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Houston industrial market report 3 q 10

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  • 1. Q3 2010 | INDUSTRIAL MARKET HOUSTON INDUSTRIAL MARKET RESEARCH & FORECAST REPORT MARKET INDICATORS Houston Industrial Market Strengthening 3Q-09 3Q-10 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 QUARTERLY NET ABSORPTION of 1.6M SF recorded through the third quarter last year. Occupancy also posted a slight gain with the 1,311,711 SF 1,855,008 SF citywide average at 93.9% in the third quarter, up from 93.2% at this time last year. While quoted rental rates YEAR-TO-DATE NET ABSORPTION 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 1,635,891 SF 4,436,683 SF the third quarter, with six leases over 200,000 SF. A significant boost to the market’s stabilization has been CITYWIDE AVERAGE QUOTED disciplined curtailment of new speculative construction activity, with only 218,918 SF in the construction RENTAL RATE NNN pipeline at the close of 3Q10, compared to 1.7M SF under construction at this time last year. $5.84/SF $5.27/SF CITYWIDE AVERAGE Looking forward, Houston’s industrial sector is expected to improve gradually as key economic drivers move INDUSTRIAL VACANCY 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. 6.8% 6.4% It is also home to a $15 billion petrochemical complex, the largest in the nation and second largest QUARTERLY DELIVERIES worldwide. Houston is a key player in the Break-bulk and Logistics sector. In October, a record 3,800 249,244 SF 330,148 SF 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 YEAR-TO-DATE DELIVERIES Authority was recently selected to host the American Association of Port Authorities annual convention in 6,055,929 SF 1,979,584 SF 2014, which will coincide with the 100th anniversary celebration of the official opening of the Houston Ship UNDER CONSTRUCTION Channel. 2,583,667 SF 218,918 SF 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 JOB GROWTH & UNEMPLOYMENT 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 08/ 09 08/10 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. HOUSTON -0.4% job growth 900 jobs lost ABSORPTION, NEW SUPPLY & VACANCY RATES 5,000,000 8% UNEMPLOYMENT 8.2% 8.7% 4,000,000 7% TEXAS 1.3% job growth 3,000,000 6% 129,000 jobs gained 2,000,000 5% ABSORPTION UNEMPLOYMENT 8.0% 8.3% NEW SUPPLY 1,000,000 4% VACANCY U.S. -0.1% job growth 0 3% 183,000 jobs lost -1,000,000 2% Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 UNEMPLOYMENT 9.7% 9.6% www.colliers.com/houston
  • 2. RESEARCH & FORECAST REPORT | Q3 2010 | HOUSTON INDUSTRIAL MARKET 2010 INDUSTRIAL LEASES Occupancy & Availability Absorption & Demand Igloo Products Corp*** Houston’s industrial market averaged Houston’s industrial market posted 777 Igloo Road 93.9% occupancy in the third quarter, 60 positive net absorption of 1.9M SF in the May-10 914,195 SF basis points (bps) higher than the previous second quarter, an improvement over the quarter, and 70 bps above the 93.2% positive net absorption of 1.3M SF in the Ashley Furniture* Airtex Industrial Center recorded in the same quarter last year. same quarter last year. This marked the Mar-10 303,000 SF Over the past eight quarters, Houston’s fourth consecutive quarter of gains, industrial market has consistently bringing the year-to-date positive net Frontier Logistics maintained occupancy levels above 90% absorption to 4.4M SF. By comparison, 3005 State Highway 225 for all major corridors, outperforming all the annual net absorption for all four Feb-10 300,000 SF other commercial real estate property quarters of 2009 was 1.8M. Trans-Hold sectors citywide. 8905 Spikewood Among Houston’s major industrial Jun-10 251,600 SF At the end of the third quarter, Houston corridors, the Northwest and Southwest posted 29.3M SF of vacant industrial continued to outperform other industrial Gulf Winds International** space citywide. Among the major sectors at midyear. The Northwest South Loop Business Park industrial corridors, the Northwest held the posted the highest positive net absorption Jun-10 212,961 SF largest amount of vacant space with 7.8M for the third quarter with 979,302 SF, Williamsport Distribution Center SF (6.0% vacancy), followed by the and 2.2M SF year-to-date. The North 11503 Highway 225 Southeast with 6.3M SF vacant (7.8% followed with positive net absorption of Apr-10 210,000 SF vacancy), the Southwest with 4.3M SF 669,127 SF in the third quarter, and vacant (6.8% vacancy), and the North with 850,697 SF year-to-date. The Portsmith 4.3M SF vacant (6.5% vacancy). Southwest posted 123,757 SF of positive 21202 Park Row Aug-10 180,000 SF net absorption, with 1.9M SF year-to- Developers have responded to current date. FedEx market conditions by halting all major Ellington Trade Center I speculative industrial construction projects Major tenant move-ins contributing to net Jun-10 146,792 SF in Houston, leaving only 208,918 SF in the absorption gains in the third quarter construction pipeline at the end of the third included Portsmith’s 180,000-SF lease at Xpedx*** quarter. The largest project under 21202 Park Row (Northwest), and 10300 North Loop Freeway construction is a 34,125-SF office/ Furniture Brands’ 109,386-SF lease at Apr-10 139,871 SF warehouse in the West Outer Loop Airtex Industrial Center (North). Exel** scheduled for delivery by December 2010. 8607 Citypark Loop Speculative construction is expected to May-10 127,900 SF remain limited over the next 6 to 12 Leasing months. Transportation Consultants Houston’s industrial market recorded Bay Area Business Park nineteen (19) leases over 100,000 SF – July-10 120,000 SF including six (6) leases over 200,000 SF Rental Rates – year-to-date through the third quarter CVS Pharmacy** Houston’s average quoted industrial rental 301 S. Trade Center Parkway 2010, which includes the 914,195-SF rates decreased by 0.4% between sale-leaseback for Igloo Products. Jun-10 113,175 SF quarters, and by 10.8% on a year-over- Furniture Brands* year basis. The overall $5.27 NNN/SF in Overall, industrial leasing activity Airtex Industrial Center the third quarter fell from $5.84 NNN/SF at reached 4.0M SF in the third quarter, July-10 109,386 SF this time last year. By property type, compared to 5.0M SF recorded in the warehouse distribution space was $4.76 same quarter last year. For a select list *Colliers International transaction NNN/SF (down $0.14/SF); bulk space of Houston’s top industrial leases signed ** Renewal stood at $4.23 NNN/SF (up $0.25/SF); and to date, please see the column at left. *** Sale-Leaseback flex space was $7.96 NNN/SF (up $0.04/SF). COLLIERS INTERNATIONAL | P. 2
  • 3. RESEARCH & FORECAST REPORT | Q3 2010 | HOUSTON INDUSTRIAL MARKET HOUSTON INDUSTRIAL INVESTMENT SALES Sales Activity Houston’s industrial investment activity Western Well Tool, Inc. acquired the Year-to-date 2010 remained below pre-recession levels 174,139-SF 16101 Vallen Drive Total volume: $93.8M with year-to-date activity through the manufacturing warehouse from # of transactions: third quarter posting $93.8M in total Khoshbin Company for $13M or 76 volume with a combined total of 5.0 $75/SF in an owner-user sale. Total SF: 5,101,014 MSF and an average $44/SF. Although industrial properties less than Donovan Investment Co. acquired the Price/SF: $44 50,000 SF continued to account for 98,850-SF 19423 Aldine Westfield Average Cap: 8.0% the majority of transactions to date, warehouse for $9.7M or $98/SF from Source: Costar Comps some larger Q3 sales included: A.E.N. Farrell, LP. The building is 100% occupied by LKQ Corporation. Albert H Powers acquired the 62,246- Granite Properties Inc. began SF Cummins Southern Plains marketing its entire industrial portfolio warehouse located at 7045 N Loop during the third quarter. The Dallas- Fwy E from Charter SW Seven, LP. based developer is selling the 17- Built in 2001, the property sold for property portfolio, which includes 14 $8.67M or $139/SF. single and multi-tenant properties in PGI International Manufacturing Houston which contain a total of 1.95M 16101 Vallen Drive SF and are 89.3 percent leased. HOUSTON INDUSTRIAL MARKET SUMMARY Direct Sublet Total Direct Sublet Total 3rd Qtr Net YTD Net 3rd Qtr YTD 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 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 - COLLIERS INTERNATIONAL | P. 3
  • 4. RESEARCH & FORECAST REPORT | Q3 2010 | HOUSTON INDUSTRIAL MARKET Industrial Projects Under Construction Estimated Submarket Building Name Building Address RBA % Leased Developer 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 Select 2010 Industrial Deliveries 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 COLLIERS INTERNATIONAL | P. 4
  • 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 COLLIERS INTERNATIONAL | HOUSTON 1300 Post Oak Boulevard Suite 200 Houston, Texas 77056 MAIN +1 713 222 2111 Accelerating success. COLLIERS INTERNATIONAL | P. 5