Market Brief...
Houston
INDUSTRIAL
1Q2021 Property Pictured Above: West by Northwest Industrial Park | 5910 West By Northwest Boulevard, Houston, Texas 77040
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HOUSTON INDUSTRIAL MARKET BRIEF 1Q 2021
WHY HLC’S HOUSTON INDUSTRIAL REPORT IS DIFFERENT At HLC, we believe that customer service and market knowledge are two of the cornerstones to delivering great service to our clients in the real estate industry, and one way we strive to provide both is through our quarterly market updates. Our Houston industrial market report stands apart because we track and analyze data unlike most others. For example, our report contains only statistics for institutional-grade distribution and flex buildings. While we recognize that specialized manufacturing buildings play an important role in Houston’s industrial market, we believe they should be tracked separately from typical institutional-grade distribution and flex warehouses. 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 in most other reports, but there are dozens of buildings that directly compete on both sides of the Interstate. 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.
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HOUSTON INDUSTRIAL MARKET BRIEF 1Q 2021
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
4
B. C. D. E. F. G. H.
Northwest Houston North Houston Far North Near East Houston Port Area South Houston Southwest Houston
HOUSTON
15,456,933 3,977,694
CONROE
HLC SUBMARKET COVERAGE
MAGNOLIA
THE WOODLANDS
NEW CANEY
FAR NORTH 4,806,752 SF
PRAIRIE VIEW
TOMBALL SPRING
DAYTON
NORTH 52,254,155 SF CYPRESS
GEORGE BUSH INTERCONTINENTAL AIRPORT
HUMBLE
NORTHWEST 105,502,381 SF
LAKE HOUSTON
PORT AREA 51,798,701 SF
MONT BELVIEU
BROOKSHIRE
NEAR EAST 25,044,850 SF
KATY
HOUSTON BAY TOWN
FAR WEST 23,290,911 SF
SHIP CHANNEL
GALLERIA
MEDICAL CENTER
SOUTHWEST 47,352,771 SF SUGAR LAND
SOUTH 24,343,818 SF
PASADENA LA PORTE HOBBY AIRPORT
HLC tracks statistics, facts, and figures for institutional-grade industrial and flex warehouses within the submarkets detailed above. RICHMOND
5
ELLINGTON AIRPORT TRINITY BAY
HLC HOU
INDUSTRIAL TRENDS & TRANSACTIONS HLC OUTLOOK
INDUSTRIAL MARKET EXPERTS
Market-wide vacancy for distribution and flex product stood at 12.2% at the close of 1Q 2021. Net absorption during 1Q 2021 was 1,636,896 SF and new deliveries came in at 3,239,354 SF, the lowest single-quarter total since 1Q 2019. Total leasing activity was strong at 7,151,406 SF. 2020 saw record absorption for the Houston market and, although the sub-2M SF absorption number is not quite on track with last year’s pace, all signs point to 2021 being another above-average year in Houston. We expect that vacancy will begin to trend downward in the coming quarters as leasing activity remains strong.
TRENDS & TRANSACTIONS • During the 1Q 2021, Houston saw an uptick of third-party logistics and last-mile CRAIG BEAN
JOHN KRUSE
Managing Principal Houston Industrial Leasing cbean@holtlunsford.com 713.602.3752
Senior Vice President Houston Industrial Leasing jkruse@holtlunsford.com 713.602.3756
delivery companies that are new to the market leasing space in first generation buildings. 4XP Express leased 347,730 SF at Boulevard Oaks Business Park, Awesung leased 239,124 SF at Southwest Commerce Center, and Cart.com leased 108,186 SF at Northwest Crossing, just to name a few.
• The Southwest submarket saw 1,438,475 SF of leasing activity in the first quarter,
marking the third quarter in a row the submarket has experienced more than 1M SF of leasing activity. Several of the deals completed in the first quarter have 2Q or 3Q commencement dates, which will help to decrease the vacancy factor from its current 10.2% at the close of 1Q 2021.
• The Port submarket experienced 420,402 SF of leasing activity and 1,028,722 SF of
net absorption due to a host of deals signed in 2020 commencing during 1Q 2021. On the new construction front, Cedar Port Trade Center, which is being developed by Hunt Southwest and is the first ever 1M SF spec building to be built in Houston, is scheduled to be complete in 2Q 2021 and is located in Baytown’s Cedar Port Industrial Park. Absorption
KELLY LANDWERMEYER
CARTER HOLMES
Senior Vice President Houston Industrial Leasing klandwermeyer@holtlunsford.com 713.602.3762
Market Analyst Houston Industrial Leasing cholmes@holtlunsford.com 713.602.3751
6
vs. Prev. Qtr
vs. 12 Mths Ago
1,636,896
5,778,299
2,854,151
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
12.2%
11.9%
10.1%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
7,151,406
8,047,565
7,089,241
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
14,695,484
11,068,452
18,708,649
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
3,239,354
8,350,715
8,754,664
HLC HOU FACTS & FIGURES
OVERALL HOU
13.0%
9,000,000
12.0%
8,000,000
11.0%
7,000,000 6,000,000
10.0%
5,000,000
9.0%
4,000,000 8.0%
3,000,000
7.0%
Market
Existing Inventory
Vacancy
1,000,000
5.0%
# Bldgs.
Total RBA
Direct SF
Total SF
Vac. %
Far West
146
23,290,911
2,820,936
2,820,936
12.1%
Northwest
1,311
105,502,381
10,869,358
11,350,146
10.8%
North
550
52,254,155
10,678,468
10,698,284
20.5%
Far North
41
4,806,752
157,621
157,621
3.3%
Near East
238
25,044,850
2,775,374
2,845,426
11.4%
Port
278
51,798,701
6,426,012
6,587,155
12.7%
South
352
24,343,818
1,523,282
1,609,437
6.6%
Southwest
832
47,352,771
4,771,468
4,830,271
10.2%
3,748
334,394,339
40,022,519
40,899,276
12.2%
Totals
2,000,000
6.0%
0
4.0%
(1,000,000) 1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
Absorption
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
Deliveries
1Q 21
Vacancy
VACANCY - OVERALL HOU 14.0% 12.2% 12.0% 12.0% 10.0% 8.0% 6.0% 6.0% 5.7% 4.0% 2.0% 0.4%
0.3% 0.0%
1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
Direct
4Q 19
1Q 20
2Q 20
3Q 20
Sublet
4Q 20
1Q 21
Total
ABSORPTION - OVERALL HOU 9,000,000
8,000,000 7,000,000 6,000,000
YTD Net Absorption
YTD Deliveries
Under Construction SF
YTD Leasing Activity
Far West
141,030
1,036,057
1,415,861
892,521
Northwest
68,459
134,800
1,961,661
2,441,592
North
170,421
988,707
1,043,600
1,199,289
Far North
415,442
402,300
2,112,000
24,774
Near East
(599,720)
0
-
503,721
Port
1,028,722
436,046
3,029,157
420,402
25,000,000
South
18,822
112,000
587,911
172,175
20,000,000
Southwest
393,720
129,444
4,545,294
1,496,932
15,000,000
1,636,896
3,239,354
14,695,484
7,151,406
Market
5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 (1,000,000)
Totals
1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
4Q 19
1Q 20
Total Net
2Q 20
3Q 20
4Q 20
1Q 21
Leasing Activity
CONSTRUCTION - OVERALL HOU
10,000,000
5,000,000
Source: CoStar
0 1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
Delivered Inventory
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Under Construction
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SUBMARKET INTELLIGENCE FAR WEST
VITAL STATS
BROOKSHIRE
14.0%
KATY
4,400,000 3,900,000
12.0%
23,290,911 SF
3,400,000 10.0% 2,900,000 8.0%
2,400,000 1,900,000
6.0%
1,400,000
4.0%
900,000 2.0%
400,000
0.0%
(100,000) 1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
Absorption
Absorption
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
Deliveries
vs. Prev. Qtr
1Q 21
Vacancy
vs. 12 Mths Ago
141,030
4,104,482
110,682
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
12.1%
8.7%
9.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
892,521
80,901
926,109
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
1,415,861
1,555,288
5,091,671
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
1,036,057
4,386,701
1,147,050
SUGAR LAND
The Far West submarket is located west along Interstate 10 stretching west from Highway 6 past Brookshire encompassing areas in Harris, Fort Bend, and Waller counties. The submarket benefits from immediate access to Interstate 10, convenient city-wide connectivity via the Grand Parkway, continued population growth in West Houston and Katy, and the ability to serve multiple major cities in Texas such as Houston, San Antonio, and Austin from a single location. As Houston’s population continues to grow west, the submarket’s strategic location will make it an attractive option for new regional e-commerce distribution centers. Prominent tenants and users in this submarket include Medline, Goya Foods, Rooms-to-Go, Amazon, Costco, Bel Furniture, Academy Sports + Outdoors, and Igloo. Vacancy increased to 12.1% in 1Q 2021 from 8.6% in 4Q 2020. The Far West submarket experienced a modest positive 132,030 SF of absorption during 1Q 2021. This small amount is direct contrast to the record positive 4,104,166 SF of absorption during 4Q 2020 due to substantial tenants such as Ross Dress for Less (2.16M SF), Medline (1.3M SF), and Amazon (805K SF) taking occupancy of completed design-builds that occurred during 4Q 2020. The supply of new construction continues to increase with 1,036,057 SF of deliveries during 1Q 2021 with the completion of Phase 1 at Empire West Business Park. The 1,287,461 SF under construction at the end of the 1Q 2021 is represented by several larger projects such as The Upland Twinwood DC 1 and Jordan Distribution Center. The submarket continues to attract both larger owner-user and design-build tenants.
NEW DEVELOPMENTS • Empire West Business Park | Phase 1 – a 1,036,057 SF development with Stream Realty • The Uplands Twinwood DC 1 – a 737,630 SF development with Clay Development/Exeter • Jordan Ranch Distribution Center – a 498,231 SF development with Phelan Bennett/WPT REIT • Stonelake West Ten – a 195,974 SF development with Stonelake Capital Partners • 7737 Cherokee Road – a 184,205 SF development with IDV/Alto Real Estate Funds
LARGE EXISTING VACANCIES Source: CoStar
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HLC OUTLOOK
• • • • • •
Empire West 3 – 750,775 SF Clay 99 Building Five – 433,200 SF Pederson Distribution Center – 205,200 SF Cane Island Business Center 197,400 SF First Grand Parkway Building 1 – 173,045 SF Empire West 1 – 163,144 SF
SUBMARKET INTELLIGENCE NORTHWEST HOUSTON
MAGNOLIA
THE WOODLANDS
PRAIRIE VIEW
TOMBALL
VITAL STATS
SPRING
GEORGE BUSH INTERCONTINENTAL AIRPORT
CYPRESS
14.0%
2,500,000
105,502,381 SF
2,000,000 12.0% 1,500,000
BROOKSHIRE
KATY
HOUSTON
10.0%
1,000,000
GALLERIA
500,000 8.0% 0
HLC OUTLOOK The Northwest submarket is the largest of the eight submarkets HLC tracks in Houston with more than 105M SF of product. Geographically located north of Interstate 10 along the Highway 290 and West Sam Houston Parkway corridors, the submarket has historically offered a “Main and Main” location for distribution tenants needing to be close to the regional population center. New development has continued to creep further out along Highway 290 in recent years due to the lack of available land sites near Beltway 8. The vacancy rate in the Northwest submarket stood at 10.8% at the close of 1Q 2021 which is a slight increase from the previous quarter’s 10.7% number. The submarket experienced leasing activity of 2,243,604 SF, and only saw one delivery equaling 134,800 SF. Currently, we are tracking 1,961,661 SF of product under construction with most of that being speculative.
NEW DEVELOPMENTS • Nexus Park NW – a four (4) building 518,608 SF project with Jackson Shaw • Seton Lake Logistics Center – a 259,654 SF development with Trammell Crow • Amazon BTS at Republic Business Center – a 141,360 SF development with National Property Holdings • Home Depot BTS at Republic Business Center – a 657K SF development with National Property Holdings
LARGE EXISTING VACANCIES • • • • •
Sam Houston Distribution Center | Building 2 – 494,800 SF 7301-7401 Security Way – 296,839 SF 3408 W 11th Street – 279,400 SF 4414 Hollister Road – 234,215 SF Telge 290 Logistics Center – 207,635 SF
6.0%
-500,000 -1,000,000
4.0% -1,500,000 2.0%
-2,000,000 1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
Absorption
Absorption
3Q 19
4Q 19
Deliveries
vs. Prev. Qtr
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Vacancy
vs. 12 Mths Ago
68,459
58,077
277,388
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
10.8%
10.7%
10.1%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
2,441,592
2,293,954
2,529,281
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
1,961,661
752,754
2,354,074
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
134,800
180,695
2,081,959 Source: CoStar
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SUBMARKET INTELLIGENCE NORTH HOUSTON
VITAL STATS
SPRING
23.0% 21.0%
2,600,000
19.0%
GEORGE BUSH INTERCONTINENTAL AIRPORT
2,100,000
52,254,155 SF
17.0%
13.0%
1,100,000
11.0%
600,000
9.0% 100,000
7.0% 5.0%
(400,000) 1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
Absorption
Absorption
4Q 19
Deliveries
vs. Prev. Qtr
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Vacancy
vs. 12 Mths Ago
170,421
(133,365)
689,477
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
20.5%
19.3%
14.7%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
1,199,289
971,117
832,201
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
988,707
2,293,707
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
1,787,539
HLC OUTLOOK The North 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. For instance, in the last two calendar years, the North submarket has seen over 11M SF of new industrial deliveries. That number equals more than one-fourth of the entire submarket’s square footage at the end of 2018. 1Q 2021 saw vacancy tick up to 20.5% in the North submarket as the historic levels of new construction continue to create challenges. Leasing activity was strong at 1,199,289 SF for the quarter while net absorption was 170,421 SF. Due to the strong leasing activity and several large lease deals that are rumored to be close to execution as of the close of 1Q, we expect vacancy to begin to tick down during the spring and summer months. With only 1,043,600 SF of spec construction currently in the pipeline (significantly less than any quarter since 2018), there will be an opportunity for this submarket to “catch its breath” and start to work through all of the supply on the ground this calendar year.
NEW DEVELOPMENTS
1,043,600
2,570,959 Source: CoStar
10
LAKE HOUSTON
1,600,000
15.0%
988,707
HUMBLE
• Park 505 at Hardy – a 534K SF project with IDV and Sealy • 59 Logistics Center – a 509,600 SF project with Hunt Southwest
LARGE EXISTING VACANCIES • • • •
Air 59 Logistics Center – 685,400 SF Generation Park (Lincoln Property Company) – 648,720 SF Kennedy Greens Distribution Center – 524,160 SF Cypress Preserve Logistics Center Building 2 – 258K SF
SUBMARKET INTELLIGENCE FAR NORTH
WILLIS LAKE CONROE
MONTGOMERY
CLEVELAND
CONROE
VITAL STATS
4,806,752 SF 12.0%
MAGNOLIA
THE WOODLANDS
PRAIRIE VIEW
900,000
NEW CANEY
10.0%
TOMBALL SPRING
700,000
DAYTON
HUMBLE
8.0% 500,000 6.0%
HLC OUTLOOK The Far North submarket begins at the southern edge of Montgomery County and stretches north all the way past Conroe. Population growth and access to the DFW market are just some attributes that make the Far North submarket attractive to end users. Another important driver of activity here are local tax incentives offered by Montgomery County and municipalities in order to attract businesses. This emerging submarket is home to several large consumer goods tenants such as Five Below, Wal-Mart, CVS, Home Depot, American Furniture Warehouse, and a recently announced 1.5M SF Lowe’s distribution center that has just kicked off construction. Vacancy sat at 3.3% at the end of 1Q 2021 in the Far North submarket. Currently, construction activity here is limited to two large BTS projects, a 1.5M SF building for Lowe’s in New Caney and a 612K SF Home Depot BTS in Conroe. If this area in the Houston metro continues to pick up traction for big box distribution centers, we could see speculative construction gain traction here as well. As of now, almost all new activity has been of the owner-user or build-tosuit variety.
NEW DEVELOPMENTS • Lowe’s Distribution Center – a 1.5M SF BTS project with Clayco • Home Depot Distribution Center – a 612K SF BTS project with Trammell Crow
300,000
4.0%
100,000
2.0%
-100,000
0.0%
-300,000 1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
Absorption
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
Deliveries
vs. Prev. Qtr
4Q 20
1Q 21
Vacancy
vs. 12 Mths Ago
415,442
109,432
18,457
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
3.3%
3.9%
9.4%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
24,774
40,403
57,537
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
2,112,000
1,506,562
1,005,210
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
402,300
-
Source: CoStar
11
SUBMARKET INTELLIGENCE NEAR EAST HOUSTON
VITAL STATS
12.0%
500,000
10.0%
25,044,850 SF
HOUSTON
250,000
8.0%
SHIP CHANNEL
0 MEDICAL CENTER
6.0%
(250,000)
4.0%
(500,000)
HLC OUTLOOK
2.0%
(750,000)
The majority of industrial product in the Near East submarket was constructed during the 1970s and 1980s. With limited new construction since that time, the average product age in this submarket is one of the oldest in Houston. Historically, this was the lowest priced submarket in Houston and attracted price-sensitive users. In particular, this submarket appealed to third-party logistics companies, notably resin repackagers. Its widespread rail infrastructure and proximity to the Port of Houston made it the preferred submarket for port-centric users. That preference has diminished in recent years with the growth of the Port submarket.
0.0%
(1,000,000) 1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
Absorption
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
4Q 20
Deliveries
vs. Prev. Qtr
1Q 21
Vacancy
vs. 12 Mths Ago
(599,720)
36,016
106,390
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
11.4%
9.0%
8.6%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
503,721
399,719
1,102,974
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
-
176,201 Source: CoStar
12
The vacancy rate increased to 11.1% to end 1Q 2021. It is anticipated that the vacancy rate should hold steady in the near term with no new developments under construction and no anticipated move-outs until the second half of 2021. Net absorption should be modestly positive for 2Q 2021 and comprise multiple smaller leases. The elevated vacancy rate along with pricing on competing new construction, notably the in Port and North submarkets, will continue to exert pressure on market rents in the Near East, particularly for transactions of 50K SF or greater.
TOP TRANSACTIONS • Vee Express signed a 218,015 SF lease in 8711 Citypark Loop. • Doggett purchased a 176,201 SF new build at 8404 East Freeway. • Sealy purchased a 663,821 SF building at 8800 Citypark Loop from First Industrial.
DEALS IN THE MARKET • Triten Infill Portfolio – a 528,094 SF seven (7) building portfolio • 400 Portwall – a 251,500 SF building
-
PASADENA
LARGE EXISTING VACANCIES • • • • • •
Houston Tradeport | 8230 Stedman Street – 371,139 SF 8550A Market Street – 231,800 SF 8705 Citypark Loop – 191,614 SF 8786 Wallisville Road – 137,368 SF 2425 Turning Basin – 127,046 SF 8530 Market Street – 124,375 SF
SUBMARKET INTELLIGENCE PORT AREA
HLC OUTLOOK The Port submarket is strategically located to the Port of Houston’s container terminals, an extensive network of refineries and downstream chemical plants, and a widespread multi-modal transportation infrastructure including rail. The submarket allows for quick access to both the Barbours Cut and Bayport container terminals where container shipments enter and exit the Houston market. The Port submarket is relatively young compared to other submarkets with 93% of the institutional product constructed since the year 2000. The main drivers for the submarket include third party logistics providers (plastic resin repackagers in particular), downstream energy service providers, and retail (ex. Walmart, Home Depot, IKEA).
DAYTON
HUMBLE
VITAL STATS LAKE HOUSTON
51,798,701 SF
MONT BELVIEU
16.0%
3,000,000
14.0%
2,500,000
12.0%
2,000,000
10.0% 1,500,000 8.0% BAY TOWN
1,000,000 6.0%
SHIP CHANNEL
500,000
4.0%
PASADENA LA PORTE
0
2.0% 0.0% TRINITY BAY
After three straight quarters of increasing vacancy rates and with 1Q 2021 deliveries falling short of their three year running average, absorption exceeded new supply resulting in a slightly reduced vacancy rate of 12.7%. While construction starts were down at the end of 2020, 1Q 2021 saw new development activity return to more normal levels. However, it should be noted that a significant portion of the new development pipeline is attributable to two projects: Hunt Southwest’s 1M SF speculative project in Baytown and Floor & Decor’s 1.5M SF distribution center should be delivered in late 2021. The remainder of the new development pipeline is in buildings less than 100K SF.
(500,000) 1Q 18
ELLINGTON AIRPORT
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
Absorption
4Q 19
Deliveries
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Vacancy
LEAGUE CITY
The near term outlook for the submarket remains choppy. Although the new development pipeline looks manageable, there are anticipated move-outs which may hinder overall absorption. In particular, Exel is expected to vacate several buildings in Baytown. Additionally, the plastic resin export market, a large driver for this submarket, remains challenged and may not return to more typical volumes until later in 2021.
NEW DEVELOPMENTS • Cedar Port Trade Center – a 1,021,440 SF development by Hunt Southwest • Floor & Decor – a 1.5M SF development by Floor & Decor
LARGE EXISTING VACANCIES • Cedar Port Logistics | 4725 E Grand Parkway South – 644K SF • Bayport South | 10591 Red Bluff Road – 642,994 SF • Underwood Port Logistics | 4600 Underwood – 402,648 SF
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
1,028,722
1,123,395
948,105
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
12.7%
14.0%
8.7%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
420,402
1,865,410
604,745
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
3,029,157
1,497,486
4,378,202
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
436,046
1,995,780
1,406,966 Source: CoStar
13
SUBMARKET INTELLIGENCE SOUTH HOUSTON
GALLERIA MEDICAL CENTER PASADENA
VITAL STATS
SOUTHWEST 31,012,181 SF
10.0%
HOBBY AIRPORT
500,000 400,000
8.0%
24,343,818 SF
300,000
PEARLAND
200,000 6.0%
100,000 0
4.0%
(100,000) (200,000)
2.0%
(300,000) (400,000)
0.0%
(500,000) 1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
Absorption
Absorption
3Q 19
4Q 19
1Q 20
2Q 20
3Q 20
Deliveries
vs. Prev. Qtr
4Q 20
1Q 21
Vacancy
vs. 12 Mths Ago
18,822
39,203
41,012
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
6.6%
6.3%
8.2%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
172,175
311,895
439,358
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
587,911
548,569
476,673
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
112,000
-
Source: CoStar
HLC OUTLOOK The South submarket benefits from its proximity to the world-renowned Texas Medical Center and growing population in the multiple master-planned communities in the Pearland area. Access to 610 Loop, Highway 288, and Highway 90 allow for easy access to the primary loops for traversing Houston from the South submarket. While the South submarket is one of the smaller submarkets of Houston, it plays a vital role in connecting larger submarkets such as Southwest and Near East/Port. Historically, the submarket has experienced slower leasing velocity and very little new development. Population is less dense within the South submarket when compared to the nearby Southwest submarket. Land values in close proximity to the Texas Medical Center and 610 Loop have increased rapidly in recent years making new industrial development effectively cost prohibitive. Industrial development opportunities still exist in the outer areas of the submarket near Beltway 8 and Highway 288. At the end of 1Q 2021, vacancy was 6.3% in the South submarket which was a modest increase from 6.0% at the end of 4Q 2020. Absorption during 1Q 2021 was a positive 40,482 SF which is noteworthy given this is the sixth consecutive quarter of positive absorption. Over the past three years, the submarket has experienced negative absorption due to tenant relocations to other submarkets and downsizing. There has been a modest 112K SF of deliveries during 1Q 2021 with an additional 460,212 SF under construction. The majority of the new construction is due to IDV’s new South Belt Center Phase 1 development.
NEW DEVELOPMENTS • South Belt Central | Phase I – a 436,569 SF development with IDV • South Point Business Park | Phase II | Amazon BTS – a +/- 200,400 SF development with National Property Holdings • A&C Plastics BTS – a 112K SF user-owned development
LARGE EXISTING VACANCIES • 5055 S Loop Freeway E – 133,077 SF • 3110 Corder Street – 109,500 SF • 5901 Griggs Road – 101,707 SF
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SUBMARKET INTELLIGENCE SOUTHWEST HOUSTON
BROOKSHIRE
KATY
GALLERIA
VITAL STATS
SUGAR LAND
16.0%
47,352,771 SF
1,800,000
14.0%
RICHMOND MISSOURI CITY
12.0%
HLC OUTLOOK The Southwest submarket is located west of Loop 610 between Interstate 10 and just east of the Fort Bend Tollway encompassing areas in both Harris and Fort Bend Counties. The Southwest industrial submarket has seen significant growth in the last several years due to both speculative and build-to-suit construction. The submarket benefits from its proximity to the affluent population base of Sugar Land, coupled with its identical proximity as the Northwest submarket to the center of population for the city in West Houston. The submarket is well positioned to see an increase in demand in coming years from its direct proximity to the dense and continually growing population base in both West and Southwest Houston. Vacancy was 10.1% at the close of 1Q 2021, which is a slight decrease from the 2020 vacancy rate at the end of 10.7%. The vacancy rate continues to be impacted by the 4,397,238 SF that was delivered during the 2020 calendar year. The submarket currently has the most new construction activity in the metro area with 4,693,726 SF. It should be noted that Amazon currently has two build-to-suits underway (850K SF at 10507 Harlem Road and 1,081,292 SF at 2303 Hurricane Lane) in the Southwest submarket which accounts for approximately 41% of new construction activity.
TOP LEASE TRANSACTIONS • • • •
4PX Express USA has signed a 347,730 SF lease in 5880 W Fuqua Street. Awesung has signed a 239,124 SF lease in 611 S Cravens Road. Soft-Tex International has signed a 166,970 SF lease in 1407 Gillingham Lane. Boise Cascade has signed a 163,583 SF lease in 500 Industrial Boulevard.
NEW DEVELOPMENTS • • • • • • • •
Boulevard Oaks Business Park | Phase II – a 986,480 SF development with Hines/TA Realty Waypoint Business Park – a 708,944 SF development with 4M Investments and Clarion Park 8Ninety | Phase V – a 676,860 SF development with Trammel Crow and ARTIS REIT Weatherford Farms Industrial Park – a 568,084 SF development with Crow Holdings City Park Logistics Center – a 438,202 SF development with Logistics Property Company Stafford Crossing – a 334,200 SF development with Transwestern and AEW Nova Logistics Park – a 326,812 SF development with Lovett Commercial Sugar Land Crossroads – a 326,807 SF development with Transwestern and Diamond Realty Investments
NEW DEVELOPMENTS • • • •
1111-1113 Gillingham – 266,663 SF 611 S Cravens Road – 238,231 SF 9500 W Sam Houston Parkway South – 231,113 SF 411 Cravens Road – 222,031 SF
1,300,000 10.0% 8.0%
800,000
6.0% 4.0%
300,000
2.0% 0.0%
(200,000) 1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
Absorption
Absorption
4Q 19
Deliveries
vs. Prev. Qtr
1Q 20
2Q 20
3Q 20
4Q 20
1Q 21
Vacancy
vs. 12 Mths Ago
393,720
441,059
662,640
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
10.2%
10.8%
9.2%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
1,496,932
2,084,166
597,036
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
4,545,294
4,219,086
3,109,112
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
129,444
-
1,371,529 Source: CoStar
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DALLAS
5950 Berkshire Lane Suite 900 Dallas, Texas 75225 T 972.241.8300 F 972.241.7955
FORT WORTH
1200 Summit Avenue Suite 300 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
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