1M SF Industrial Buildings In Houston Are So Back In Demand
Developers can’t build industrial buildings in Houston fast enough.
It was less than two years ago that Houston ended a two-year drought of industrial leases 1M SF or larger. But the market has now flipped to the point that tenants were fighting over Junction Commercial Real Estate’s 1M SF building at its Port 99 development in Baytown, CEO Reed Vestal said.
The developer underwrote rents at 54 cents per SF, and the demand-fueled scuffle drove rents up to 63 cents per SF, Vestal said Tuesday at the 2026 National Association of Real Estate Editors Conference.
“On a 1M SF building, a 9-cent increase is massive,” Vestal said. “Since we had that cat fight over that, we have three or four groups already ready to rock and roll on 1.2M SF that we're going to do across the road.”
The 1M SF building was ultimately leased to two tenants that divided it into 600K SF and 400K SF. But more tenants like Walmart, Ikea and large energy companies are in the market for millions of square feet combined, Vestal said.
Junction has a 400K SF building, two 700K SF buildings and another 1.2M SF building set to break ground in the next 30 days.
“We already have people knocking on our doors to backfill it,” Vestal said.
Houston had 24.3M SF of industrial product under construction in the first quarter, the market’s largest pipeline since 2023, a year of record-high deliveries. Speculative projects accounted for 82% of the first quarter's construction activity, underscoring developer confidence, a Cushman & Wakefield report states.
Capital is flooding back to the Houston industrial development market. Capital providers willing to give nonrecourse loans have come off the sidelines over the past year, creating more competition for privately capitalized developers like Junction, Vestal said.
“We're starting to see people push the envelope in regards to land pricing and pushing the land pricing up,” he said. “I don't think it's a lack of capital. That is not the case anymore in the Houston or Dallas-Fort Worth markets. I think maybe too much money is coming to the market.”
Vestal wishes there were more constraints to lessen competition, he said.
The development rush could also present a problem if demand wanes. But for now, industrial tenant demand is keeping developer confidence sky-high.
Houston isn’t seeing as much data center development as other markets, but it is seeing related demand. A power switch company that leased 100K SF two years ago is now doing switch gears for artificial intelligence and data center groups and is in the market for 1M SF, Vestal said.
“The guys that are backing these guys are like, ‘Here’s $50M. They wrote a check to advance payments just so that they can go build a building so that they can supply this AI group,’” Vestal said. “It is just absolutely wild.”
