HOUSTON—In commercial real estate, vacancy can greatly increase (or decrease) depending on the net absorption of new deliveries that add to existing vacant or occupied stock. Also, deliveries year over year under low net absorption can lead to increases in vacancy.
The Northwest industrial market has had low vacancy since 2006, with only a modest uptick in 2016 with the large deliveries in 2015, says Houston-based NAI Partners. From 2005 to 2008, the Northwest corridor had a modest surge in new deliveries each year, which was balanced by annual net absorption that matched annual deliveries. This kept vacancy at 4 to 6%, the brokerage indicates.
From 2012 to 2015, there was another surge in construction and new deliveries, which was also largely balanced by net absorption, with the exception of 2015, leading to a modest uptick in vacancy to 6.7% in 2016. Overall, the Northwest market has remained relatively stable with new supply (deliveries) matched by demand (net absorption) from 2006 to 2014, resulting in low vacancies of 3.7 to 6.7%, according to NAI Partners.
With balanced supply and demand in the Northwest market, construction and new deliveries have spread to and increased in the North corridor. Specifically, following few deliveries, modest net absorption, and falling vacancies from 2009 to 2012, substantial increases in new deliveries occurred from 2012 to 2015 which have not been balanced by net absorption. This has led vacancy to climb from 4.9 to 9.3%, says NAI Partners.
J. Nathaniel Holland, Ph.D. chief research and data scientist, NAI Partners, tells GlobeSt.com: “The North Corridor has experienced great growth (new deliveries) that has not yet been matched by new demand, leading to a modestly overbuilt market with high vacancy in 2016.”
The Southeast corridor, on the other hand, appears to be under-supplied with reasonably strong demand. After substantial construction and new deliveries from 2005 to 2009, vacancy in the Southeast market climbed to a high 11.6%. From 2010 to 2014, the Southeast market had few new deliveries, balanced by net absorption, leading each successive year to decline in vacancy to a low 3.4% in 2015, says NAI. The Southeast market remains strong, whereby supply and demand are in a balanced growth stage.
With three major industrial submarkets differing so greatly in supply and demand, the availability of various sizes of buildings differs among these three submarkets. The Southeast and Northwest markets have similar availabilities for the different building size classes, while the North market has substantially greater availability, and in the case of 100,000 square feet or more, with excessive availability nearing 20%.
Join the conversation March 29 at RealShare HOUSTON. Click here for more details on Houston CRE's premier information and networking event.
HOUSTON—In commercial real estate, vacancy can greatly increase (or decrease) depending on the net absorption of new deliveries that add to existing vacant or occupied stock. Also, deliveries year over year under low net absorption can lead to increases in vacancy.
The Northwest industrial market has had low vacancy since 2006, with only a modest uptick in 2016 with the large deliveries in 2015, says Houston-based NAI Partners. From 2005 to 2008, the Northwest corridor had a modest surge in new deliveries each year, which was balanced by annual net absorption that matched annual deliveries. This kept vacancy at 4 to 6%, the brokerage indicates.
From 2012 to 2015, there was another surge in construction and new deliveries, which was also largely balanced by net absorption, with the exception of 2015, leading to a modest uptick in vacancy to 6.7% in 2016. Overall, the Northwest market has remained relatively stable with new supply (deliveries) matched by demand (net absorption) from 2006 to 2014, resulting in low vacancies of 3.7 to 6.7%, according to NAI Partners.
With balanced supply and demand in the Northwest market, construction and new deliveries have spread to and increased in the North corridor. Specifically, following few deliveries, modest net absorption, and falling vacancies from 2009 to 2012, substantial increases in new deliveries occurred from 2012 to 2015 which have not been balanced by net absorption. This has led vacancy to climb from 4.9 to 9.3%, says NAI Partners.
J. Nathaniel Holland, Ph.D. chief research and data scientist, NAI Partners, tells GlobeSt.com: “The North Corridor has experienced great growth (new deliveries) that has not yet been matched by new demand, leading to a modestly overbuilt market with high vacancy in 2016.”
The Southeast corridor, on the other hand, appears to be under-supplied with reasonably strong demand. After substantial construction and new deliveries from 2005 to 2009, vacancy in the Southeast market climbed to a high 11.6%. From 2010 to 2014, the Southeast market had few new deliveries, balanced by net absorption, leading each successive year to decline in vacancy to a low 3.4% in 2015, says NAI. The Southeast market remains strong, whereby supply and demand are in a balanced growth stage.
With three major industrial submarkets differing so greatly in supply and demand, the availability of various sizes of buildings differs among these three submarkets. The Southeast and Northwest markets have similar availabilities for the different building size classes, while the North market has substantially greater availability, and in the case of 100,000 square feet or more, with excessive availability nearing 20%.
Join the conversation March 29 at RealShare HOUSTON. Click here for more details on Houston CRE's premier information and networking event.
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
