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Q4 2012 | INDUSTRIAL MARKET

HOUSTON INDUSTRIAL MARKET

RESEARCH & FORECAST REPORT

HOUSTON INDUSTRIAL MARKET RESEARCH & FORECAST REPORT Houston YE 2012 Industrial Absorption – 6.2M SF
HOUSTON INDUSTRIAL MARKET RESEARCH & FORECAST REPORT Houston YE 2012 Industrial Absorption – 6.2M SF

Houston YE 2012 Industrial Absorption – 6.2M SF

Houston’s industrial market remains one of the ten healthiest U.S. industrial markets because of its low vacancy, stable rental rates and positive absorption. Houston posted 1.4M SF of positive net absorption in the fourth quarter, pushing the year-end total to 6.2M SF. Leasing activity reached 3.3M SF in the fourth quarter, pushing the year-to-date total to 13.2M SF. Houston’s average industrial vacancy rate decreased from 5.3% to 5.2% in the between quarters. Due to the large amount of new inventory deliveries, Houston’s industrial vacancy only decreased 1% between quarters despite the significant positive absorption. The overall average quoted industrial rental rate increased from $5.51 to $5.59 per SF NNN between quarters, and increased by 2.6% on a year-over-year basis from $5.45 per SF NNN at the end of 2011.

CITYWIDE MARKET INDICATORS

Houston

YE 2011

YE 2012

Net Absorption

(SF)

4.4M

6.2M

Average Rental Rate per SF

$5.45

$5.59

Vacancy

5.2%

5.2%

Vacancy 5.2% 5.2%

SF Delivered

1.7M

4.0M

SF Under

Construction

2.9M

2.6M

Houston’s lack of available industrial inventory has spurred demand for new product. Developers have responded an d currently have over inventory has spurred demand for new
of available industrial inventory has spurred demand for new product. Developers have responded an d currently product. Developers have responded and currently have over 2.5M SF under construction. Much of the increased activity has been driven by build-to-suit projects for companies expanding in or relocating to the Houston market, however, there are now more spec developments (1.9M SF) than build-to-suit projects. As Houston’s available industrial inventory shrinks, we believe the
available industrial inventory shrinks, we believe the increasing demand for new product will continue to spur increasing demand for new product will continue to spur both build-to-suit and spec development.

The Houston metropolitan area added 85,000 jobs between November 2011 and November 2012, an annual increase of 3.2% over the prior years job growth. Further, Houston’s November 2012, an annual increase of 3.2% over the prior years job growth. Further, Houston’s unemployment rate fell to 5.8% from 7.3% one year ago which has bolstered Houston area home sales. With continued expansion in the energy industry and a strong housing market, Houston’s economy is expected to remain healthy for both the near and long-term.

JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted)

   

UNEMPLOYMENT

11/11

11/12

 

ABSORPTION, NEW SUPPLY & VACANCY RATES

Houston

7.3%

5.8%

2,000,000

Houston 7.3% 5.8% 2,000,000

Texas

7.2%

5.8%

1,500,000

U.S.

8.2%

7.4%

1,000,000

 

500,000

 

ANNUAL

# OF JOBS ADDED

0

JOB GROWTH

CHANGE

-500,000

Houston

3.2%

85K

Texas

2.6%

274K

-1,000,000

U.S.

1.4%

1.9M

U.S. 1.4% 1.9M
U.S. 1.4% 1.9M
U.S. 1.4% 1.9M
U.S. 1.4% 1.9M
U.S. 1.4% 1.9M
U.S. 1.4% 1.9M
U.S. 1.4% 1.9M
U.S. 1.4% 1.9M
 
  Absorption New Supply Vacancy

Absorption

  Absorption New Supply Vacancy

New Supply

Vacancy

Vacancy

8%

7%

6%

5%

4%

3%

2%

www.colliers.com/houston

RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON INDUSTRIAL MARKET Vacancy & Availability Houston’s

RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON INDUSTRIAL MARKET

Vacancy & Availability

Houston’s industrial vacancy decreased from 5.3% to 5.2% between quarters because close to 1M SF of new inventory was added to the market.

At the close of the fourth quarter, Houston had 24.3M SF of vacant industrial space citywide, 126K SF less than the previous quarter. Among the major industrial corridors, the Northwest submarket has the largest amount of vacant space with 5.5M SF (4.1% vacancy), followed by the Southeast submarket with 4.9M SF vacant (5.9% vacancy), the Southwest submarket with 4.3M SF vacant (6.9% vacancy), and the North submarket with 3.9M SF vacant (5.5% vacancy).

Houston’s industrial construction pipeline had 2.6M SF of projects underway at the end of the fourth quarter, including 1.9M SF of spec development. The largest project under construction is a 475,000- SF state-of-the-art foodservice distribution facility that will be the new Gulf Coast regional distribution hub for the Ben E. Keith Company. The facility is being constructed on an 82-acre tract located in Missouri City in the Beltway Crossing Business Park. A list of additional buildings currently under construction can be found on Page 4 of this report. The largest spec project in the pipeline is a 299,840-SF distribution warehouse located on Langfield Rd. in the Northwest industrial submarket.

Rental Rates

Houston’s overall average quoted industrial rental rate increased from $5.51 to $5.59 per SF NNN in the fourth quarter, increasing by 2.6% on a year- over-year basis from $5.45 per SF

NNN. By property type, the average quoted NNN rental rates are as follows:

$5.36 per SF for Distribution space; $4.36 per SF for Bulk Warehouse space; $7.08 per SF for Flex/Service space; with Tech/R&D space averaging $8.07 per SF.

Absorption & Demand

Houston’s industrial market posted 1.4M SF of positive net absorption in the fourth quarter pushing the year-to-date total to 6.2M SF.

Among Houston’s major industrial corridors, the Northwest and Southeast submarkets outperformed all others in the fourth quarter, posting the highest positive net quarterly absorption of 915K SF and 380K SF respectively. The Southwest submarket followed with 280K SF of positive net absorption.

There were several major tenant move- ins contributing to net absorption gains in the fourth quarter, including Francesca’s Collections, Inc. (217,869 SF); See Notes (197,708 SF); Floor & Décor Outlets of American, Inc. (109,200 SF); Zoyto, Inc. (63,600 SF); Bayou Well Services (60,000 SF); and MI Group (36,960 SF).

Leasing

Houston’s industrial leasing activity reached 3.3M SF in the fourth quarter, pushing the year-to-date total to over 13.2M SF. Some of Houston’s top fourth quarter industrial leases include:

Schenker, Inc.

DCT Northwest 8 Distribution Ctr

Dec-12

267,201 SF

PCS-CTS 2

4949 Windfern

Nov-12

201,574 SF

Core Labs Instruments 2 Windfern Distribution Center 1

Oct-12

187,147 SF

Supply Chain Management 1

3007

Pasadena Fwy

Dec-12

137,000 SF

International Distribution Center 2 Bay Area Business Park

Nov-12

104,300 SF

Overland Distribution 1,3 Port Crossing Commerce Center

Oct-12

103,185 SF

International Distribution Center

Bayport North Distribution Center

Oct-12

100,000 SF

Parker Uniform West by Northwest Industrial Park

Dec-12

67,089 SF

Jv Industrial Companies Ltd

4100

Underwood Rd

Dec-12

52,592 SF

Advanced Rig Services 2

6750

Bender Rd

Nov-12

51,040 SF

Noah’s Manufacturing

6028

Navigation

Nov-12

44,000 SF

Windfield Solutions Bammel Business park

Oct-12

41,250 SF

Severn Trent Environmental Services 1,3

16680

Central Green

Oct-12

41,170 SF

Katalyst Data Management, LLC 1

10311 Westpark Dr.

Dec-12

40,095 SF

Protect

12130

Highway 3

Nov-12

32,238 SF

Skyline Art Services, Inc. 1 8011 Blankenship Dr.

Dec-12

32,220 SF

1 Colliers International transaction

2 Renewal

3 Expansion

4 Sublease

RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON INDUSTRIAL MARKET Sales Activity Sharewell Properties,

RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON INDUSTRIAL MARKET

Sales Activity

Sharewell Properties, L.P. sold a 15,900-SF, Class B, flex light industrial building to Michael Nguyen
Sharewell Properties, L.P. sold a
15,900-SF, Class B, flex light
industrial building to Michael
Nguyen for $76 per SF. The
building is located at 12200 W Little
York Rd. in the West Outer Loop
Industrial submarket. The property
was 100% leased at the time of
sale.
W.P. Carey & Co. sold a 49,600-SF flex light industrial building to Archway Properties, LP
W.P. Carey & Co. sold a 49,600-SF
flex light industrial building to
Archway Properties, LP for an
undisclosed amount. The Class B
property was built in 1985 and is
located at 500 Century Plaza Dr. in
the North Hardy Toll Rd industrial
submarket. The building was 52.0%
leased at the time of sale.
The building was 52.0% leased at the time of sale. The industrial sales statistics shown above

The industrial sales statistics shown above only include October and November 2012 sales. We expect December sales statistics to be published after the initial release date of this report, at which time we will update the statistics.

Allied Group L.P. sold a 46,000- SF Class B, industrial warehouse to Hose & Accessories
Allied Group L.P. sold a 46,000-
SF Class B, industrial warehouse
to Hose & Accessories Sales for
$27 per SF. The building located at
5731 Harvey Wilson Dr., is in the
Downtown Inner Loop Industrial
submarket. The new owner will
occupy the building.
DriveTime Automotive Group, Inc. purchased a 51,000-SF Class B, showroom warehouse from East Freeway Properties
DriveTime Automotive Group, Inc.
purchased a 51,000-SF Class B,
showroom warehouse from East
Freeway Properties Llc for $68 per
SF. The property is located at
6335 Southwest Fwy in the Hwy
59/Hwy 90 Industrial submarket.
The new owner will occupy the
building.

HOUSTON INDUSTRIAL MARKET SUMMARY

 

Houston Industrial Market Statistical Summary 4th Quarter 2012

 
     

Direct

 

Sublet

 

Total

         

Direct

Sublet

Total

4Q12 Net

YE 2012 Net Absorption

4Q12

2012

SF Under

Market

Rentable Area

Vacant SF

Vacancy

Vacant SF

Vacancy

Vacant SF

Vacancy

Absorption

Completions

Completions

Construction

Rate

Rate

Rate

 

Greater Houston Total

482,535,159

24,271,066

5.0%

592,377

0.1%

24,863,443

5.2%

1,440,472

6,245,393

949,497

4,017,344

2,554,598

NW Inner Loop

11,738,184

545,998

4.7%

22,200

0.2%

568,198

4.8%

(103,966)

(32,041)

-

-

-

Downtown

31,839,034

1,713,109

5.4%

-

0.0%

1,713,109

5.4%

139,780

88,523

38,232

38,232

-

North Inner Loop

5,185,017

475,369

9.2%

-

0.0%

475,369

9.2%

(40,000)

35,641

-

-

-

SW Inner Loop

7,527,531

134,013

1.8%

-

0.0%

134,013

1.8%

(11,100)

19,756

-

-

-

Total Inner Loop

56,289,766

2,868,489

5.1%

22,200

0.0%

2,890,689

5.1%

(15,286)

111,879

38,232

38,232

-

North Fwy/Tomball Pky

14,537,557

1,139,243

7.8%

-

0.0%

1,139,243

7.8%

(34,470)

516,754

120,670

533,913

299,011

North Hardy Toll Rd

25,165,275

1,235,023

4.9%

-

0.0%

1,235,023

4.9%

(41,024)

471,457

-

376,758

738,751

North Outer Loop

17,862,050

782,014

4.4%

-

0.0%

782,014

4.4%

96,767

635,366

-

232,470

25,000

The Woodlands/Conroe

13,539,822

746,425

5.5%

-

0.0%

746,425

5.5%

110,967

45,254

65,000

65,000

-

Total North Corridor

71,104,704

3,902,705

5.5%

-

0.0%

3,902,705

5.5%

132,240

1,668,831

185,670

1,208,141

1,062,762

Northeast Hwy 321

1,188,527

1,980

0.2%

7,500

0.6%

9,480

0.8%

0

0

-

-

-

Northeast Hwy 90

15,728,690

415,106

2.6%

129,000

0.8%

544,106

3.5%

(124,510)

(41,255)

-

20,000

20,000

Northeast I-10

3,901,655

126,972

3.3%

-

0.0%

126,972

3.3%

1,492

29,058

-

-

-

Northeast Inner Loop

11,542,388

722,240

6.3%

-

0.0%

722,240

6.3%

(338,652)

(68,073)

-

-

-

Total Northeast Corridor

32,361,260

1,266,298

3.9%

136,500

0.4%

1,402,798

4.3%

(461,670)

(80,270)

-

20,000

20,000

Hwy 290/Tomball Pky

15,178,208

719,603

4.7%

25,636

0.2%

745,239

4.9%

52,647

89,336

-

198,555

52,000

Northwest Hwy 6

4,163,324

107,827

2.6%

11,520

0.3%

119,347

2.9%

(1,435)

28,332

-

40,452

-

Northwest Inner Loop

60,616,406

2,669,448

4.4%

75,590

0.1%

2,745,038

4.5%

609,467

1,022,827

65,400

332,673

150,000

Northwest Near

16,450,213

678,005

4.1%

83,051

0.5%

761,056

4.6%

2,627

678,287

112,653

377,183

317,840

Northwest Outlier

13,005,394

373,837

2.9%

49,055

0.4%

422,892

3.3%

32,804

21,193

26,480

48,980

West Outer Loop

22,911,320

650,154

2.8%

31,897

0.1%

682,051

3.0%

219,320

1,098,523

149,842

217,677

58,250

Total Northwest Corridor

132,324,865

5,198,874

3.9%

276,749

0.2%

5,475,623

4.1%

915,430

2,938,498

354,375

1,215,520

578,090

South Highway 35

30,995,323

1,331,793

4.3%

23,600

0.1%

1,355,393

4.4%

167,242

(84,143)

66,841

224,341

87,975

South Inner Loop

13,360,202

589,701

4.4%

-

0.0%

589,701

4.4%

41,579

(25,679)

-

-

-

Total South Corridor

44,355,525

1,921,494

4.3%

23,600

0.1%

1,945,094

4.4%

208,821

(109,822)

66,841

224,341

87,975

East I-10 Outer Loop

15,623,397

115,535

0.7%

-

0.0%

115,535

0.7%

2,000

62,700

-

-

-

East-SE Far

46,895,170

4,429,353

9.4%

36,488

0.1%

4,465,841

9.5%

339,217

932,997

62,115

862,915

292,771

SE Outer Loop

20,410,167

326,802

1.6%

-

0.0%

326,802

1.6%

38,940

273,915

-

-

-

Total Southeast Corridor

82,928,734

4,871,690

5.9%

36,488

0.0%

4,908,178

5.9%

380,157

1,269,612

62,115

862,915

292,771

Highway 59/Highway 90

21,768,198

1,147,815

5.3%

-

0.0%

1,147,815

5.3%

55,347

359,554

223,000

282,227

475,000

Southwest Far

10,217,779

901,597

8.8%

-

0.0%

901,597

8.8%

120,156

88,488

19,264

69,713

38,000

Southwest Outer Loop

12,714,944

893,583

7.0%

4,240

0.0%

897,823

7.1%

27,988

(18,854)

-

-

-

Fort Bend County/Sugar Lan

18,469,384

1,298,521

7.0%

92,600

0.5%

1,391,121

7.5%

77,289

17,477

-

96,255

-

Total Southwest Corridor

63,170,305

4,241,516

6.7%

96,840

0.2%

4,338,356

6.9%

280,780

446,665

242,264

448,195

513,000

RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON INDUSTRIAL MARKET 4Q 2012 Industrial Under

RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON INDUSTRIAL MARKET

4Q 2012 Industrial Under Construction – 20,000 SF or greater

 

Estimated

Submarket Cluster

Submarket

Building Address

RBA

% Leased

Developer

Delivery

Southwest Corridor Ind

Hwy 59/Hwy 90

1001 Cravens Rd

475,000

100.0

Ben E Keith

Jan-13

Northwest Corridor Ind

Northwest Near

7310 Langfield - Bldg 200

299,840

0.0

Avera Companies

Apr-13

North Corridor Ind

North Hardy Toll Rd

Airtex Dr & I-45

267,113

0.0

DCT Industrial Trust

Aug-13

Southeast Corridor Ind

East-SE Far

1902 S 16th St

261,291

0.0

ML Realty Partners

Jan-13

North Corridor Ind

North Hardy Toll Rd

16330 Central Green Blvd - Bldg 10

163,600

0.0

Liberty Property Trust

Feb-13

North Corridor Ind

North Fwy/Tomball Pky

14300 Hollister Rd

111,065

76.8

Liberty Property Trust

Jan-13

North Corridor Ind

North Fwy/Tomball Pky

12101 Cutten Rd

101,123

100.0

Clay Development

Feb-13

North Corridor Ind

North Hardy Toll Road

250 Century Plaza Dr

91,520

0

Avera Companies

Jul-13

North Corridor Ind

North Fwy/Tomball Pky

7505 Bluff Point Dr

86,823

0.0

EastGroup Properties

Jan-13

Northwest Corridor Ind

Northwest Inner Loop

1315 W Sam Houston Pky N - Bldg 1

70,000

0.0

Caldwell Companies

Feb-13

North Corridor Ind

North Hardy Toll Rd

2330 Peyton Rd

56,915

0.0

Capital Commercial

Jan-13

North Corridor Ind

North Hardy Toll Rd

4741 World Houston Pky

56,513

0.0

EastGroup Properties

Feb-13

South Corridor Ind

South Hwy 35

2425 Mowery Rd - Bldg A

53,000

0.0

Colliers International

Apr-13

North Corridor Ind

North Hardy Toll Rd

4721 World Houston Pky

45,040

0.0

EastGroup Properties

Feb-13

Northwest Corridor Ind

Northwest Inner Loop

1315 W Sam Houston Pky N - Bldg 2

40,000

0.0

Caldwell Companies

Feb-13

Northwest Corridor Ind

Northwest Inner Loop

1315 W Sam Houston Pky N - Bldg 3

40,000

0.0

Caldwell Companies

Feb-13

Southwest Corridor Ind

Southwest Far

1145 Highway 90 A

38,000

0

Jacob Realty Group

Jun-13

Northwest Corridor Ind

West Outer Loop

5915 Brittmoore Rd

35,750

0

Triten Real Estate Partners

Mar-13

North Corridor Ind

North Hardy Toll Rd

1368 E Richey Rd

33,000

0.0

Northwinds Commercial

Feb-13

Southeast Corridor Ind

East-Southeast Far

11804 Fairmont Pky

31,480

0

VIGAVI Realty

Feb-13

North Corridor Ind

North Hardy Toll Road

20221 Carriage Point Dr

25,050

100

The National Realty Group, Inc.

Mar-13

North Corridor Ind

North Outer Loop

6010 Dwyer Dr

25,000

0

Nobel House Real Estate

Feb-13

Northwest Corridor Ind

West Outer Loop

7530 Fairview Rd

22,500

100

Metroway Commercial Realty

Apr-13

Northwest Corridor Ind

Hwy 290/Tomball Pky

10030 Fairbanks North Houston Rd

20,000

100

The National Realty Group, Inc.

Jan-13

Northeast Corridor Ind

Northeast Hwy 90

14452 Smith Rd

20,000

0

Capital Real Estate Commercial, Inc.

Jan-13

4Q 2012 Industrial Deliveries - 20,000 SF or greater

Submarket Cluster

Submarket

Building Address

RBA

% Leased

Developer

Delivered

Southwest Corridor Ind

Hwy 59/Hwy 90

13443 S Gessner

116,480

100.0

Stream Realty Partners

Oct-12

Southwest Corridor Ind

Hwy 59/Hwy 90

13513 S Gessner Dr

91,520

0.0

Stream Realty Partners

Nov-12

North Corridor Ind

North Fwy/Tomball Pky

14400 Hollister Rd

88,170

70.6

Liberty Property Trust

Dec-12

Southern Corridor Ind

South Hwy 35

9225 Park South Vw

66,841

100.0

Loomis Armored US

Dec-12

North Corridor Ind

Woodland/Conroe

3375 Pollock Dr

65,000

100.0

KDW

Oct-12

Northwest Corridor Ind

Northwest Near

6410 Langfield Rd - Bldg F

41,641

0.0

Capital Commercial

Nov-12

Inner Loop Corridor Ind

Downtown

6363 Navigation Blvd

38,232

100.0

GSL Welcome Group

Dec-12

Northwest Corridor Ind

West Outer Loop

12223 FM 529

37,875

0.0

Texas Development Company

Dec-12

Northwest Corridor Ind

Northwest Inner Loop

9855 Genard Rd

36,000

100.0

First Industrial Texas

Dec-12

Northwest Corridor Ind

West Outer Loop

12014 FM 529 - Building B

35,000

0.0

United Equities, Ltd.

Dec-12

Southeast Corridor Ind

East-SE Far

10200 New Decade Dr

32,000

0.0

Unknown

Oct-12

Northwest Corridor Ind

Northwest Near

6410 Langfield Rd - Bldg E

30,070

0.0

Clay Development

Dec-12

Southeast Corridor Ind

East-SE Far

5349 Bay Oaks Dr

30,115

0.0

Unknown

Dec-12

Northwest Corridor Ind

Northwest Inner Loop

10892 Shadow Wood

29,400

0.0

Greater Houston Commerical

Dec-12

Northwest Corridor Ind

West Outer Loop

12601 FM 529

27,267

100.0

Challenger Tire Topete, Inc.

Dec-12

Northwest Corridor Ind

Northwest Outlier

21414 Julie Marie Ln

26,480

0.0

Ivest

Dec-12

Northwest Corridor Ind

West Outer Loop

14040 West Rd

25,200

0.0

Nickson Industrial Dev Llc

Dec-12

Northwest Corridor Ind

West Outer Loop

12010 FM 529 - Bldg A

24,500

100.0

United Equities, Ltd.

Dec-12

Northwest Corridor Ind

Northwest Near

6511 West Little York Rd

22,942

0.0

Levey Development

Dec-12

RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON INDUSTRIAL MARKET LISA R. BRIDGES Director

RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON INDUSTRIAL MARKET

& FORECAST REPORT | Q4 2012 | HOUSTON INDUSTRIAL MARKET LISA R. BRIDGES Director of Market
& FORECAST REPORT | Q4 2012 | HOUSTON INDUSTRIAL MARKET LISA R. BRIDGES Director of Market
& FORECAST REPORT | Q4 2012 | HOUSTON INDUSTRIAL MARKET LISA R. BRIDGES Director of Market
& FORECAST REPORT | Q4 2012 | HOUSTON INDUSTRIAL MARKET LISA R. BRIDGES Director of Market
& FORECAST REPORT | Q4 2012 | HOUSTON INDUSTRIAL MARKET LISA R. BRIDGES Director of Market
& FORECAST REPORT | Q4 2012 | HOUSTON INDUSTRIAL MARKET LISA R. BRIDGES Director of Market
& FORECAST REPORT | Q4 2012 | HOUSTON INDUSTRIAL MARKET LISA R. BRIDGES Director of Market

LISA R. BRIDGES Director of Market Research Houston Direct +1 713 830 2125 Fax +1 713 830 2118 lisa.bridges@colliers.com

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