Robert Kramp, director of client services in Houston for Grubb & Ellis, tells GlobeSt.com that the local industrial market will "gain momentum during the early months of 2004 with vacancy embarking on a slow descent and rents stabilizing by the end of 2004." The predicted market shift is based on an upswing in economic indicators such as inventories, durable goods orders, production, wholesale trade and retail sales. "The orientation is beginning to lean more toward landlords in lease negotiations," he says.
Houston closed out 2003 with an 8.5% industrial vacancy. Kramp expects it could dip to 8% or slightly less this year.
The asking rate was $4.08 per sf triple net at the 2003 close, but it will go up 3% to 5% this year and could possibly spike as much as 10%, Kramp says. The 2003 absorption was slightly more than two million sf and that too should increase this year.
In the annual forecast report, the research team concluded low interest rates encouraged many small- to medium-size tenants to "sink equity into an owned facility versus paying rent." As a result, about $400 million in sales closed in 2003 versus about $200 million in sales each year between 1999 and 2002. Kramp believes industrial sales volume will remain high despite predictions that interest rates will rise this year. And though the rate might climb, he says it will still be historically favorable and "demand for freestanding industrial buildings will remain strong.
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