🌟Construction & Demand Drive Houston's Industrial Success! 🏢

🚀 Houston's Industrial Market Soars in Q2! 🚀

July 24, 2024•3 min read

🚀 Houston's Industrial Market Soars in Q2! 🚀

Hey there, Houston! 🌟 The second quarter has been fantastic for our industrial market, keeping up the solid momentum from the beginning of the year. Tenant demand is skyrocketing, thanks to our growing population and affordable living costs. And guess what? The forecast for the rest of the year looks bright and sunny as potential rate cuts could boost investments and construction. 🌞💼

Houston Highlights

📈 Leasing Activity Surges: The Houston industrial market saw a 25.7% increase in leasing activity, jumping to 10.8 million square feet from 8.6 million SF last quarter, marking a 12.4% year-over-year rise. 🏢✨ Integra Mission Critical made the biggest splash with a 1.2 million SF sublease from Wayfair, who never occupied their new building in Prologis' Presidents Park. 🏗️

🏗️ Construction & Vacancy Rates: New supply hit 7.3 million SF, outpacing the current net absorption of 3.2 million SF, which is a 4.7% increase from last year. The vacancy rate nudged up by 40 basis points to 7.7%. But don't worry, the construction pipeline is still 48% pre-leased, although it has shrunk to 12.1 million SF from 33.7 million SF year-over-year. 📉

💲 Rental Rates: Rents are climbing, too! We saw a rise to $9.58 PSF NNN from $9.43 PSF NNN last quarter, representing a 4.8% growth rate year-over-year. 📈💰

The Market Rebalancing Act

Despite a slowdown in construction after years of record-setting levels, leasing activity is picking up. With a solid 48% of under-construction properties pre-leased, we're on track to more sustainable levels. 🎢

🌆 Steady Absorption & Rising Rents: Net absorption is holding steady at 3.2 million SF, and rental rates are up 4.8% year-over-year. However, the vacancy rate at 7.7% continues to rise due to the influx of new construction. We might see rental rates plateau in the second half of 2024 before climbing again in late 2025. 📊

Construction Pipeline Shrinks

Developers face challenges in capitalizing new projects due to today's debt and equity markets, along with landowners' high pricing expectations from 2021 and 2022. But with strong leasing activity, developers are back hunting for new land positions heading into 2025. 🏞️💼

Opportunities for Tenants

Now could be a golden opportunity for tenants to strike advantageous long-term deals, especially in larger big-box vacancies. Landlords, responding to slight overbuilding in certain sectors, are offering aggressive concession packages. But this window might not last, given the strong leasing activity and limited future deliveries. 🏭🏢

Owning vs. Leasing Trend

More developers are selling to owner/users, who believe owning real estate is a great hedge against inflation. With Houston's business-friendly environment and low cost of living, many tenants are relocating here, even willing to pay a premium to own a building. This trend boosts sales and diversifies supply chains. 🏘️🔑

Cautious Optimism for 2024

As we head into an election year, we remain cautiously optimistic. Reduced vacancies due to rising overall requirements are happening, although bulk distribution faces a slowdown. Active industries include furniture, retail goods, hardware, solar, building materials, food and beverage, 3PLs, and manufacturing. 🛋️🔨🌞

Houston's Manufacturing Strength

Houston's strong manufacturing presence, coupled with a lack of quality manufacturing facilities, has spurred build-to-suit activity. The Port of Houston's increasing container volume also bolsters future industrial space demand. With our growing population, multiple deep-water ports, and two international airports, Houston remains a powerhouse in the national economy for logistics and manufacturing. 🛳️✈️

Stay tuned, Houston! The future looks bright! 🌟✨

#HoustonIndustrial #RealEstateBoom #TenantDemand #Construction #LeasingActivity #HoustonGrowth #CommercialRealEstate #HoustonEconomy

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Bill Rapp, CRE Broker

I am a Houston commercial broker, with residential experience, as well as a lending background. I have been in the real estate industry for 14 years and counting, and I have worked in many roles within the industry and each has given me a unique perspective of the industry as a whole. My dedication to clients is rooted in this industry knowledge, but also includes my desire to go the extra mile in networking to source off market opportunities for my clients. Me and my team at eXp Commercial have a cutting-edge technology package that gets the widest exposure for each transaction. eXp Commercial offers a nationwide network through which we can deliver the best exposure and professional advice to achieve our clients’ goals while also minimizing their risk. Clients appreciate my methodical method of discovery in our initial consultation. Through which we can get to know each other and their specific’s business’s needs and objectives on a granular level. Our processes help navigate each transaction and its potential pitfalls through to a successful outcome for our clients. It is my stated goal to provide our clients with extensive market analysis and expertise that fosters innovative solutions and rewarding commercial real estate opportunities.

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