Port, Airport Lure Investors to Houston

Houston —With a fast-growing port, busy international airport and burgeoning Latin American trade, this Texas city has become a major focus for investors and developers. Nothing provides greater evidence of this than recent plays by three large California companies eager to capitalize on the region’s prospects and lower costs, at least compared to the West Coast.

• The Carson Cos. of Newport Beach, CA, acquired Bayport North Distribution Center in La Porte, about 25 miles southeast of Houston. The complex includes two industrial buildings totalling 565,000 sf built to handle cargo from the Port of Houston.
• The Khoshbin Co. of Irvine, CA bought the 18-building North Belt Industrial Park, a 474,000-sf complex on 30 acres in Houston near George Bush Intercontinental Airport.
• And, as reported in the last issue of IPJ, San Francisco-based AMB Property Corp. also picked up 913,000 sf of distribution space and 59 acres of developable land near Bush Intercontinental Airport. The purchase was part of a portfolio deal that included properties in Seattle, Dallas and Atlanta.

The single greatest catalyst for interest in the market is the Bayport Terminal expansion project, which was planned to siphon business from the congested California ports of Los Angeles and Long Beach. The first phase adds 720 acres of container yards, an intermodal rail yard holding up to six trains and a 124-acre industrial development area. According to Carson Cos. president Jim Flynn, plans by several of the firm’s distribution tenants to move some operations from Southern California to Houston played a major role in the company’s decision to buy the property. His firm plans to open a Houston office as a springboard for acquisition of more local properties.

Airport expansion, however, including development of a $180 million air cargo distribution center, drove both the AMB and Khoshbin buys. The distribution center will feature a 500,000-sf warehouse and an increase in ramp capacity to handle 20 wide-body aircraft. Though AMB senior vice president John Meyer says the Houston airport is not as dynamic as Dallas-Fort Worth’s, additional flight links with Central and South America promise a substantial boost in cargo traffic in coming years. Activity is projected to increase about 4% annually, exceeding 800,000 tons by 2017.

Californians aren’t the only ones showing interest in Houston. Atlanta-based IDI, Indianapolis-based Duke Realty Corp. and El Paso, TX-based Verde Realty all made first-time entries into the market in the past year, including establishment of regional offices. Duke opened its Houston office in March but didn’t make its first industrial buy until October, when it purchased two parcels totaling more than 100 acres in the city’s rapidly growing north and northwest markets.