www.colliers.com/houston
Q4 2013 | INDUSTRIAL MARKET
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RESEARCH & FORECAST REPORT | Q4 2013 | HOUSTON INDUSTRIAL MARKET
COLLIERS INTERNATIONAL | P.2
Vacancy & Availability
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RESEARCH & FORECAST REPORT | Q4 2013 | HOUSTON INDUSTRIAL MARKET
COLLIERS INTERNATIONAL | P.3
Houston Industrial Market Su...
RESEARCH & FORECAST REPORT | Q4 2013 | HOUSTON INDUSTRIAL MARKET
COLLIERS INTERNATIONAL | P.4
Q4 2013 Industrial Under Con...
RESEARCH & FORECAST REPORT | Q4 2013 | HOUSTON INDUSTRIAL MARKET
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Q4 2013 Houston Industrial Market Research Report

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Transcript of "Q4 2013 Houston Industrial Market Research Report"

  1. 1. www.colliers.com/houston Q4 2013 | INDUSTRIAL MARKET 2% 3% 4% 5% 6% 7% 8% -500,000 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 Absorption New Supply Vacancy With low vacancy, stable rental rates, and positive absorption, Houston’s industrial market remains one of the top ten healthiest U.S. industrial markets. Houston posted 2.1M SF of positive net absorption in the fourth quarter, pushing the net absorption for the year to 7.0M SF. Industrial leasing activity reached 2.7M SF, partly due to large tenants leasing some of the 4.4M SF of space currently under construction. Houston’s average industrial vacancy rate dropped 10 basis points between quarters to 5.2% from 5.3%, and remained unchanged when compared to the same quarter one year ago. The citywide average quoted industrial rental rate increased 0.3% between quarters to $5.92 from $5.90 per SF NNN, and increased 5.9% on a year-over-year basis from $5.59 per SF NNN. Houston’s lack of available industrial inventory has spurred demand for new product. Developers have responded and currently have 4.4M SF under construction. Some of the increased activity has been driven by build-to-suit projects for companies expanding in or relocating to the Houston market; however, most is in spec developments (3.7M SF). As Houston’s available industrial inventory shrinks, we believe the increasing demand for new product will continue to spur both build-to-suit and spec development. The Houston metropolitan area added 86,200 jobs between November 2012 and November 2013, an annual increase of 3.1% over the prior year’s job growth. Local economists have forecasted 2014 job growth to remain steady, adding between 68,000 and 72,000 jobs. Further, Houston’s unemployment fell to 5.6% from 5.8% one year ago. Houston area home sales increased 19.4% between November 2012 and November 2013. Houston’s economy is expected to remain strong in 2014 due to steady job growth and continued expansion in the energy sector. RESEARCH & FORECAST REPORT HOUSTON INDUSTRIAL MARKET ABSORPTION, NEW SUPPLY & VACANCY RATES Houston YE 2013 Industrial Absorption – 7.0M SF HOUSTON INDUSTRIAL MARKET INDICATORS Q4 2012 Q4 2013 CITYWIDE NET ABSORPTION (SF) 1.9M 2.1M CITYWIDE AVERAGE VACANCY 5.2% 5.2% CITYWIDE AVERAGE RENTAL RATE $5.77 $5.92 SF DELIVERED 1.0M 1.6M SF UNDER CONSTRUCTION 2.5M 4.4M Houston UNEMPLOYMENT 11/12 11/13 HOUSTON 5.8% 5.6% TEXAS 6.0% 5.8% U.S. 7.4% 6.6% JOB GROWTH ANNUAL CHANGE # OF JOBS ADDED HOUSTON 3.1% 86.2K TEXAS 2.5% 275.7K U.S. 1.7% 2.3M JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted)
  2. 2. RESEARCH & FORECAST REPORT | Q4 2013 | HOUSTON INDUSTRIAL MARKET COLLIERS INTERNATIONAL | P.2 Vacancy & Availability Although 2.2M SF of new inventory delivered during the fourth quarter, Houston’s industrial vacancy rate still dropped by 10 basis points between quarters to 5.2% from 5.3%. At the end of the fourth quarter, Houston had 24.5M SF of vacant space, 1.0M SF less than the previous quarter. Among the major industrial corridors, the Northeast Corridor has the lowest vacancy rate at 2.9%, followed by the Northwest Corridor at 4.1%. Houston’s industrial construction pipeline had 4.4M SF of projects underway at the end of the fourth quarter, including 3.7M SF of spec development. The largest project under construction is Liberty Property Trust’s 650,000-SF spec warehouse located on Fallbrook in the Northwest Corridor. A list of additional buildings currently under construction can be found on Page 4 of this report. Rental Rates According to CoStar, our data service provider, Houston’s citywide average quoted industrial rental rate for all product types increased 1.0% from $5.86 per SF NNN in the third quarter to $5.92 per SF NNN in the fourth quarter. According to Colliers’ internal data, actual lease transactions are in the $4.32 – $4.80 per SF NNN range for newer bulk industrial spaces, while flex rates are ranging from $6.60 to $9.00 per SF, depending on the allowance for tenant improvements and the location of the of the property. By property type, the average quoted NNN rental rates are as follows: $5.54 per SF for Distribution space; $4.57 per SF for Bulk Logistics space; $9.30 per SF for Flex/Service space; with Tech/R&D space averaging $14.25 per SF, according to CoStar. Absorption & Demand Houston’s industrial market posted 2.1M SF of positive net absorption in the fourth quarter, bringing the 2013 year-end total to 7.0M SF. The Northwest Corridor submarket clearly out- performed all others in the fourth quarter, posting the largest positive net quarterly absorption of 1.5MSF, followed by the Southwest Corridor with 304K SF. There were several major tenant move-ins contributing to net absorption gains in the fourth quarter, including Igloo (535,000 SF); Smart Warehousing, LLC (151,260 SF); PrimeSource (149,500 SF); Builders First Source (148,400 SF); Williams- Sonoma (74,100 SF); and Rectorseal (69,133 SF). Leasing Houston’s industrial leasing activity reached 2.7M SF in the fourth quarter. A list of select fourth quarter industrial lease transactions are included in the table below. 1 Colliers International transaction 2 Renewal 3 Expansion 4Pre-lease proposed or under construction Building Name/Address Submarket SF Tenant Lease Date 225 RailPort East-Southeast Far 600,000 Frontier Logistics LP4 Oct-13 Pinto Business Park North Fwy/Tomball Pky 500,000 HD Supply4 Nov-13 DCT Airtex Industrial Center North Hardy Toll Road 267,000 B&G Foods Dec-13 Gillingham Distribution Center Sugar Land/Ft Bend Co 161,755 Keller Warehousing and Distribution, LLC1 Dec-13 Pinto Business Park North Fwy/Tomball Pky 130,000 The Reynolds Co4 Nov-13 1128 Silber Rd Northwest Inner Loop 98,506 Integrity Packaging1 Oct-13 Central Green Distribution Center North Hardy Toll Road 83,575 Wartsila North America1,2 Dec-13 Ten West Crossing Bldg 3 Northwest Outliers 67,743 Welltec Dec-13 13721 S Gessner Hwy 59/Hwy 90 (Alt) 47,430 ToolMart Dec-13 1805 Brittmoore Road West Outer Loop 31,250 Benthic USA, LLC Oct-13 1234 Silber Road Northwest Inner Loop 30,757 Sunny Sky Products Oct-13 1218 Silber Road Northwest Inner Loop 25,000 Arbor Contract Services, Inc Oct-13 Beltway Service Center Southwest Outer Loop 24,069 Export 220 Volt, Inc.1,2 Dec-13 7540 Fairview Street West Outer Loop 22,500 Tobul Accumulator, Inc. Oct-13 Q4 2013 Top Industrial Leases
  3. 3. RESEARCH & FORECAST REPORT | Q4 2013 | HOUSTON INDUSTRIAL MARKET COLLIERS INTERNATIONAL | P.3 Houston Industrial Market Summary Sales Activity Q4 2013 Total Sales : $1.5B No. of Properties: 44 Total SF: 13.0M Average $/SF: $64 Average Cap Rate: None reported Menco Management Group sold a 114,923-SF Class B industrial distribution warehouse to Monmouth Real Estate Investment Corp. for $15.3M or $133 per SF. The building, completed in 2013, is leased to Federal Express through 11/2023. Deepwater Corrosion Services, Inc. sold a 18,384-SF Class C industrial warehouse to HWM Properties for $1.5M or $81 per SF. The building is located on Train Ct in the Northwest Industrial submarket. The property was sold as a sale leaseback to Deepwater Corrosion Services, Inc. Sources: Real Capital Analytics; CoStar Comps Market Rentable Area Direct Vacant SF Direct Vacancy Rate Sublet Vacant SF Sublet Vacancy Rate Total Vacant SF Total Vacancy Rate 4Q13 Net Absorption YE 2013 Net Absorption 4Q13 Completions YE 2013 Completions SF Under Construction Greater Houston Total 483,638,295 24,476,429 5.1% 594,616 0.1% 25,071,045 5.2% 2,058,205 7,024,157 2,170,623 8,045,817 4,447,149 CBD-NW Inner Loop 11,485,642 645,832 5.6% 22,200 0.2% 668,032 5.8% (36,055) 103,974 - - - Downtown 31,717,528 1,839,091 5.8% - 0.0% 1,839,091 5.8% (69,756) (79,042) - - - North Inner Loop 5,083,616 451,369 8.9% - 0.0% 451,369 8.9% - - - - - Southwest Inner Loop 7,313,135 47,070 0.6% - 0.0% 47,070 0.6% 35,828 89,742 - - - Total CBD Corridor 55,599,921 2,983,362 5.4% 22,200 0.0% 3,005,562 5.4% (69,983) 114,674 - - - North Fwy/Tomball Pky 16,216,491 1,097,705 6.8% 4,000 0.0% 1,101,705 6.8% 175,992 484,823 - 529,075 1,103,268 North Hardy Toll Rd 26,972,843 2,033,643 7.5% 98,965 0.4% 2,132,608 7.9% 6,498 666,334 531,712 1,961,669 583,148 North Outer Loop 18,139,153 1,139,357 6.3% - 0.0% 1,139,357 6.3% 64,114 104,432 25,000 271,616 351,250 The Woodlands/Conroe 14,109,086 606,349 4.3% - 0.0% 606,349 4.3% 18,958 226,525 10,000 165,645 137,803 Total North Corridor 75,437,573 4,877,054 6.5% 102,965 0.1% 4,980,019 6.6% 265,562 1,482,114 566,712 2,928,005 2,175,469 Northeast Hwy 321 1,181,673 - 0.0% - 0.0% - 0.0% 14,879 9,480 - - - Northeast Hwy 90 15,807,048 227,946 1.4% 129,000 0.8% 356,946 2.3% (7,725) 100,860 - 20,000 30,560 Northeast I-10 3,602,145 143,081 4.0% - 0.0% 143,081 4.0% (7,911) 6,991 - 21,000 - Northeast Inner Loop 11,602,910 433,599 3.7% - 0.0% 433,599 3.7% 57,595 302,897 - - - Total Northeast Corridor 32,193,776 804,626 2.5% 129,000 0.4% 933,626 2.9% 56,838 420,228 - 41,000 30,560 Hwy 290/Tomball Pky 15,583,805 1,011,376 6.5% - 0.0% 1,011,376 6.5% 30,691 219,523 210,085 541,560 1,094,670 Northwest Hwy 6 4,148,353 114,536 2.8% - 0.0% 114,536 2.8% 33,034 34,311 44,400 58,800 - Northwest Inner Loop 58,478,596 2,031,205 3.5% 143,120 0.2% 2,174,325 3.7% 200,100 388,413 - 150,000 - Northwest Near 16,848,047 807,297 4.8% 52,719 0.3% 860,016 5.1% 169,517 197,280 - 317,840 132,470 Northwest Outlier 16,785,333 1,100,855 6.6% - 0.0% 1,100,855 6.6% 1,110,041 2,142,294 1,297,426 2,823,853 63,868 West Outer Loop 23,040,101 266,854 1.2% 23,600 0.1% 290,454 1.3% (33,301) 423,921 19,500 77,750 288,350 Total Northwest Corridor 134,884,235 5,332,123 4.0% 219,439 0.2% 5,551,562 4.1% 1,510,082 3,405,742 1,571,411 3,969,803 1,579,358 South Highway 35 31,038,342 1,193,426 3.8% 23,600 0.1% 1,217,026 3.9% (757) 95,616 17,500 133,474 17,500 South Inner Loop 12,959,587 793,977 6.1% - 0.0% 793,977 6.1% (89,560) (248,222) - - - Total Southern Corridor 43,997,929 1,987,403 4.5% 23,600 0.1% 2,011,003 4.6% (90,317) (152,606) 17,500 133,474 17,500 East I-10 Outer Loop 13,047,099 235,136 1.8% - 0.0% 235,136 1.8% (40,001) (119,601) - - - East-Southeast Far 46,527,657 4,285,906 9.2% 13,000 0.0% 4,298,906 9.2% 217,291 545,045 - 338,574 420,462 Southeast Outer Loop 18,079,956 594,010 3.3% - 0.0% 594,010 3.3% (95,656) (220,888) - - - Total Southeast Corridor 77,654,712 5,115,052 6.6% 13,000 0.0% 5,128,052 6.6% 81,634 204,556 - 338,574 420,462 Highway 59/Highway 90 21,838,715 873,433 4.0% 52,372 0.2% 925,805 4.2% 62,942 741,510 15,000 490,000 223,800 Southwest Far 10,711,120 818,571 7.6% 12,500 0.1% 831,071 7.8% 124,028 254,423 - 83,961 - Southwest Outer Loop 12,750,635 692,991 5.4% 4,240 0.0% 697,231 5.5% 74,530 197,557 - - - Sugar Land/Ft Bend Co 18,569,679 991,814 5.3% 15,300 0.1% 1,007,114 5.4% 42,889 355,959 - 61,000 - Total Southwest Corridor 63,870,149 3,376,809 5.3% 84,412 0.1% 3,461,221 5.4% 304,389 1,549,449 15,000 634,961 223,800 Houston Industrial Market Statistical Summary 4th Quarter and Year-end 2013
  4. 4. RESEARCH & FORECAST REPORT | Q4 2013 | HOUSTON INDUSTRIAL MARKET COLLIERS INTERNATIONAL | P.4 Q4 2013 Industrial Under Construction – 50,000 SF or greater Q4 2013 Industrial Deliveries - 15,000 SF or greater Submarket Building Address RBA % Pre- Leased Developer Estimated Delivery Building Description Hwy290/Tomball PkyInd 8303 Fallbrook Dr 650,000 0.0% LibertyPropertyTrust May-14 Spec Warehouse North Fwy/Tomball PkyInd 10565 Greens Crossing Blvd 600,750 82.9% Hines Jun-14 Spec Warehouse, HD Supplyleased 500K Hwy290/Tomball PkyInd DCT Northwest Phase 1 384,680 0.0% DCT Industrial Trust Sep-14 Spec Office Warehouse North HardyToll Rd 19802 Imperial ValleyDr 328,020 0.0% Avera Companies Jan-14 Spec Warehouse/ Distribution North Outer Loop 121 Esplanade 244,550 0.0% IDI Apr-14 Spec Office/Warehouse East-Southeast Far 3750 Highway225 185,168 0.0% The Carson Companies Feb-14 Spec Distribution Warehouse West Outer Loop 16257 Port NW - Bldg 6 171,850 0.0% Transwestern Jan-14 Spec Distribution Warehouse North Fwy/Tomball Pky 11220 Ella Blvd 163,000 0.0% LibertyPropertyTrust Jan-14 Spec Office/Warehouse North Outer Loop 13627 W HardyRd 151,339 100.0% TNRG Jan-14 BTS Office/Warehouse South Hwy35 11951 Spectrum Blvd 150,000 100.0% Unknown Feb-14 BTS Dover Manufacturing North HardyToll Road 525 CenturyPlaza Dr 149,760 100.0% Avera Companies Jan-14 PrimeSource leased building South Hwy35 7232 Airport Blvd 137,297 100.0% Unknown Dec-14 BTS Powell Electrial Systems Northwest Near Ind 7330 Langfield Rd 132,470 72.4% Avera Companies Jan-14 Spec Warehouse, Spears Manufacturing North HardyToll Road 16501 Central Green Blvd 129,143 0.0% Verde Jan-14 Spec Office/Warehouse North HardyToll Road 16507 Central Green Blvd 129,143 0.0% Verde Jan-14 Spec Office/Warehouse Hwy59/Hwy90 (Alt) 13615 S Gessner Rd 123,300 0.0% Stream RealtyPartners, L.P. Mar-14 Spec Office/Warehouse North Fwy/Tomball PkyInd 433 Plaza Verde Dr 120,159 0.0% Hines Jun-14 Spec Office/Warehouse North Fwy/Tomball PkyInd 545 Plaza Verde Dr 120,159 0.0% Hines Apr-14 Spec Office/Warehouse East-Southeast Far 3700 Highway225 118,500 0.0% The Carson Companies Feb-14 Spec Office/Warehouse North Outer Loop Ind 71 Esplanade 106,700 0.0% IDI Mar-14 Spec Office/Warehouse Hwy59/Hwy90 (Alt) 13721 S Gessner 85,500 55.5% Stream RealtyPartners, L.P. Jun-14 Spec Office/Warehouse North Fwy/Tomball Pky 1050 Greens Pky 67,200 0.0% LibertyPropertyTrust Jan-14 Spec Office/Warehouse Northwest Outliers 461 Stonegate Dr 63,382 100.0% ClayDevelopment Jan-14 Spec Office/Warehouse East-Southeast Far 3800 Highway225 61,794 0.0% The Carson Companies Feb-14 Spec Crane-Served Office/Warehouse Northwest Outliers Ind 22110 Merchants Way 51,868 0.0% InSite Apr-14 Spec Warehouse Submarket Building Address RBA % Leased Developer Delivered Building Description NorthwestOutliers 28501 US-90 Hwy 535,000 100.0% Panattoni Oct-13 BTS for Igloo NorthwestOutliers 28900 US-90 Hwy 500,000 100.0% Panattoni Oct-13 BTS Weatherford Artificial LiftSystems NorthwestOutliers 30602 Mcallister Rd 400,000 100.0% KDWLtd Nov-13 BTS Goya Food Processing North HardyToll Rd Imperial ValleyDr @ FM1960 328,020 0.0% Avera Companies Dec-13 Spec Warehouse/Distribution North HardyToll Rd 14700 North Fwy 267,170 100.0% DCTIndustrial Trust Nov-13 Spec Office/Warehouse,B&GFoods leased North HardyToll Road 19245 Kenswick Dr 74,880 0.0% Trammell Crow Company Nov-13 Spec Office/Warehouse NorthwestOutliers 22220 Merchants Way 67,743 100.0% InSite Commercial Real Estate Dec-13 Spec Office/Warehouse,Welltec leased North HardyToll Road 19345 Kenswick Dr 58,370 0.0% Trammell Crow Company Nov-13 Spec Office/Warehouse NorthwestOutliers 22330 Merchants Way 45,633 52.7% InSite Commercial Real Estate Dec-13 Spec Office/Warehouse Hwy290/Tomball Pky 7337 Empire Central Dr 20,085 0.0% Boyd Commercial Nov-13 Spec Office/Warehouse North HardyToll Rd 15370 Vantage PkyW 17,646 0.0% Northwinds Commercial Realty Oct-13 Spec Office/Warehouse North HardyToll Rd 15380 Vantage PkyW 17,646 100.0% Northwinds Commercial Realty Oct-13 Spec Office/Warehouse.Metso Automation leased
  5. 5. RESEARCH & FORECAST REPORT | Q4 2013 | HOUSTON INDUSTRIAL MARKET Accelerating success. COLLIERS INTERNATIONAL 1233 W. Loop South Suite 900 Houston, Texas 77027 Main +1 713 222 2111 LISA R. BRIDGES Director of Market Research | Houston Direct +1 713 830 2125 Fax +1 713 830 2118 lisa.bridges@colliers.com The Colliers Advantage Enterprising Culture Colliers International is a leader in global real estate services, defined by our spirit of enterprise. Through a culture of service excellence and a shared sense of initiative, we integrate the resources of real estate specialists worldwide to accelerate the success of our partners. When you choose to work with Colliers, you choose to work with the best. In addition to being highly skilled experts in their field, our people are passionate about what they do. And they know we are invested in their success just as much as we are in our clients’ success. This is evident throughout our platform—from Colliers University, our proprietary education and professional development platform, to our client engagement strategy that encourages cross-functional service integration, to our culture of caring. We connect through a shared set of values that shape a collaborative environment throughout our organization that is unsurpassed in the industry. That’s why we attract top recruits and have one of the highest retention rates in the industry. Colliers International has also been recognized as one of the “best places to work” by top business organizations in many of our markets across the globe. Colliers International offers a comprehensive portfolio of real estate services to occupiers, owners and investors on a local, regional, national and international basis. COLLIERS INTERNATIONAL | P. 5

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