Houston’s industrial market continued to attract strong interest from e-commerce and third-party logistics users during the first quarter of 2021, buoyed by growing demand for online retail and last-mile delivery needs.
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In particular, deal sizes smaller than 100K SF and larger than 300K SF were very popular during Q1, according to Stream Realty Partners Senior Vice President Jeremy Lumbreras.
Lumbreras said that overall, the Houston industrial market appears to be very active, and Stream is tracking over 14M SF in tenant requirements searching for space in Houston.
“Large blocks of vacancy across the market are seeing a ton of activity, and if everything progresses, should lead to a healthy amount of positive net absorption this year,” Lumbreras said.
By large blocks of vacancy, Lumbreras said he was referring to existing buildings on the ground larger than 250K SF under one roof. Those larger buildings that happen to be vacant are seeing a substantial amount of interest.
CoStar Group Director of Market Analytics Justin Boyar said that according to available transaction data, Houston experienced strong industrial leasing and sales during the first quarter of 2021, carrying on the momentum gained in Q4 2020.
Houston saw a dip in transactions during the second and third quarters of 2020 before volumes rocketed back in the fourth quarter. The Houston market saw a return to large portfolio deals in Q4, absorbing 6.6M SF — the second-best quarter on record for industrial demand. Overall, Houston absorbed more than 14M SF during 2020, the fifth-best year on record, according to Boyar.
On the leasing side, Boyar noted that Amazon signed three new Houston-area leases during the first quarter of 2021, which accounted for about 685.8K SF, or 8.9% of all leasing activity in Houston during that period. That compares to an estimated 8.3M SF that the e-commerce giant leased across the U.S., or about 3.6% of all U.S. industrial leasing activity during Q1 2021.
Houston’s industrial leasing activity comes with a caveat: Despite the flurry of deals, vacancies increased significantly, rising from 5% in 2018 to 8.8% in Q1 2021.
“This was due to an unprecedented amount of speculative supply that delivered in 2020, outstripping such demand. Houston had the highest vacancy rate out of the top 30 U.S. markets as of year-end 2020. Nationally, average industrial vacancies were about 5%,” Boyar said.
Here are the six biggest industrial leases by square footage that took place in Houston during Q1 2021, according to CoStar research.
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Fallbrook Pines Business Park
Tenant: Amazon
Landlord: Trammell Crow Co.
Address: 9155 Derrington Road
Submarket: Highway 290/Tomball Parkway
Size: 368.5K SF
Move-In: August 2021
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Boulevard Oaks Business Park
Tenant: 4PX Express USA Inc.
Landlord: TA Realty
Address: 5880 West Fuqua St.
Submarket: Southwest Far
Size: 347.7K SF
Move-In: May 2021
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Southwest Commerce Center
Tenant: Awesung
Landlord: Ridge Development
Address: 611 South Cravens Road
Submarket: Southwest Far
Size: 239.1K SF
Move-In: February 2021
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City Park East
Tenant: Vee Express
Landlord: CenterPoint Properties
Address: 8711 Citypark Loop
Submarket: Northeast Highway 90
Size: 218K SF
Move-In: April 2021
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4975 Gulf Freeway (Built-To-Suit)
Tenant: Amazon
Landlord/Developer: Duke Realty Partners
Address: 4975 Gulf Freeway
Submarket: South Highway 35 (La Marque)
Size: 180K SF
Move-In: December 2021
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Sugar Land Business Park
Tenant: Soft-Tex
Landlord: Johnson Development Associates
Address: 1407 Gillingham Lane
Submarket: Sugar Land
Size: 167K SF
Move-In: August 2021
