HOUSTON – Houston has one of the best industrial markets in the nation with a low vacancy rate of 5.3 percent and 6 million sf of annual absorption, according to CBRE Group.
“Industrial is strong. Demand continues to be strong and supply continues to be constrained,” said Mark Taylor, senior managing director in Houston for CBRE at a recent CBRE Press Luncheon.
Houston has a significant number of warehouses and industrial buildings under construction, Taylor said, and sites for new facilities are harder to obtain.
“We are running out of land, affordable land,” Taylor said. “Land costs have tripled.”
Speaking at the recent BoyarMiller Real Estate Forum, Welcome Wilson Jr. of Welcome Group said Houston’s industrial market is a “machine” churning out new industrial space in a strong local economy.
Dubbing Houston a “paragon city,” Wilson touted the strength of the city’s recovery from the recession and its benefit to the industrial real estate market.
“Houston has added two jobs for each one it lost during the recession,” said Wilson. “We are the leading machine in the country with an industrial market of 521 million sq. ft. and more than five million sq. ft. under construction.
“The vacancy rate of industrial space is about five percent, which is the same as last year even though the city has added more space,” said Wilson. “That is better than the national average of eight percent and we predict vacancies will decline in 2014.”
Wilson said that the Grand Parkway expansion is a catalyst for new industrial development in the city and added that activity in two other areas will continue to fuel new projects.
“The 2015 completion of the Panama Canal expansion will result in more job growth and activity at the Port of Houston and will stimulate development of industrial construction, rail and infrastructure,” said Wilson. “Additionally, the agreement between ExxonMobil and Qatar Petroleum to construct a $10 billion natural gas export terminal at Sabine Pass will bring about more construction and need for crane-ready buildings.”
CBRE reports that 7.8 million sf of industrial space is under construction in the Houston area. The average monthly rental rate is 63 cents per sf, in the fourth quarter, CBRE said.