Houston Industrial Market Report 1Q 2011
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Houston Industrial Market Report 1Q 2011

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Houston Industrial Market Report 1Q 2011 Houston Industrial Market Report 1Q 2011 Document Transcript

  • Q1 2011 | INDUSTRIAL MARKETHOUSTON INDUSTRIAL MARKETRESEARCH & FORECAST REPORT Houston’s Industrial Vacancy Continues to Shrink Houston’s industrial market fundamentals continue to strengthen, adding 531,985 SF of positive net absorption in the first quarter, an improvement from the positive net absorption of 354,079 SF recorded in fourth quarter 2010. In addition, Houston’s industrial vacancy decreased slightly by 20 basis points to 6.0% from 6.2% the previous quarter. The quoted citywide rental rate for industrial space decreased CITYWIDE MARKET INDICATORS slightly by 0.4% between quarters from $5.33 to $5.31 per SF NNN, but increased by 8.1% on a year-over-year basis from $4.88 per SF NNN. On the leasing front, three 1Q-10 1Q-11 leases over 100,000 SF were signed during the first quarter, with the majority of the QUARTERLY NET ABSORPTION leases signed for 40,000 SF or less. For several years now developers have shown restraint due to the economic downturn; however, first quarter 2011 saw increased 1,843,261 SF 531,985 SF construction activity. Houston’s industrial construction pipeline increased to 723,801 QUOTED RENTAL RATE NNN SF from 207,000 SF the previous reported in the previous quarter. 4.88/SF $5.31/SF Looking forward, Houston’s industrial sector is expected to improve moderately as key INDUSTRIAL VACANCY economic drivers move towards recovery. The Port of Houston has been instrumental in Houstons development as a center of international trade. Over 100 steamship lines 6.6% 6.0% offer service linking Houston with 1,053 ports in 203 countries. It is also home to a $15 QUARTERLY DELIVERIES billion petrochemical complex, the largest in the nation and second largest worldwide. 1,423,176 SF 185,645 SF Looking forward, The Port of Houston Authority will host the American Association of Port Authorities annual convention in 2014, which will coincide with the 100th UNDER CONSTRUCTION anniversary celebration of the official opening of the Houston Ship Channel. 202,918 SF 723,801 SF Macro factors driving the absorption of office space ultimately relates to job count. According to the Texas Labor Market Review, total nonagricultural employment in Texas rose by 22,700 jobs in February, or 0.2%. Six of the eleven major industries grew over the month, with Professional and Business Service jobs contributing to more than half of the job gains. At the local level, Houston’s MSA had the largest monthly job increase, with 9,600 jobs added in February, followed by Dallas with 7,700 jobs added. According to the Greater Houston Partnership, Houston has recaptured more than half of the jobs lost during the recession.UNEMPLOYMENT 1/11 2/11HOUSTON 8.8% 8.4% ABSORPTION, NEW SUPPLY & VACANCY RATESTEXAS 8.3% 8.2% 5,000,000 8% ABSORPTION NEW SUPPLY VACANCYU.S. 9.0% 8.9% 4,000,000 7% ANNUAL 3,000,000 6%JOB GROWTH CHANGE 2/11 9.6k 2,000,000 5%HOUSTON 2.1%TEXAS 2.3% 22.7k 1,000,000 4%U.S. 1.8% 192k 0 3% -1,000,000 2% Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11www.colliers.com/houston
  • RESEARCH & FORECAST REPORT | Q1 2011 | HOUSTON INDUSTRIAL MARKET2011 INDUSTRIAL LEASES Vacancy & Availability Absorption & DemandAmerican Packing & Crating* Houston’s industrial market averaged Houston’s industrial market posted404 N Witter St 6.0% vacancy in the first quarter, 20 basis positive net absorption of 532K SF in theFeb-11 140,782SF points (bps) less than the previous quarter, first quarter, an improvement over theASCO and 60 bps below the 6.6% recorded in the positive net absorption of 354K SF in theGreens Port Industrial Park – 2G same quarter last year. Over the past six previous quarter. This marked theJan-11 120,000 SF quarters, Houston’s industrial vacancy has seventh consecutive quarter of gains.Max Movers** decreased, outperforming all other1205 North Post Oak Rd. commercial real estate property sectors Among Houston’s major industrialFeb-11 103,800 SF citywide. corridors, the Northwest and Southeast outperformed other industrial sectors inBerlin Packaging13788 West Rd. At the end of the first quarter, Houston the first quarter. The Northwest postedFeb-11 80,000 SF posted 29.1M SF of vacant industrial the highest positive net quarterly space citywide. Among the major absorption with 661K SF, followed by theBrook Furniture RentalAmerica Plaza industrial corridors, the Northwest held the Southeast with 360K SF. The SouthwestFeb-11 43,050 SF largest amount of vacant space with 7.2M followed with positive net quarterly SF (5.4% vacancy), followed by the absorption of 100K SF.Flexmaster USA** Southeast with 5.8M SF vacant (6.9%Pineway Service CenterFeb-11 35,645 SF vacancy), the Southwest with 4.8M SF There were several major tenant move- vacant (7.2% vacancy), and the North with ins contributing to net absorption gains inFrank Supply Company** 4.7M SF vacant (6.7% vacancy). the first quarter. Several of those tenantsMain Park Distribution - Bldg H are: Sysco moved into the former HPFeb-11 32,670 SF Houston’s industrial construction pipeline campus on Hwy 290 in Cypress (669,102Integrated Drive Systems, LLC increased to 723,801 SF from 207,000 SF SF) and American Packing & Crating6623 Willowbrook Park Dr. the previous reported in the previous moved into 140,782 SF on N Witter St.Jan-11 26,600 SF quarter. The largest project underDispoz-O Products** construction is a 300,000 SF multi-tenant LeasingClaymoore Business Park – Bldg. 5 office/warehouse in the West Outer Loop Houston’s industrial market recordedJan-11 22,275 SF Ind submarket scheduled for delivery April twenty-one (3) leases over 100,000 SF inPioneer Drilling 2011. The project is being developed by the first quarter. The majority of theNorthwest Green Bus. Pk. – Bldg. 4 Duke Realty and is pre-leased by Ram leases singed during were less thanFeb-11 20,000 SF 40,000 SF. Chemical & Supply and Berlin Packaging.Lee Specialties A list of current properties under5119 Hitonview Rd. construction can be found in a table on Overall, industrial leasing activityNov-10 17,000 SF page 4 or this report. reached 2.6M SF in the first quarter, 2.0M SF less than the previous quarter Rental Rates and 2.5M SF less than what was*Colliers International transaction Houston’s average quoted industrial rental recorded in the same quarter last year.** Renewal rates decreased slightly by 0.4% between For a select list of Houston’s top quarters from $5.33 to $5.31 per SF NNN, industrial leases signed to date, please and increased by 8.1% on a year-over- see the column at left. year basis from $4.88 per SF NNN. By property type on a year-over-year basis, warehouse distribution space is $5.01 NNN/SF (up $0.11/SF) and flex space stood at $6.95 NNN/SF (down $0.97/SF). COLLIERS INTERNATIONAL | P. 2
  • RESEARCH & FORECAST REPORT | Q1 2011 | HOUSTON INDUSTRIAL MARKET HOUSTON INDUSTRIAL INVESTMENT SALES Sales Activity Houston’s industrial investment activity remains sluggish with only 14 Q1 2011 sales reported in the first quarter. The most significant transaction was Granite Properties’ 1.2M SF, 11-property portfolio which sold to Cabot Total Volume: $80.8M Properties for an estimated $49 per SF. The properties included in the # of Properties: 14 transaction are listed in the table below. Total SF: 1.8M Average Price/SF: $45 Average Cap: 7.5% Property Submarket RBA (SF) % Leased Source: Costar Comps Town & Country Business Park 9 Katy Freeway 18,900 100% Greenbriar Place North 78,745 55.4% 1406 N Sam Houston Pky W North 15,000 100% Wallisville Industrial Park Northeast 127,744 89.8% Clay-Campbell Business Park 1 Northwest 228,900 100% Willowbend Distribution Center Greenbriar Place North West by Northwest Northwest 96,000 80.0% Granite Plaza Tech Northwest 84,025 0% Pinemont Service Center Northwest 21,760 66.2% Post Oak Service Center Northwest 8,050 100% Plaza Del Oro Business Park South 180,094 79.5% Willowbend Distribution Center II Southwest 100,800 100% Town & Country 9 West by Northwest HOUSTON INDUSTRIAL MARKET SUMMARY Direct Sublet Total Direct Sublet Total 1Q 2011 Net 4Q 2010 Net 1Q 2011 4Q 2010 SF Under Market Rentable Area Vacancy Vacancy Vacancy Vacant SF Vacant SF Vacant SF Absorption Absorption Completions Completions Construction Rate Rate Rate Greater Houston Total 498,295,069 29,130,713 5.8% 917,096 0.2% 30,047,809 6.0% 897,271 354,079 185,645 282,843 723,801 NW Inner Loop 12,704,036 698,100 5.5% 37,000 0.3% 735,100 5.8% 14,707 (28,683) - - - CBD 34,093,884 1,889,152 5.5% - 0.0% 1,889,152 5.5% (24,604) 262,336 - - - North Inner Loop 5,661,218 498,639 8.8% - 0.0% 498,639 8.8% - 13,299 - - - SW Inner Loop 10,032,127 269,037 2.7% - 0.0% 269,037 2.7% (62,653) (4,382) - - - Total Inner Loop 62,491,265 3,354,928 5.4% 37,000 0.1% 3,391,928 5.4% (72,550) 242,570 - - - North Fwy/Tomball Pky 14,078,375 1,263,070 9.0% 9,975 0.1% 1,273,045 9.0% (29,266) 32,936 - 10,000 88,362 North Hardy Toll Rd 24,461,512 1,640,951 6.7% 83,521 0.3% 1,724,472 7.0% (64,494) 238,213 52,400 - 68,146 North Outer Loop 17,557,767 972,442 5.5% - 0.0% 972,442 5.5% (106,554) (16,597) 67,250 111,126 The Woodlands/Conroe 14,234,874 753,353 5.3% 21,197 0.1% 774,550 5.4% (37,144) 78,008 - 10,800 - Total North Corridor 70,332,528 4,629,816 6.6% 114,693 0.2% 4,744,509 6.7% (237,458) 332,560 52,400 88,050 267,634 Northeast Hwy 321 1,375,459 - 0.0% - 0.0% - 0.0% 0 0 - - - Northeast Hwy 90 16,354,801 568,322 3.5% 214,120 1.3% 782,442 4.8% (135,790) 31,000 - - - Northeast I-10 4,173,338 148,692 3.6% - 0.0% 148,692 3.6% (53,397) (30,154) - - - Northeast Inner Loop 11,609,890 1,066,393 9.2% - 0.0% 1,066,393 9.2% (73,475) (25,811) - 148,793 - Total Northeast Corridor 33,513,488 1,783,407 5.3% 214,120 0.6% 1,997,527 6.0% (262,662) (24,965) - 148,793 - Hwy 290/Tomball Pky 16,641,215 666,002 4.0% 16,024 0.1% 682,026 4.1% 74,518 67,645 - - 39,700 Northwest Hwy 6 5,470,140 96,646 1.8% - 0.0% 96,646 1.8% 675,800 44,557 - Northwest Inner Loop 61,252,443 3,537,212 5.8% 232,605 0.4% 3,769,817 6.2% 182,643 (115,712) - - - Northwest Near 16,977,654 956,600 5.6% 13,550 0.1% 970,150 5.7% (65,730) 58,300 - - - Northwest Outlier 12,019,056 445,975 3.7% 5,348 0.0% 451,323 3.8% (6,768) (40,768) - - - West Outer Loop 21,604,713 1,317,287 6.1% - 0.0% 1,317,287 6.1% 165,870 69,547 34,125 - 300,000 Total Northwest Corridor 133,965,221 7,019,722 5.2% 267,527 0.2% 7,287,249 5.4% 1,026,333 83,569 34,125 - 339,700 East I-10 Outer Loop 15,153,987 208,435 1.4% 70,000 0.5% 278,435 1.8% 207,960 2,750 - - - East-SE Far 48,336,809 4,911,309 10.2% 38,903 0.1% 4,950,212 10.2% 241,511 152,282 27,120 - 30,170 SE Outer Loop 21,582,150 561,786 2.6% 50,000 0.2% 611,786 2.8% (89,412) 6,715 - - - Total Southeast Corridor 85,072,946 5,681,530 6.7% 158,903 0.2% 5,840,433 6.9% 360,059 161,747 27,120 - 30,170 South Highway 35 31,906,061 1,575,454 4.9% 11,000 0.0% 1,586,454 5.0% (10,680) (17,910) - 26,000 - South Inner Loop 13,535,789 365,022 2.7% - 0.0% 365,022 2.7% (5,830) (10,554) - - - Total South Corridor 45,441,850 1,940,476 4.3% 11,000 0.0% 1,951,476 4.3% (16,510) (28,464) - 26,000 - Highway 59/Highway 90 23,500,999 1,301,527 5.5% 64,871 0.3% 1,366,398 5.8% 28,400 (28,003) - - - Southwest Far 10,747,027 822,899 7.7% 26,084 0.2% 848,983 7.9% 8,581 21,906 20,000 - 38,797 Southwest Outer Loop 14,911,147 1,167,245 7.8% - 0.0% 1,167,245 7.8% 74,330 (83,897) - - - Fort Bend County/Sugar Lan 18,318,598 1,429,163 7.8% 22,898 0.1% 1,452,061 7.9% (11,252) (322,944) 52,000 20,000 47,500 Total Southwest Corridor 67,477,771 4,720,834 7.0% 113,853 0.2% 4,834,687 7.2% 100,059 (412,938) 72,000 20,000 86,297 COLLIERS INTERNATIONAL | P. 3
  • RESEARCH & FORECAST REPORT | Q1 2011 | HOUSTON INDUSTRIAL MARKET Select Industrial Projects Under Construction Estimated Submarket Building Address RBA % Leased Developer Delivery 1 West Outer Loop Ind 13788 West Rd 300,000 73.27 Duke Realty Apr-11 2 North Outer Loop Ind 14555 John F Kennedy Blvd 111,126 100.00 Noble Drilling Llc May-11 3 North Fwy/Tomball Pky Ind 10811 Vinecrest Dr 88,362 0.00 East Properties Jul-11 4 Sugar Land Ind 0 Richmond Gaines Rd 47,500 5.26 Trend Setter Realty May-11 5 North Hardy Toll Road Ind 4540 Kendrick Plaza Dr 43,536 27.75 East Properties Jun-11 6 Hwy 290/Tomball Pky Ind 12606 N Houston Rosslyn Rd 39,700 24.14 2004 Nw Park Ltd Jun-11 7 Southwest Far Ind 425 Summer Park Dr 38,797 100.00 Red Sea Properties Jun-11 8 East-Southeast Far Ind 201 Beltway Green 30,170 0.00 Chrysler Group Realty Co LLC Jun-11 9 North Hardy Toll Road Ind 2437 Peyton Rd 24,610 0.00 Capital Commercial Investme May-11 Total u/c industrial projects listed above 723,801 Select 2011 Industrial Deliveries Submarket Building Address RBA % Leased Developer Name Delivered 1 North Hardy T oll Road Ind 7902 FM 1960 52,400 0 Inspect Connect Mar-11 2 Sugar Land Ind 15445 Old Richmond Ave 52,000 0 Richards Investment Mar-11 3 Conroe 2000 S Loop 336 W 34,709 100 N/A Mar-11 4 West Outer Loop Ind 11987 FM-529 34,125 100 T exas Development Comp Feb-11 5 East-Southeast Far Ind 5391 Bay Oaks Dr 27,120 0 Clayco-h2o Ltd Feb-11 6 Southwest Far Ind 4314 FM 2218 20,000 100 N/A Jan-11 T otal year-to-date industrial deliveries listed above 220,354 1Q 2011 Houston Industrial Deliveries 1Q 2011 Houston Industrial Under Construction 3 1 9 5 3 2 1 6 4 8 4 2 5 7 6 COLLIERS INTERNATIONAL | P. 4
  • RESEARCH & FORECAST REPORT | Q1 2011 | HOUSTON INDUSTRIAL MARKET 480 offices in 61 countries on 6 continents United States: 135 Canada: 39 Latin America: 17 Asia Pacific: 52 EMEA: 95 COLLIERS INTERNATIONAL | HOUSTON 1300 Post Oak Boulevard Suite 200 Houston, Texas 77056 MAIN +1 713 222 2111 Accelerating success. COLLIERS INTERNATIONAL | P. 5