrial Midwest, Texas and Mexico.

Looking ahead, Houston ranks fourth among the 22 communities examined in the report for warehouse space under construction. The 31.1 million SF now being built is also 46.5 percent leased.

Not far behind in this category is Dallas-Fort Worth, listed as number 6 among the 22 CBRE locations studied. D-FW has 11.1 million SF of industrial properties being built, with about 20 percent of them leased.

Top cities on the under-construction list are: South New Jersey/East Pennsylvania, first; Chicago, second; Atlanta, third and Memphis, fourth.

The Dallas-Fort Worth area is no slouch in the big-box market. The CBRE report says D-FW is also centrally located and is home to two major ports, Alliance Global Logistics Hub and the International Inland Port of Dallas.

Dallas is also at “the confluence of three major railroad networks (Union Pacific, Burlington Northern Santa Fe and Kansas City Southern). By rail, “98 percent of the U.S. market is within 48 hours” travel time.

“D-FW International is the nation’s ninth largest cargo airport and the only one with the capacity to double operations in its existing footprint. All major U.S. markets can be reached by air in less than four hours.”

The report says D-FW’s logistic position has benefited from “73 economic incentive deals during the past five years that totaled more than $606 million – basically $11,541 per new job in the Dallas metro area, according to Wavteq.

“D-FW continues to outperform expectations and possesses some of the healthiest industrial market fundamentals and sales activity in the U.S.,” said CBRE Vice Chairman Randy Baird, a contributor to the report.

“U.S. Q-1 2020 sales volume totaled $1.1 billion, up more than 500 percent from Q-1 2019. However, the COVID pandemic brought sales activity to a virtual halt in Q-2, with $658 million in sales for Q-3 and $1.2 billion in Q.4.”


April 1, 2021 Realty News Report Copyright 2021


For more about Houston development, check out the book Houston 2020: America’s Boom Town – An Extreme Close Up  by Ralph Bivins. Available on Amazon  http://tiny.cc/4a2g6y


Image: Rendering of new Houston project. Courtesy: Trammell Crow

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