Industrial

23Q2
Houston

Despite a second-quarter slowdown, the industrial market in the

Greater Houston MSA remains active and healthy, with 3.9 million
square feet of net absorption and a construction pipeline of more
than 29.5 million square feet.
Vacancy rates are gradually increasing due to the large amount
of new supply, but the market should remain steady and strong
barring any major economic downturn.

Danny Rice | President

Accelerating success.
 Industrial Key Takeaways

Houston
23Q2
• Construction volume drops after record highs
• Deliveries up, increasing vacancy
• Leasing activity declines
• Rental rates increasing

YOY YOY Under YOY Overall Asking Lease YOY

Vacancy Rate Net Absorption Construction Rates (NNN)

6.2% FORECAST
3.9M SF FORECAST
29.5M SF FORECAST
$9.07/SF FORECAST

Houston Highlights
The industrial market’s activity level slowed during the second quarter with new supply outpacing net absorption. At midyear,
almost twice as much new product has been delivered than absorbed. Developers have decreased the construction level to 29.5
million square feet after record-level previous quarters. Positive net absorption this quarter was 3.9 million square feet, a 9.3%
decrease from the previous quarter, while deliveries increased to 9.5 million square feet with less than half preleased. The 5.0
million square feet of new vacant product entering the market helped to lift the vacancy rate to 6.2%. Leasing activity totaled 7.5
million square feet, down from 10.5 million square feet the previous quarter.

Market Indicators Market Fundamentals

4.4% 3.7% $71
Absorption New Supply Vacancy

Houston Unem- Houston annual WTI Spot Price, 20 9.0%

Millions

ployment Rate % change in U.S. benchmark 18 8.0%

employment for light sweet
crude 16
7.0%

Historic Comparison 14
6.0%
12

22Q2 23Q1 23Q2 10

5.0%

4.0%
Total Inventory
695.0 717.3 726.8 8
(in Millions of SF) 3.0%
6

New Supply 4
2.0%
5.4 6.8 9.5
(in Millions of SF) 1.0%
2

Net Absorption 0 0.0%

10.0 4.3 3.9
(in Millions of SF)

Overall Vacancy 5.3% 5.7% 6.2% Absorption New Supply Total Vacancy

Under
Construction 28.6 34.9 29.5 Houston’s industrial vacancy rate climbed 50 basis points
(in Millions of SF) during second quarter as net absorption totaled 3.9 million
square feet while more than 9.5 million square feet of new
Overall Asking
$8.39 $8.65 $9.07 supply delivered.
Lease Rates (NNN)

Recent Transactions *Colliers Transaction

Lease* Lease Lease* Sale* Sale*

Central Green 5 Empire West BP Bldg 5 Opus Fannin Center 235 Benton 6100 Almeda Genoa
North Hardy Toll Rd Northwest Outliers Southwest Far Southwest Far South Highway 35
114.4k SF 229.2k SF 57.7k SF 137.4k SF 35.5k SF
Houston
Industrial
23Q2
Executive Summary
Commentary by Paul Dominique, Senior Associate
The Houston industrial commercial real estate market
continues to display steady activity and resiliency through
the second quarter of 2023. The rise in vacancy from 5.7%
during first quarter to 6.2% in second quarter is more a result
of new construction delivery and less due to tenant move-
outs. Of the 9.5 million square feet of new supply this quarter,
approximately 47% was preleased upon delivery.
The construction pipeline currently totals 29.5 million square
feet, a drop from the 34.8 million square feet in the first
quarter. Construction starts have slowed due to constrained
capital and continued upward pressure on interest rates.
Tenant demand also slowed during the second quarter,
generating 7.5 million square feet of leasing activity. This
activity combined with the stronger leasing activity of prior
quarters led to another period of positive net absorption for
Houston, with the mid-year total close to 8.7 million square
feet. (Comparison: Dallas/Fort Worth reports approximately
9.2 million square feet of net absorption through midyear.)
The majority of absorption occurred with large deals in the
high-demand, port-centric South and Southeast submarkets.
Notable lease commencements include Quantix at AmeriPort
for 1.2 million square feet (both landlord and tenant rep by
Colliers Houston) and in the South with Penske occupying
603,780 square feet at IDV’s South Belt Central Business Park.
The continued strong activity of the South and Southeast
submarkets has been buoyed by the Port of Houston’s
continued growth. The Port is still operating at well above
historic averages with regards to container volume, although
Colliers | Houston | 23Q2 | Industrial Report
June 2023 volume is down 2% from the record-breaking 2022.
This decrease could be signaling a return to more normal
global supply chain shipping patterns. The outlook remains
optimistic at Port Houston with Union Pacific announcing a
new on-dock rail service to help streamline containers from
ships directly to railcars. Such infrastructure investments will
better position the Port as a competitive alternative to east
and west coast ports.
Rent growth trend sustainable?
The recent rent growth trend remains robust in the Houston
industrial real estate market, with increasing rates favoring
landlords in both lease renewals and new lease transactions.
The sustainability of this rent growth for the remainder of the
year will be contingent on the status of the larger sublease
spaces currently available (Broad Range, Safavieh, Article,
Snow Joe, Wayfair), which may create some downward
pressure on rents. The sublease availabilities coupled with a
number of new and second-generation vacancies, primarily
in the West and Northwest submarkets, may lead to a more
tenant-friendly rate structure in those submarkets. Any
deviation from this projection may stem from the slowing
construction pipeline in the coming quarters and possibly into
early 2024.
Overall the outlook for the remainder of the year is positive
for Houston’s industrial real estate market. All these factors
combined with Port Houston’s expansion, metro Houston’s
continued regional population growth, and the region’s strong
overall investment interest will carry momentum into and
during the second half of 2023.
Houston
Industrial

23Q2
Under Construction
Institutional Inventory - 500,000 SF or Greater

The buildings in the table below represent a sampling of the developments currently underway in Houston’s industrial market.

% Leased/ Est. Delivery Developer/Owner/

Business Park/Address Submarket RBA Owned Date Tenant
The Woodlands/
NorthPort Logistics Center 1,224,498 0% Q3 2023 Lovett Industrial
Conroe
TGS Cedar Port DC4 East-Southeast Far 1,218,956 0% Q3 2023 Trans-Global Solutions
North Hardy Toll
Presidents Park Bldg 4 1,213,573 0% Q4 2023 Prologis
Road
Beltway66 Logistics Park Bldg 1 South Hwy 35 1,200,000 100% Q4 2023 Target
Provident Realty
Port 88 Logistics Bldg 1 East-Southeast Far 1,027,490 0% Q2 2024
Advisors
Generation Park Northeast Hwy 90 1,026,270 0% Q4 2023 CA Ventures
Falcon Commercial
Kingsland Ranch Logistics Park Bldg 3 Sugar Land 855,610 0% Q3 2023
Development
Capital Development
Logistics Center II East-Southeast Far 800,405 0% Q1 2024
Partners
Principal Global
Parkside Logistics Center Bldg 1 East-Southeast Far 759,693 0% Q3 2023
Investors

Construction Activity
Houston Industrial Construction

# of Buildings Available SF Construction

Houston Industrial by Submarket
Under Construction
190 20,373,146
Total SF Pre-Leased
29,508,236 34.4%

Future Deliveries
Future Deliveries
18,000,000 16,360,582
16,000,000
14,000,000
11,400,321 11,744,268
Square Feet

12,000,000
9,405,963
10,000,000
7,553,425 7,027,446
8,000,000 6,186,196
6,000,000
4,000,000
2,000,000
-
Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 2025 North Northeast Northwest South Southeast Southwest
Estimated
Estimated Completion
Completion

Colliers | Houston | 23Q2 | Industrial Report

Houston
Industrial

23Q2
Market Statistics
Total Direct Sublease Total Previous Net Net Avg Direct
Inventory Availability Availability Availability Vacancy Vacancy Absorption Absorption Under Deliveries Asking Rate
SF Rate Rate Rate Rate Rate Current YTD Construction YTD (NNN)

HOUSTON TOTAL 726,796,316 11.9% 0.7% 12.6% 6.2% 5.7% 3,918,345 8,238,553 29,508,236 16,306,160 $9.07

Inner Loop Corridor

CBD-NW Inner Loop 10,921,637 5.0% 0.3% 5.2% 3.6% 2.8% (59,343) (94,823) 0 0 $10.65
Downtown 30,001,282 6.6% 2.0% 8.6% 6.1% 5.8% (136,300) (246,941) 0 0 $5.96
North Inner Loop 5,051,857 7.8% 0.4% 8.2% 6.5% 6.1% (21,525) (230,745) 0 0 $3.15

Southwest Inner Loop 5,466,777 4.3% 0.4% 4.7% 5.0% 5.7% 32,122 (26,911) 0 0 $13.75

INNER LOOP TOTAL 51,441,553 6.1% 1.3% 7.5% 5.5% 5.2% (185,046) (599,420) 0 0 $7.01

Liberty County
Liberty County 1,994,653 3.1% 1.6% 4.7% 4.7% 5.7% 18,535 (43,447) 20,000 0 $0.00

LIBERTY CO TOTAL 1,994,653 3.1% 1.6% 4.7% 4.7% 5.7% 18,535 (43,447) 20,000 0 $0.00

North Total
North Fwy Tomball Pky 37,055,839 8.1% 1.9% 10.0% 4.5% 5.2% (58,491) 362,368 982,686 1,018,658 $9.90

North Hardy Toll Rd 44,367,178 12.5% 2.9% 15.4% 9.0% 8.4% 848,157 630,746 2,443,284 1,536,377 $8.37

North Outer Loop 26,834,002 7.3% 0.0% 7.4% 5.0% 5.5% (213,813) (92,516) 168,243 0 $6.63

The Woodlands/Conroe 27,209,990 11.0% 0.1% 11.1% 3.6% 3.1% 172,720 200,223 2,019,363 244,649 $12.23

NORTH TOTAL 135,467,009 10.0% 1.5% 11.5% 5.9% 5.9% 748,573 1,100,821 5,613,576 2,799,684 $8.88

Northeast Corridor
Northeast Hwy 321 2,183,331 3.7% 0.0% 3.7% 3.2% 1.4% (25,372) (65,377) 0 0 $9.84

Northeast Hwy 90 25,580,363 14.5% 0.0% 14.5% 5.1% 6.4% (52,883) 64,658 1,812,076 255,871 $6.24

Northeast I-10 5,908,420 21.5% 0.0% 21.5% 15.9% 15.9% 322,503 322,660 1,222,750 0 $6.66

Northeast Inner Loop 12,927,286 1.1% 0.0% 1.1% 2.1% 2.0% 4,840 46,259 0 0 $6.00

NORTHEAST TOTAL 46,599,400 11.5% 0.0% 11.5% 5.5% 6.1% 249,088 368,200 3,034,826 255,871 $6.44

Northwest Corridor
Hwy 290 Tomball Pky 31,550,271 12.1% 1.0% 13.2% 8.5% 6.2% (97,778) 244,135 0 1,948,848 $8.26

Northwest Hwy 6 16,572,170 15.9% 1.1% 17.0% 8.0% 7.0% 1,093,228 1,098,369 1,188,554 2,466,580 $11.93

Northwest Inner Loop 60,685,118 5.9% 0.8% 6.8% 4.6% 4.3% (270,820) (306,675) 0 192,400 $9.47

Northwest Near 18,848,795 7.5% 0.3% 7.7% 3.8% 3.9% (63,766) (56,799) 238,200 10,865 $8.22

Northwest Outliers 40,967,136 6.5% 0.6% 7.1% 5.4% 9.8% 277,059 2,178,505 526,850 153,514 $12.54

West Outer Loop 30,463,970 8.4% 0.6% 8.9% 4.8% 4.4% (24,720) (105,130) 800,756 63,250 $9.68

NORTHWEST TOTAL 199,087,460 8.6% 0.7% 9.3% 5.6% 5.9% 913,203 3,052,405 2,754,360 4,835,457 $9.99

South Corridor
South Hwy 35 39,069,573 8.6% 0.5% 9.1% 3.6% 3.1% 24,315 54,575 3,778,173 1,559,443 $9.02

South Inner Loop 11,820,870 3.9% 0.0% 3.9% 3.1% 3.7% 101,730 175,361 62,000 0 $9.57
SOUTH TOTAL 50,890,443 7.6% 0.4% 8.0% 3.5% 3.3% 126,045 229,936 3,840,173 1,559,443 $9.06
Southeast Corridor
East I-10 Outer Loop 15,134,352 3.3% 0.0% 3.3% 1.0% 1.9% 136,377 85,901 0 0 $10.11

East-Southeast Far 96,817,291 12.0% 1.0% 12.9% 6.0% 5.8% 1,438,632 2,498,036 9,066,128 3,204,390 $9.29

Southeast Outer Loop 19,354,190 2.8% 4.0% 6.5% 3.1% 4.7% 288,317 223,828 0 332,064 $6.03
SOUTHEAST TOTAL 131,305,833 9.8% 1.3% 11.0% 5.0% 5.2% 1,863,326 2,807,765 9,066,128 3,536,454 $8.97
Southwest Corridor
Highway 59/Highway
27,568,242 4.0% 0.3% 4.3% 4.4% 4.1% (59,148) 154,355 204,000 0 $10.96
90
Southwest Far 22,364,499 14.8% 0.7% 15.5% 6.2% 8.5% 580,268 1,052,207 2,168,938 455,836 $9.96

Southwest Outer Loop 13,380,025 7.0% 0.4% 7.5% 5.4% 4.8% (135,757) (8,421) 0 0 $10.95

Sugar Land 36,930,048 17.3% 1.0% 18.3% 11.7% 11.0% (200,742) 124,152 2,806,235 2,863,415 $8.22

SOUTHWEST TOTAL 100,242,814 11.9% 0.7% 12.6% 7.6% 7.7% 184,621 1,322,293 5,179,173 3,319,251 $9.24

Colliers | Houston | 23Q2 | Industrial Report

 501 offices in Market Contacts:
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65 countries on Research Director

Houston
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6 continents
+1 713 830 2125
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Houston
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william.uhalt@colliers.com President
Houston
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Houston
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william.uhalt@colliers.com

Contributor:
Paul Dominique
Senior Associate
Houston
$4.5B +1 713 830 2158
paul.dominique@colliers.com
in revenue

2B
square feet under management

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