www.colliers.com/houston
Q3 2010 | INDUSTRIAL MARKET
Houston Industrial Market Strengthening
Houston’s industrial market f...
RESEARCH & FORECAST REPORT | Q3 2010 | HOUSTON INDUSTRIAL MARKET
Occupancy & Availability
Houston’s industrial market aver...
RESEARCH & FORECAST REPORT | Q3 2010 | HOUSTON INDUSTRIAL MARKET
COLLIERS INTERNATIONAL | P. 3
Sales Activity
Houston’s in...
RESEARCH & FORECAST REPORT | Q3 2010 | HOUSTON INDUSTRIAL MARKET
COLLIERS INTERNATIONAL | P. 4
Industrial Projects Under C...
RESEARCH & FORECAST REPORT | Q3 2010 | HOUSTON INDUSTRIAL MARKET
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Houston industrial market report 3 q 10

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Houston industrial market report 3 q 10

  1. 1. www.colliers.com/houston Q3 2010 | INDUSTRIAL MARKET Houston Industrial Market Strengthening Houston’s industrial market fundamentals continue to strengthen, with 1.8M SF of positive net absorption in the third quarter bringing the year-to-date total to 4.4M SF, an improvement from the positive net absorption of 1.6M SF recorded through the third quarter last year. Occupancy also posted a slight gain with the citywide average at 93.9% in the third quarter, up from 93.2% at this time last year. While quoted rental rates for industrial space fell below levels for the same period last year, rental rates remained stable from the previous quarter. On the leasing front, nineteen leases over 100,000 SF were signed year-to-date through the third quarter, with six leases over 200,000 SF. A significant boost to the market’s stabilization has been disciplined curtailment of new speculative construction activity, with only 218,918 SF in the construction pipeline at the close of 3Q10, compared to 1.7M SF under construction at this time last year. Looking forward, Houston’s industrial sector is expected to improve gradually as key economic drivers move towards recovery. The Port of Houston has been instrumental in Houston's development as a center of international trade. Over 100 steamship lines offer service linking Houston with 1,053 ports in 203 countries. It is also home to a $15 billion petrochemical complex, the largest in the nation and second largest worldwide. Houston is a key player in the Break-bulk and Logistics sector. In October, a record 3,800 people attended the Annual Break-bulk Americas Transportation Conference and Exhibition, hosted by The Port of Houston Authority at the George R. Brown Convention Centre. Looking forward, The Port of Houston Authority was recently selected to host the American Association of Port Authorities annual convention in 2014, which will coincide with the 100th anniversary celebration of the official opening of the Houston Ship Channel. According to the Texas Labor Market Review, Texas MSA’s have experienced job gains in six out of eight months so far this year. Although Houston isn’t the top performing MSA in Texas, Houston continues to be recognized as one of the strongest metros in the U.S. for business activity, with the employment sector reporting marked improvement from this time last year. In the 12 months ending in August 2010, Houston’s job loss totaled 18,300, significantly below the 100,000 jobs lost in 2009, with the local MSA projected to end 2010 with positive job growth. The area’s above-average population growth spurs the need for increased services, which in turn contributes positively to Houston’s strong long-term outlook. 3Q-09 3Q-10 QUARTERLY NET ABSORPTION 1,311,711 SF 1,855,008 SF YEAR-TO-DATE NET ABSORPTION 1,635,891 SF 4,436,683 SF CITYWIDE AVERAGE QUOTED RENTAL RATE NNN $5.84/SF $5.27/SF CITYWIDE AVERAGE INDUSTRIAL VACANCY 6.8% 6.4% QUARTERLY DELIVERIES 249,244 SF 330,148 SF YEAR-TO-DATE DELIVERIES 6,055,929 SF 1,979,584 SF UNDER CONSTRUCTION 2,583,667 SF 218,918 SF RESEARCH & FORECAST REPORT HOUSTON INDUSTRIAL MARKET JOB GROWTH & UNEMPLOYMENT MARKET INDICATORS 08/ 09 08/10 HOUSTON -0.4% job growth 900 jobs lost UNEMPLOYMENT 8.2% 8.7% TEXAS 1.3% job growth 129,000 jobs gained UNEMPLOYMENT 8.0% 8.3% U.S. -0.1% job growth 183,000 jobs lost UNEMPLOYMENT 9.7% 9.6% 2% 3% 4% 5% 6% 7% 8% Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 -1,000,000 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 ABSORPTION NEW SUPPLY VACANCY ABSORPTION, NEW SUPPLY & VACANCY RATES
  2. 2. RESEARCH & FORECAST REPORT | Q3 2010 | HOUSTON INDUSTRIAL MARKET Occupancy & Availability Houston’s industrial market averaged 93.9% occupancy in the third quarter, 60 basis points (bps) higher than the previous quarter, and 70 bps above the 93.2% recorded in the same quarter last year. Over the past eight quarters, Houston’s industrial market has consistently maintained occupancy levels above 90% for all major corridors, outperforming all other commercial real estate property sectors citywide. At the end of the third quarter, Houston posted 29.3M SF of vacant industrial space citywide. Among the major industrial corridors, the Northwest held the largest amount of vacant space with 7.8M SF (6.0% vacancy), followed by the Southeast with 6.3M SF vacant (7.8% vacancy), the Southwest with 4.3M SF vacant (6.8% vacancy), and the North with 4.3M SF vacant (6.5% vacancy). Developers have responded to current Absorption & Demand Houston’s industrial market posted positive net absorption of 1.9M SF in the second quarter, an improvement over the positive net absorption of 1.3M SF in the same quarter last year. This marked the fourth consecutive quarter of gains, bringing the year-to-date positive net absorption to 4.4M SF. By comparison, the annual net absorption for all four quarters of 2009 was 1.8M. Among Houston’s major industrial corridors, the Northwest and Southwest continued to outperform other industrial sectors at midyear. The Northwest posted the highest positive net absorption for the third quarter with 979,302 SF, and 2.2M SF year-to-date. The North followed with positive net absorption of 669,127 SF in the third quarter, and 850,697 SF year-to-date. The Southwest posted 123,757 SF of positive net absorption, with 1.9M SF year-to- 2010 INDUSTRIAL LEASES Igloo Products Corp*** 777 Igloo Road May-10 914,195 SF Ashley Furniture* Airtex Industrial Center Mar-10 303,000 SF Frontier Logistics 3005 State Highway 225 Feb-10 300,000 SF Trans-Hold 8905 Spikewood Jun-10 251,600 SF Gulf Winds International** South Loop Business Park Jun-10 212,961 SF Williamsport Distribution Center 11503 Highway 225 Apr-10 210,000 SF Portsmith 21202 Park Row Aug-10 180,000 SF COLLIERS INTERNATIONAL | P. 2 Developers have responded to current market conditions by halting all major speculative industrial construction projects in Houston, leaving only 208,918 SF in the construction pipeline at the end of the third quarter. The largest project under construction is a 34,125-SF office/ warehouse in the West Outer Loop scheduled for delivery by December 2010. Speculative construction is expected to remain limited over the next 6 to 12 months. Rental Rates Houston’s average quoted industrial rental rates decreased by 0.4% between quarters, and by 10.8% on a year-over- year basis. The overall $5.27 NNN/SF in the third quarter fell from $5.84 NNN/SF at this time last year. By property type, warehouse distribution space was $4.76 NNN/SF (down $0.14/SF); bulk space stood at $4.23 NNN/SF (up $0.25/SF); and flex space was $7.96 NNN/SF (up $0.04/SF). date. Major tenant move-ins contributing to net absorption gains in the third quarter included Portsmith’s 180,000-SF lease at 21202 Park Row (Northwest), and Furniture Brands’ 109,386-SF lease at Airtex Industrial Center (North). Leasing Houston’s industrial market recorded nineteen (19) leases over 100,000 SF – including six (6) leases over 200,000 SF – year-to-date through the third quarter 2010, which includes the 914,195-SF sale-leaseback for Igloo Products. Overall, industrial leasing activity reached 4.0M SF in the third quarter, compared to 5.0M SF recorded in the same quarter last year. For a select list of Houston’s top industrial leases signed to date, please see the column at left. Aug-10 180,000 SF FedEx Ellington Trade Center I Jun-10 146,792 SF Xpedx*** 10300 North Loop Freeway Apr-10 139,871 SF Exel** 8607 Citypark Loop May-10 127,900 SF Transportation Consultants Bay Area Business Park July-10 120,000 SF CVS Pharmacy** 301 S. Trade Center Parkway Jun-10 113,175 SF Furniture Brands* Airtex Industrial Center July-10 109,386 SF *Colliers International transaction ** Renewal *** Sale-Leaseback
  3. 3. RESEARCH & FORECAST REPORT | Q3 2010 | HOUSTON INDUSTRIAL MARKET COLLIERS INTERNATIONAL | P. 3 Sales Activity Houston’s industrial investment activity remained below pre-recession levels with year-to-date activity through the third quarter posting $93.8M in total volume with a combined total of 5.0 MSF and an average $44/SF. Although industrial properties less than 50,000 SF continued to account for the majority of transactions to date, some larger Q3 sales included: Albert H Powers acquired the 62,246- SF Cummins Southern Plains warehouse located at 7045 N Loop Fwy E from Charter SW Seven, LP. Built in 2001, the property sold for $8.67M or $139/SF. HOUSTON INDUSTRIAL MARKET SUMMARY Year-to-date 2010 Total volume: $93.8M # of transactions: 76 Total SF: 5,101,014 Price/SF: $44 Average Cap: 8.0% Source: Costar Comps PGI International Manufacturing 16101 Vallen Drive HOUSTON INDUSTRIAL INVESTMENT SALES Western Well Tool, Inc. acquired the 174,139-SF 16101 Vallen Drive manufacturing warehouse from Khoshbin Company for $13M or $75/SF in an owner-user sale. Donovan Investment Co. acquired the 98,850-SF 19423 Aldine Westfield warehouse for $9.7M or $98/SF from A.E.N. Farrell, LP. The building is 100% occupied by LKQ Corporation. Granite Properties Inc. began marketing its entire industrial portfolio during the third quarter. The Dallas- based developer is selling the 17- property portfolio, which includes 14 single and multi-tenant properties in Houston which contain a total of 1.95M SF and are 89.3 percent leased. Market Rentable Area Direct Vacant SF Direct Vacancy Rate Sublet Vacant SF Sublet Vacancy Rate Total Vacant SF Total Vacancy Rate 3rd Qtr Net Absorption YTD Net Absorption 3rd Qtr Completions YTD Completions SF Under Construction Greater Houston Total 473,516,005 29,290,284 6.2% 762,210 0.2% 30,125,025 6.4% 1,855,008 4,436,683 330,148 1,979,584 218,918 NW Inner Loop 11,447,633 553,590 4.8% 53,034 0.5% 679,154 5.5% (9,202) 110,455 - - - CBD 34,380,936 2,171,501 6.3% - 0.0% 2,171,501 6.3% (252,607) (123,264) - - - North Inner Loop 5,619,637 532,738 9.5% - 0.0% 532,739 9.5% 30,500 (56,032) - - - SW Inner Loop 9,079,323 218,838 2.4% 13,164 0.1% 232,002 2.6% 73,722 155,428 - - - Total Inner Loop 60,527,529 3,476,667 5.7% 66,198 0.1% 3,615,396 6.0% (157,587) 86,587 - - - North Fwy/Tomball Pky 13,231,183 1,229,979 9.3% 9,975 0.1% 1,239,954 9.4% 153,023 101,806 - - 10,000 North Hardy Toll Rd 24,319,203 1,694,388 7.0% 127,992 0.5% 1,822,380 7.5% 670,311 881,349 - 195,100 - North Outer Loop 17,349,599 836,649 4.8% - 0.0% 836,649 4.8% (72,909) (23,083) 67,250 67,250 - The Woodlands/Conroe 11,403,524 581,509 5.1% 29,880 0.3% 611,389 5.4% (81,298) (109,375) - - - Total North Corridor 66,303,509 4,342,525 6.5% 167,847 0.3% 4,510,372 6.8% 669,127 850,697 67,250 262,350 10,000 Northeast Hwy 321 1,068,683 - 0.0% - 0.0% - 0.0% 0 7,700 - - - Northeast Hwy 90 15,839,459 494,672 3.1% 68,680 0.4% 563,352 3.6% (106,260) (249,101) - - - Northeast I-10 3,274,197 - 0.0% - 0.0% - 0.0% - - - - - Northeast Inner Loop 11,344,182 818,314 7.2% - 0.0% 818,314 7.2% (26,961) (220,698) - - 148,793 Total Northeast Corridor 31,526,521 1,312,986 4.2% 68,680 0.2% 1,381,666 4.4% (133,221) (462,099) - - 148,793 Hwy 290/Tomball Pky 16,200,541 990,116 6.1% 16,024 0.1% 1,006,140 6.2% 34,536 300,312 204,800 - Northwest Hwy 6 4,234,555 815,703 19.3% - 0.0% 815,703 19.3% 17,099 170,906 65,000 - Northwest Inner Loop 60,849,381 3,106,913 5.1% 196,745 0.3% 3,303,658 5.4% 534,457 826,713 - 25,760 - Northwest Near 16,272,442 985,839 6.1% 13,550 0.1% 999,389 6.1% 132,393 113,989 - - - Northwest Outlier 11,199,421 399,787 3.6% - 0.0% 399,787 3.6% 235,573 378,446 180,000 180,000 - West Outer Loop 21,225,037 1,476,795 7.0% 3,678 0.0% 1,480,473 7.0% 25,244 394,636 - 101,650 34,125 Total Northwest Corridor 129,981,377 7,775,153 6.0% 229,997 0.2% 8,005,150 6.2% 979,302 2,185,002 180,000 577,210 34,125 East I-10 Outer Loop 14,956,245 413,345 2.8% 70,000 0.5% 483,345 3.2% 40,000 (18,422) - - - East-SE Far 43,138,260 5,289,505 12.3% 37,500 0.1% 5,327,005 12.3% 275,732 142,478 - - - SE Outer Loop 22,090,334 564,339 2.6% - 0.0% 564,339 2.6% 85,095 (104,553) - - - Total Southeast Corridor 80,184,839 6,267,189 7.8% 107,500 0.1% 6,374,689 7.9% 400,827 19,503 - - - South Highway 35 28,485,232 1,420,141 5.0% 11,000 0.0% 1,431,141 5.0% (59,158) (325,149) - - 26,000 South Inner Loop 13,597,795 397,878 2.9% - 0.0% 397,878 2.9% 31,961 161,187 - - - Total South Corridor 42,083,027 1,818,019 4.3% 11,000 0.0% 1,829,019 4.3% (27,197) (163,962) - - 26,000 Highway 59/Highway 90 22,560,202 1,342,944 6.0% 66,607 0.3% 1,409,551 6.2% 67,764 599,259 62,898 62,898 - Southwest Far 9,536,167 612,328 6.4% - 0.0% 612,328 6.4% 39,485 119,366 - - - Southwest Outer Loop 13,508,772 1,140,786 8.4% - 0.0% 1,140,786 8.4% 10,170 108,680 - - - Fort Bend County/Sugar Land 17,304,062 1,201,687 6.9% 44,381 0.3% 1,246,068 7.2% 6,338 1,093,650 20,000 1,077,126 - Total Southwest Corridor 62,909,203 4,297,745 6.8% 110,988 0.2% 4,408,733 7.0% 123,757 1,920,955 82,898 1,140,024 -
  4. 4. RESEARCH & FORECAST REPORT | Q3 2010 | HOUSTON INDUSTRIAL MARKET COLLIERS INTERNATIONAL | P. 4 Industrial Projects Under Construction Select 2010 Industrial Deliveries Submarket Building Name Building Address RBA % Leased Developer Estimated Delivery West Outer Loop 11987 FM 529 Warehouse 11987 FM-529 34,125 0 Texas Development Company Dec-10 South Highway 35 80 White Road Warehouse 80 White Rd 26,000 0 Holt Lundsford Commercial Oct-10 Total u/c industrial projects listed above 60,125 Submarket Building Park Building Name Building Address RBA % Leased Developer Name Delivered Sugar Land Ind Rooms To Go Distribution Center 31111 Miller Rd 1,057,126 100 Houston Associates LLC Mar-10 Hwy 290/Tomball Pky Ind Jake's Finer Foods HQ 13400 Hollister Dr 180,000 100 n/a Feb-10 Northwest Outlier Primewest Business Park Pointsmith HQ 21202 Park Row 180,000 100 n/a Aug-10 West Outer Loop Ind 15300 Hempstead Highway Warehouse II 15300 Hempstead Hwy 150,000 82.67 The National Realty Group May-10 North Hardy Toll Road Ind LKQ Corporation 19423 Aldine Westfield Rd 98,850 100 n/a Feb-10 North Hardy Toll Road Ind AMB IAH Logistics Center III Forward Air 19220 Kenswick Dr 96,250 100 AMB Property Corporation Jan-10 North Outer Loop Ind 13627 W Hardy Warehouse 13627 W Hardy Rd 67,250 0 The National Realty Group Jun-10 Northwest Hwy 6 Ind Hempstead 1960 Business Park 20220 Hempstead Warehouse 20220 Hempstead Rd 65,000 0 Capital RE Commercial Mar-10 Northwest Inner Loop Ind 1557 W Sam Houston Industrial Flex 1557 W Sam Houston Pky 25,760 17.39 Caldwell Companies Feb-10 Hwy 290/Tomball Pky Ind Beltway 249 Business Park Beltway 249 BP, bldg. A 15825 Tx-249 Hwy 24,800 0 Capital RE Commercial Mar-10 North Fwy/Tomball Pky Ind FM 2920 Business Park FM 2920 BP, Bldgs. 1 & 2 5045 FM 2920 10,000 100 The National Realty Group May-10 Northeast I-10 Ind 9835 Wallisville Warehouse 9835 Wallisville Rd 7,800 100 n/a Mar-10 Total year-to-date industrial deliveries listed above 1,962,836
  5. 5. RESEARCH & FORECAST REPORT | Q3 2010 | HOUSTON INDUSTRIAL MARKET 480 offices in 61 countries on 6 continents United States: 95 Canada: 17 Latin America: 17 Asia Pacific: 52 EMEA: 85 Accelerating success. COLLIERS INTERNATIONAL | HOUSTON 1300 Post Oak Boulevard Suite 200 Houston, Texas 77056 MAIN +1 713 222 2111 COLLIERS INTERNATIONAL | P. 5

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