Overall industrial fundamentals are very strong—our market-wide vacancy is 4.7%. But the North submarket, long the darling of industrial users, may have overdone construction this cycle.

Stream Realty managing director Matteson Hamilton tells us we’ve developed over 7.1M SF of spec space in north Houston, and only 64% of it has been leased, leaving 2.5M SF of new vacancy. Large users (over 75k SF) have more options than a year ago when that market was very tight, which Matteson says may translate into more aggressive deals and impact rents. He’s still seeing lots of activity in the market, but says the deal cycle has gotten longer. The period from initial tour to signed lease has stretched out from a year ago.

But while the spotlight’s been on all the new construction, Class-B product citywide has been quietly performing at a very high level. Matteson tells us that’s partially because new development can’t accommodate smaller users (which have been very active), so they’re all competing in the Class-B market. That’s pushed rents up.