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Jump in Spec Industrial Predicted for '05

HOUSTON-Bayou City developers will break ground on one million sf of spec industrial inventory in 2005, a 50% increase compared to this year, ending several years of build-to-suit mania and developer conservatism.

By Jennifer D. Duell | Updated on December 27, 2004

HOUSTON-After five years of declining industrial development, speculative construction in 2005 is expected to increase as much as 50% compared to this year. “Speculative construction was very conservative this year–most of the activity was build-to-suit,” says Darryl Noon, an industrial broker with Transwestern Commercial Services Inc. “Next year, speculative industrial development will increase, probably as much as 50% to more than one million sf.”

Noon tells GlobeSt.com that as interest rates continue to increase, industrial users will move away from buying facilities and return to leasing space as the more economical choice. To that end, he expects that developers will start delivering more speculative space rather than build-to-suits.

There is nearly two million sf of industrial space under construction in the Houston metropolitan market, according to Alexandria, VA-based Delta Associates, a subsidiary of locally based Transwestern. About 2.2 million sf of industrial space was delivered this year, down from 3.1 million sf in 2003 and 4.4 million sf in 2002.

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