1Q 2019 Houston Industrial Market Brief by Holt Lunsford Commercial

Market Brief...

Houston

INDUSTRIAL

1Q19 Property Pictured Above: 4849 Homestead Road | Houston, Texas 77028

HOUSTON INDUSTRIAL MARKET BRIEF 1Q 2019

WHY HLC’S HOUSTON INDUSTRIAL REPORT IS DIFFERENT At HLC, we believe that superb customer service and professional expertise are two of the cornerstones to delivering great service to our clients in the real estate industry. And in real estate, professional expertise is achieved largely by having excellent market knowledge. This month, you will receive several reports focusing on Houston’s industrial real estate. These reports will be filled with data and statistics, but will these numbers be the right numbers? Our market report stands apart because we track and analyze the data unlike anyone else. Our report contains only data and statistics for institutional-grade, dock-high and semi-dock buildings. Additionally, our report only tracks concrete tilt-wall and masonry buildings, which means all metal construction has been removed from our data set. While grade-level, metal, and manufacturing buildings play an important role in Houston’s industrial market, we believe they should be tracked separately from typical institutional-grade warehouses. Does this change in the underlying data set make a difference in the final statistics? You bet it does. Most reports focusing on Houston’s industrial market will likely peg the overall vacancy rate at between 5 and 6 percent. However, when you redefine the base data set to focus only on institutional product, a different picture emerges. Specifically, the vacancy factor increases substantially to 7.7 percent. While this isn’t positive news for our landlord clients, it is important that our clients are making good decisions based on solid and correct information. Another significant feature that sets our report apart is our submarket boundaries. We noticed that most of the standard submarket definitions used in CoStar and other market reports are not consistent with how the submarkets actually behave. For example, in East Houston, Interstate 10 serves as the boundary between the NE and SE submarkets, but there are dozens of buildings that directly compete with each other on both sides of the freeway. We believe submarkets should show a complete picture of the surrounding competitive set, so we created our own based not on arbitrary physical boundaries like roads or neighborhoods, but on which buildings actually compete against each other within a specific region of the Houston market. We hope you enjoy reading our report and find the information useful. If you have any questions, please don’t hesitate to call or email a member of our team.

Sincerely, The HLC Houston Industrial Team

HOUSTON INDUSTRIAL MARKET BRIEF 1Q 2019

TABLE OF CONTENTS 1. HOUSTON INDUSTRIAL SUBMARKETS

1 2 3

2. OVERALL HOUSTON MARKET A. Industrial Trends & Transactions

B. Facts and Figures

2. SUBMARKET INTELLIGENCE A. Far West & Katy

B. C. D. E. F. G.

Northwest Houston North Houston Near East Houston Port Area South Houston Southwest Houston

HOUSTON HLC SUBMARKET COVERAGE

TOMBALL

FAR NORTH 1,635,538 SF

PRAIRIE VIEW SPRING

GEORGE BUSH INTERCONTINENTAL AIRPORT

CYPRESS

HUMBLE

LAKE HOUSTON

NORTH 30,397,932 SF

NORTHWEST 74,462,797 SF

MONT BELVIEU

NEAR EAST 20,511,995 SF KATY

BROOKSHIRE

HOUSTON

CBD 1,594,199 SF

SOUTHWEST 23,714,621 SF

FAR WEST/KATY 12,818,919 SF

SHIP CHANNEL

GALLERIA

PORT AREA 38,392,514 SF

BAY TOWN

PASADENA

MEDICAL CENTER

LA PORTE

SOUTH 20,873,978 SF

SUGAR LAND

ELLINGTON AIRPORT

RICHMOND MISSOURI CITY

HOBBY AIRPORT

TRINITY BAY

HLC tracks statistics, facts, and figures for institutional-grade industrial and flex warehouses within the submarkets detailed above. PEARLAND

HLC HOU

INDUSTRIAL TRENDS & TRANSACTIONS HLC OUTLOOK

INDUSTRIAL MARKET EXPERTS

The first quarter of 2019 can best be defined as the moment when construction starts in Houston’s industrial market took off and we officially entered the “hyper-supply” stage of the cycle. With around 20M SF of product currently either physically under construction or capitalized, to say we are experiencing a flood of new construction would be an understatement. While the Northwest, North, Port, and Southwest submarkets have seen the most activity, almost no major submarket is being neglected when it comes to developers’ appetite to build in Houston right now. During the first quarter, over 3M SF of new product was delivered, but absorption lagged at around 1M SF. Due to slow leasing activity, vacancy ticked upward to 7.7 percent marketwide in the first quarter from 7.0 percent in 4Q 2018 and unfortunately, we believe there is even more cause for concern moving forward. One indicator that should suggest caution is necessary is the availability rate—or, the total amount of space being marketed even if the building is still under construction or there is a tenant still occupying. The availability rate sat at 14.9 percent market-wide at the close of 1Q 2019, with almost 35M SF of warehouse space being actively marketed.

KELLY LANDWERMEYER

JOHN KRUSE

Managing Principal klandwermeyer@hlhouston.com 713.602.3762

Market Director jkruse@hlhouston.com 713.602.3756

TRENDS & TRANSACTIONS • The Northwest, North, Port, and Southwest submarkets are seeing the majority of Houston’s new industrial construction, with the North and Port submarkets leading the way. • With all of the new product set to be delivered this year, absorption will be a key indicator to gauge the overall health of the market. • Vacancy is lowest in the Southwest, South, and Far West submarkets. Moving forward, with most of Greater Houston’s population growth occurring west of the city, we expect more activity to occur in the southwestern MSA, especially in Fort Bend County.

Absorption

BRAD SEGRETO

CRAIG BEAN

Market Associate bsegreto@hlhouston.com 713.602.3758

Market Associate cbean@hlhouston.com 713.602.3752

vs. Prev. Qtr

vs. 12 Mths Ago

893,984

2,857,919

2,882,602

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

7.7%

7.0%

6.4%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

2,373,626

4,955,367

4,777,163

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

19,929,570

12,165,141

9,084,568

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

3,191,212

1,866,013

2,309,103

HLC HOU FACTS & FIGURES

OVERALL HOU

8.5%

5,000,000

8.0% 4,000,000 7.5% 7.0%

3,000,000

6.5% 2,000,000 6.0% 5.5%

1,000,000

5.0% 0

Market

Existing Inventory

4.5%

Vacancy

4.0%

# Bldgs.

Total RBA

Direct SF

Total SF

Vac. %

Far West/Katy

12,818,919

717,349

724,147

5.6%

Northwest

782

74,462,797

7,405,071

7,808,807

10.5%

North

285

30,397,932

2,209,169

2,317,023

7.6%

(1,000,000) 1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

Absorption

4Q 17

1Q 18

2Q 18

3Q 18

Deliveries

4Q 18

1Q 19

Vacancy

VACANCY - OVERALL HOU 9.0% 7.9%

7.7%

8.0% 7.0%

Near East

168

20,511,995

1,301,413

1,350,913

6.6%

Port

132

38,392,514

2,142,037

2,495,037

6.5%

5.0%

South

225

20,873,978

1,164,217

1,172,020

5.7%

3.0%

Southwest

245

23,714,621

874,872

913,844

3.9%

Far North

1,635,538

154,690

201,790

12.3%

CBD

1,594,199

198,405

12.4%

Totals

1,947

224,402,493

16,167,223

17,181,986

7.7%

7.3%

6.0%

4.0%

2.0% 0.4%

0.2%

1.0% 0.0%

1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

Direct

4Q 17

1Q 18

2Q 18

3Q 18

Sublet

4Q 18

1Q 19

Total

ABSORPTION - OVERALL HOU 8,000,000 7,000,000 6,000,000 5,000,000

YTD Net Absorption

YTD Deliveries

Under Construction SF

YTD Leasing Activity

Far West/Katy

31,480

131,954

993,870

33,957

Northwest

(2,204)

1,044,073

3,869,308

693,752

North

(82,673)

320,000

5,450,173

654,010

Near East

(41,380)

702,295

184,103

Port

891,915

1,217,830

5,961,906

404,632

121,540

25,000,000

Southwest

77,432

477,355

2,952,018

275,232

20,000,000

Far North

6,400

15,000,000

CBD

19,414

10,000,000

Totals

893,984

3,191,212

19,929,570

2,373,626

5,000,000

Market

4,000,000 3,000,000 2,000,000 1,000,000 0 (1,000,000)

South

Source: CoStar

1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

4Q 17

Total Net

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Leasing Activity

CONSTRUCTION - OVERALL HOU

0 1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

Delivered Inventory

3Q 17

4Q 17

1Q 18

2Q 18

3Q 18

Under Construction

4Q 18

1Q 19

SUBMARKET INTELLIGENCE FAR WEST & KATY

VITAL STATS KATY

BROOKSHIRE

12,818,919 SF

15.0%

1,500,000

10.0%

1,100,000

5.0%

700,000

0.0%

300,000

HLC OUTLOOK The Far West/Katy submarket follows along Interstate 10 and stretches from Highway 6 out to Brookshire and up and down the newly developed Grand Parkway. The submarket benefits from rapid population growth in West Houston, Katy, and the surrounding communities. Additionally, the submarket’s location along Interstate 10 and proximity to San Antonio and Austin (the seventh and eleventh largest U.S. cities, respectively) make it an attractive location for new regional e-commerce distribution centers. Vacancy ticked slightly upward from 4.9 percent to 5.6 percent in the first quarter, and with new speculative projects expected to come online in 2019, we expect vacancy to remain above 5 percent for the foreseeable future. The availability rate is currently 6.7 percent.

NEW DEVELOPMENTS • Clay Development & Construction’s 621,920 SF Pederson Distribution Park • First Industrial’s 371,950 SF First Grand Parkway Commerce Center

LARGE EXISTING VACANCIES • 28420 West Ten Boulevard – 238,000 SF • 22370 Merchants Way – 81,939 SF • 1325 S Creek Drive – 80,555 SF

-5.0%

(100,000) 1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

Absorption

3Q 17

4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

Deliveries

vs. Prev. Qtr

1Q 19

Vacancy

vs. 12 Mths Ago

31,480

850,388

1,415,636

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.6%

4.9%

2.7%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

33,957

109,092

43,764

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

993,870

221,394

956,665

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

131,954

520,880

1,016,000 Source: CoStar

SUBMARKET INTELLIGENCE NORTHWEST HOUSTON

SPRING

GEORGE BUSH INTERCONTINENTAL AIRPORT

VITAL STATS

11.0%

1,100,000

10.0%

74,462,797 SF 600,000

9.0% 8.0%

100,000

KATY

HOUSTON

7.0% -400,000

6.0% 5.0%

-900,000 4.0% 3.0%

-1,400,000 1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

Absorption

3Q 17

4Q 17

1Q 18

2Q 18

3Q 18

Deliveries

vs. Prev. Qtr

4Q 18

1Q 19

Vacancy

vs. 12 Mths Ago

(2,204)

540,621

(95,624)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

10.5%

9.2%

6.8%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

693,752

2,133,768

2,215,068

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

3,869,308 Delivered SF 1,044,073

2,001,791 vs. Prev. Qtr 124,915

HLC OUTLOOK The Northwest submarket is far and away the largest of the seven major submarkets we track. With over 74M SF of existing product, it is more than double the size of the second largest (the Port submarket). Geographically located north of Interstate 10, along the Highway 290 and West Sam Houston Parkway corridors, the submarket offers somewhat of a “Main and Main” location for industrial tenants. With easy access to a large population base, it is ideal for e-commerce and last mile businesses, as well as businesses that service household needs such as plumbing, flooring, cabinet, and other various building supply-related items. New speculative construction continues to occur in Northwest Houston, although land constraints are increasingly becoming a factor for developers to consider. Although the Northwest submarket has long been one of the strongest in Houston, we believe building owners and developers should proceed with caution here. The vacancy rate was 10.5 percent at the close of the first quarter, which is an increase from 9.2 percent in 4Q 2018. The availability rate is even more alarming at 15.1 percent. Currently, almost 4M SF of new product is under construction in Northwest Houston and it is hard to see all the new space being absorbed in the next 12-18 months.

NEW DEVELOPMENTS

2,689,312 vs. 12 Mths Ago Source: CoStar

HUMBLE

CYPRESS

• Hines’ 1,286,740 SF Grand National Business Park • Transwestern’s 833,720 SF Sam Houston Distribution Center • Panattoni’s 806,360 SF 249 Business Park • Crow Holdings’ 458,280 SF Highland Grove Business Park • Molto Properties’ 136,651 SF 290 Northwest Business Center

LARGE EXISTING VACANCIES • • • • •

10700 Telge Road – 401,753 SF 9800 Derrington Road – 368,467 SF 4414 Hollister Road – 234,215 SF 3480 W 11th Street – 191,520 SF 8100 Kempwood Drive – 181,313 SF

SUBMARKET INTELLIGENCE NORTH HOUSTON

TOMBALL

SPRING

GEORGE BUSH INTERCONTINENTAL AIRPORT

VITAL STATS

HUMBLE

18.0%

1,000,000

LAKE HOUSTON

800,000

16.0%

30,397,932 SF 600,000 14.0% 400,000

HOUSTON

12.0% 200,000

HLC OUTLOOK

10.0% 0

The North submarket is defined as the area between Veterans Memorial Drive to the west and Highway 59/Interstate 69 to the east moving north from Loop 610 all the way to Montgomery County. The submarket provides a strategic location for companies looking for convenient access to George Bush Intercontinental Airport, as well as three of Houston’s most critical thoroughfares: Interstate 45, Sam Houston Parkway, and Highway 59/Interstate 69. This submarket has been one of the fastest growing submarkets in recent years, growing by approximately 39 percent on a square footage basis since 2010 (there was 18,544,317 SF of product existing at the close of 2010 compared to 30,397,932 SF today). The first quarter of 2019 saw negative absorption for the first time in almost three years for the North submarket and vacancy increased from sub-7 percent last quarter to 7.6 percent. There is currently over 5M SF of new product under construction (although a portion of that number is pre-leased/build-to-suits). With all this new development, we should see vacancy continue to rise throughout 2019 and potentially into 2020. To that end, the availability rate is currently 18.4 percent. It will take extremely strong absorption numbers throughout 2019 to account for most of the new space coming online.

NEW DEVELOPMENTS • Davis Commercial Development’s 515,780 SF Cypress Preserve Logistics Center • Crow Holdings’ 529,034 SF Layne Crossing • Archway Property / Ridgeline / USAA’s 685,400 SF Park Air 59 • East Group’s 160,000 SF World Houston 45

LARGE EXISTING VACANCIES

• 600 Fallbrook Drive – 250,681 SF • 16680-16684 Air Center Boulevard – 119,125 SF • 971 N Sam Houston Parkway E – 118,100 SF • 16605 Air Center Boulevard – 114,400 SF

8.0%

(200,000)

6.0%

(400,000) 1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

Absorption

3Q 17

4Q 17

1Q 18

2Q 18

3Q 18

Deliveries

vs. Prev. Qtr

4Q 18

1Q 19

Vacancy

vs. 12 Mths Ago

(82,673)

437,122

252,444

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

7.6%

6.4%

10.4%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

654,010

867,266

872,968

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

5,450,173

2,835,509

939,126

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

320,000

0 Source: CoStar

SUBMARKET INTELLIGENCE NEAR EAST HOUSTON

VITAL STATS

20,511,995 SF

7.0%

300,000

6.0%

HOUSTON

200,000

5.0%

SHIP CHANNEL

100,000 4.0% 0 3.0%

MEDICAL CENTER

PASADENA

(100,000) 2.0% (200,000)

1.0%

0.0%

(300,000) 1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

Absorption

3Q 17

4Q 17

1Q 18

2Q 18

3Q 18

Deliveries

vs. Prev. Qtr

4Q 18

1Q 19

Vacancy

vs. 12 Mths Ago

(41,380)

33,969

61,313

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.6%

6.4%

5.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

184,103

290,066

417,728

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

702,295

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

Source: CoStar

HLC OUTLOOK Geographically, the Near East submarket borders downtown Houston and runs east, ending outside of Loop 610. This submarket is home to a large amount of product built in the 1970s and 1980s, making it one of the oldest industrial hubs in the metro region. There has been little new construction in this submarket over the last 20 years and the typical tenant here has historically been more price-sensitive relative to other parts of Houston. Historically, a large amount of third-party logistics companies (3PL) have called the Near East submarket home, and we continue to see requirements for 3PLs on this side of town. Vacancy stood at 6.6 percent at the close of the first quarter, but we expect that number to rise as we move toward the third and fourth quarters of 2019 due to a few large tenants giving back space, coupled with some new construction coming online for the first time in several years. To that end, the availability rate currently sits at 9.2 percent.

LARGE EXISTING VACANCIES • 8705 Citypark Loop – 191,603 SF • 221 Portwall Street – 162,178 SF • 4849 Homestead Road – 102,681 SF • 8979-8999 Market Street – 116,195 SF

SUBMARKET INTELLIGENCE PORT AREA

MONT BELVIEU

HOUSTON

38,392,514 SF

VITAL STATS

BAY TOWN

SHIP CHANNEL

GALLERIA

10.0% PASADENA

MEDICAL CENTER

3,000,000

9.0%

LA PORTE HOBBY AIRPORT

2,500,000

8.0% 2,000,000

7.0%

ELLINGTON AIRPORT TRINITY BAY

PEARLAND

HLC OUTLOOK The Port submarket is largely defined by its strategic location near the Port of Houston, its proximity to Gulf Coast plants and refineries, and the extensive multi-modal transportation infrastructure in the area, including an extensive rail network. The submarket allows for quick access to and from both the Barbours Cut container terminal and the Bayport container terminal, where almost all foreign inbound shipments of goods come into the Houston market. Vacancy increased to 6.5 percent from 5.8 percent in the previous quarter largely due to over 1M SF of new deliveries coming online in 1Q 2019. With over 5M SF of new product under construction currently, the Port submarket could see vacancy creep up further as we move along into summer. The availability rate currently sits at 11.1 percent.

NEW DEVELOPMENTS • Principal Financial Group’s 1.3M SF Bay Area Business Park Phase III • Johnson Development Associates’ 248,240 SF Bayport South Business Park Phase III • Triten Real Estate Partners’ 102,863 and 233,190 SF Bayport North Logistics Center I and II

LARGE EXISTING VACANCIES • 359 Old Underwood Road – 350,000 SF • 2851 E Pasadena Boulevard (Victory Commerce Center) – 349,050 SF • 2700 East Freeway – 294,323 SF • 4311 Malone Drive – 207,425 SF • 1706 S 16th Street – 157,200 SF

6.0%

1,500,000

5.0% 1,000,000

4.0% 3.0%

500,000

2.0% 0

1.0% 0.0%

(500,000) 1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

Absorption

4Q 17

Deliveries

vs. Prev. Qtr

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Vacancy

vs. 12 Mths Ago

891,915

522,844

1,187,967

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.5%

5.8%

3.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

404,632

915,191

588,815

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

5,961,906

3,872,859

3,859,929

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,217,830

1,220,218

1,138,442 Source: CoStar

SUBMARKET INTELLIGENCE SOUTH HOUSTON

HOUSTON SHIP CHANNEL

GALLERIA

VITAL STATS

PASADENA

MEDICAL CENTER

6.0%

400,000

20,873,978 SF

300,000 5.0%

HOBBY AIRPORT

200,000 100,000

4.0%

ELLINGTON AIRPORT MISSOURI CITY

(100,000) 3.0%

(200,000) (300,000)

2.0%

(400,000) 1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

Absorption

3Q 17

4Q 17

1Q 18

2Q 18

3Q 18

Deliveries

vs. Prev. Qtr

4Q 18

1Q 19

Vacancy

vs. 12 Mths Ago

(25,042)

(52,200)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.7%

4.6%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

121,540

148,619

264,892

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

38,500

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

Source: CoStar

HLC OUTLOOK The South submarket benefits from its proximity to Houston’s Medical Center just south of downtown and is defined by a high volume of flex buildings designed to service the wide range of health care providers within the Medical Center. Geographically, the submarket stretches from just north of Loop 610 south to Beltway 8. With just over 20M SF of product, the South submarket is the third smallest of the seven major submarkets we track in Houston. Large portions of this area have not been developed yet, making this submarket potentially the least land-constrained. However, due to the lack of population growth relative to the western submarkets, there has not been a strong demand for new development in this area. At the close of 1Q 2019, vacancy was 5.7 percent in the South submarket, which was unchanged from the previous quarter. The availability rate was 10.7 percent.

DEALS ON THE MARKET • Texas Technology Park – 569,661 SF

PEARLAND

LARGE EXISTING VACANCIES • 411 Brisbane Street – 345,100 SF • 750 Almeda Genoa Road – 125,000 SF • 3203 S Sam Houston Parkway E – 108,000 SF • 1903-1977 Tellepsen Drive – 72,319 SF • 3440 S Sam Houston Parkway E – 72,070 SF

SUBMARKET INTELLIGENCE SOUTHWEST HOUSTON

HOUSTON

23,714,621 SF GALLERIA

VITAL STATS

MEDICAL CENTER

10.0%

1,200,000

9.0% SUGAR LAND

1,000,000

8.0% 800,000

7.0% RICHMOND

MISSOURI CITY

6.0%

600,000

5.0%

HLC OUTLOOK The Southwest submarket encompasses most of Southwest Houston outside of Loop 610, stretching from the Westchase area to the north, all the way south to the cities of Stafford and Sugar Land located in Fort Bend County. The submarket has seen steady growth in new construction over the last several years and it continues to increase with new speculative projects breaking ground during the first quarter along the Sam Houston Parkway. The businessfriendly local governments in Fort Bend County and available Triple Freeport Tax Exemption are two big reasons why we’ve seen so much activity in the Southwest submarket. Furthermore, the labor demographics in the area are excellent and rapid population growth—which has been the norm for over a decade in Fort Bend County—is expected to continue in this region. Vacancy was 3.9 percent at the close of the first quarter; however, availability was significantly higher at 10.5 percent. This is largely due to several large projects that are currently under construction and expected to be complete by the end of 2019. The storyline to watch will be how much of this new space is absorbed and how much is left on the market when the dust settles.

NEW DEVELOPMENTS • Transwestern’s Southwest Commerce Center – 477,355 SF • Hines’ Boulevard Oaks Business Park – 429,625 SF

400,000

4.0%

LARGE EXISTING VACANCIES • • • • •

1631 Gillingham Lane – 88,200 SF 12505 Reed Road – 68,893 SF 12315 Parc Crest Drive – 66,626 SF 14453 Hillcroft Street – 56,250 SF 12121 McLain Road – 54,340 SF

3.0%

200,000

2.0% 0

1.0% 0.0%

(200,000) 1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

Absorption

3Q 17

4Q 17

1Q 18

2Q 18

3Q 18

Deliveries

vs. Prev. Qtr

4Q 18

1Q 19

Vacancy

vs. 12 Mths Ago

77,432

398,811

164,067

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

3.9%

4.2%

7.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

275,232

586,804

386,822

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,952,018

906,980

596,500

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

Source: CoStar

DALLAS

5950 Berkshire Lane Suite 900 Dallas, Texas 75225 T 972.241.8300 F 972.241.7955

FORT WORTH

300 Throckmorton Street Suite 550 Fort Worth, Texas 76102 T 817.710.1110 F 817.810.9017

www.holtlunsford.com

HOUSTON

11451 Katy Freeway Suite 300 Houston, Texas 77079 T 713.850.8500 F 713.850.8550