Industrial Space Under Construction Nearly Doubles

HOUSTON—Sound fundamentals, population growth, e-commerce logistics requirements, and innovations in building design and utilization continue to drive the rapid evolution of the industrial property sector across North America, according to a recent report by Avison Young. Major online players are altering the supply chain, and new technologies and innovations are determining how, where and what type of industrial product is being built. Meanwhile, the needs of big data are adding to an already crowded playing field.

An undersupply of available space remains a central issue in most markets, and developers have responded with notable new construction to anticipate occupiers’ growing needs. That is certainly the case in Houston where the industrial market remains the strongest commercial real estate sector. Here, industrial properties cater to the logistics requirements of e-commerce and last-mile distribution hubs. The Port of Houston continues to experience robust activity with petrochemical companies leading the charge.

Industrial is expected to continue to prosper as the economic outlook for the downstream energy market remains optimistic. Both crude oil prices and the rig count have shown steady improvement year-over-year, up 25.6% and 17.3%, respectively, as of March 2018. Employment rates are on the rise, and the Greater Houston Partnership calls for job growth in 14 sectors–a potential addition of 45,500 jobs in 2018.

Houston’s vacancy rate of 4.8% fell slightly from a year ago below the current national average of 5%. Overall industrial vacancy fell 50 basis points year-over-year to 4.8% in the first quarter of 2018. The amount of space under construction–8.2 million square feet at the end of the first quarter–was nearly double compared with one year earlier. Hurricane Harvey did minimal damage to industrial buildings and, in fact, impacted the market positively by spurring demand for warehouse space for building materials as home-rebuilding continued. Average asking rental rates remained relatively steady year-over-year, finishing the first quarter of 2018 at $6.49 per square foot.

Construction in Houston doubled in the last 12 months and demand has been primarily concentrated around the Port of Houston. The industrial submarket surrounding the port has experienced a tremendous amount of activity because of increased volumes of cargo on the waterways. Northwest Houston has 3.5 million square feet of industrial space underway. Southwest Houston is also registering strong activity with several valve, metal-alloy and tire companies expanding in the area.

One recent example of a new project in the Southeast submarket is Victory Commerce Center being built by Crow Holdings Industrial, the industrial development division of Dallas‐based Crow Holdings. The 349,050-square-foot class-A cross-dock tilt-wall distribution building will feature 32-foot clear height, 185-foot truck aprons, ample car parking and outside storage. Delivery is slated for the first quarter 2019.

The property will serve the needs of the rapidly expanding petrochemical industry and the Port of Houston. The site provides access to Highway 225, Beltway 8, Highway 146 and Fairmont Parkway, allowing connectivity to all areas of the petrochemical and Port of Houston complex.

“We are excited to kick off this project and offer a modern state-of-the-art distribution facility to a wide range of industrial users serving the expanding petrochemical and Port of Houston industries,” said Cory Driskill, Crow Holdings’ managing director.

The Colliers team of Jon Lindenberger, Walter Menuet and Paul Dominique will market the property for Crow Holdings Industrial. Lindenberger also represented Crow Holdings Industrial in the transaction.

ATTENTION! If you, your company or someone you know has made an indelible impact on the business of industrial real estate, we want to hear about it!  Submit a nomination to Real Estate Forum’s Industrial Influencers before the June 15th deadline.