Houston Industrial Market Report 4Q 2010

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Houston Industrial Market Report 4Q 2010

  1. 1. Q4 2010 | INDUSTRIAL MARKETHOUSTON INDUSTRIAL MARKETRESEARCH & FORECAST REPORT Industrial Market, Houston’s Strongest Real Estate Sector in 2010 Houston’s industrial market fundamentals continue to strengthen, adding 354,000-SF of positive net absorption in the fourth quarter bringing the year-to-date total to 4.8M SF, a huge improvement from the positive net absorption of 1.7M SF recorded in 2009. Vacancy also posted a slight gain with the citywide average at 6.2% in the CITYWIDE MARKET INDICATORS fourth quarter, down from 6.7% at this time last year. The quoted citywide rental rate 4Q-09 4Q-10 for industrial space increased by 8.5% over the same period last year. On the leasing front, twenty-one leases over 100,000 SF were signed in 2010, with seven leases over QUARTERLY NET ABSORPTION 200,000 SF. A significant boost to the market’s stabilization has been disciplined 440,906 SF 354,079 SF curtailment of new speculative construction activity, with only 207,000 SF in the construction pipeline at the close of 4Q10, compared to 1.3M SF under construction at YEAR-END NET ABSORPTION this time last year. 1,722,819 SF 4,760,762 SF Looking forward, Houston’s industrial sector is expected to improve moderately as key QUOTED RENTAL RATE NNN economic drivers move towards recovery. The Port of Houston has been instrumental $4.95/SF $5.37/SF in Houstons 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 INDUSTRIAL VACANCY billion petrochemical complex, the largest in the nation and second largest worldwide. Looking forward, The Port of Houston Authority will host the American Association of 6.7% 6.2% Port Authorities annual convention in 2014, which will coincide with the 100th QUARTERLY DELIVERIES anniversary celebration of the official opening of the Houston Ship Channel. 328,613 204,793 Macro factors driving the absorption of industrial space ultimately ties back to job YEAR-END DELIVERIES count. According to the Texas Labor Market Review, total nonagricultural employment 6,689,662 SF 2,239,377 SF in Texas rose by 19,100 jobs in November, gaining jobs in eight out of eleven months. At the local level, Houston’s MSA had the largest monthly job increase, with 10,900 UNDER CONSTRUCTION jobs added in November. Dallas followed with 5,200 jobs added. Houston also led in 1,301,926 SF 206,671 SF the monthly growth of retail and government jobs, adding 7,400 and 2,300 jobs, respectively. ABSORPTION, NEW SUPPLY & VACANCY RATES UNEMPLOYMENT 11/09 11/10 5,000,000 8% HOUSTON 8.1% 8.2% ABSORPTION NEW SUPPLY VACANCY TEXAS 8.2% 8.2% 4,000,000 7% U.S. 10.0% 9.3% 3,000,000 6% ANNUAL 2,000,000 5% JOB GROWTH 11/10 CHANGE 1,000,000 4% HOUSTON 0.4% 10.9k TEXAS 1.9% 19.1k 0 3% U.S. -0.1% (173k) -1,000,000 2% Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10www.colliers.com/houston
  2. 2. RESEARCH & FORECAST REPORT | Q4 2010 | HOUSTON INDUSTRIAL MARKET2010 INDUSTRIAL LEASES Vacancy & Availability Absorption & DemandIgloo Products Corp*** Houston’s industrial market averaged Houston’s industrial market posted777 Igloo Road 6.2% vacancy in the fourth quarter, 20May-10 914,195 SF positive net absorption of 354K SF in the basis points (bps) less than the previous fourth quarter, an improvement over theAshley Furniture* quarter, and 70 bps below the 6.9% positive net absorption of 200K SF in theAirtex Industrial Center recorded in the same quarter last year. same quarter last year. This marked theMar-10 303,000 SF Over the past nine quarters, Houston’s fifth consecutive quarter of gains,Frontier Logistics industrial market has consistently bringing the year-to-date positive net3005 State Highway 225 maintained vacancy levels below 10% for absorption to 4.8M SF. By comparison,Feb-10 300,000 SF all major corridors, outperforming all other the annual net absorption for all fourFord Motor Company** commercial real estate property sectors quarters of 2009 was 1.8M.Alamo Crossing Commerce Center citywide.Dec-10 252,328 SF Among Houston’s major industrial At the end of the fourth quarter, Houston corridors, the Northwest and SouthwestTrans-Hold8905 Spikewood posted 29.6M SF of vacant industrial outperformed other industrial sectors atJun-10 251,600 SF space citywide. Among the major year-end 2010. The Northwest posted industrial corridors, the Northwest held the the highest positive net year-endGulf Winds International**South Loop Business Park largest amount of vacant space with 7.9M absorption with 2.3 SF, and 1.5M SF.Jun-10 212,961 SF SF (6.1% vacancy), followed by the The North followed with positive net year- Southeast with 6.1M SF vacant (7.6% end absorption of 1.2M SF.Williamsport Distribution Center11503 Highway 225 vacancy), the Southwest with 4.5M SFApr-10 210,000 SF vacant (7.2% vacancy), and the North with There was only one major tenant move-in 4.3M SF vacant (6.5% vacancy). contributing to net absorption gains in thePortsmith 4th quarter, Val-Fit Inc. moved into21202 Park RowAug-10 180,000 SF Developers have continued to show 170,017-SF (Northeast). restraint to current market conditions byVal-Fit Inc. halting major speculative industrial Leasing9051 Spikewood Dr. construction projects in Houston, leaving Houston’s industrial market recordedNov-10 170,017 SF only 207,000 SF in the construction twenty-one (21) leases over 100,000 SFFedEx pipeline at the end of the fourth quarter. – including seven (7) leases overEllington Trade Center I The largest project under construction is a 200,000 SF during 2010. The majority ofJun-10 146,792 SF 52,400-SF multi-tenant office/warehouse in the leases singed during 4Q10 were lessXpedx*** the North Hardy Toll Rd submarket than 50,000 SF.10300 North Loop Freeway scheduled for delivery March 2011.Apr-10 139,871 SF Speculative construction is expected to Overall, industrial leasing activityExel** remain limited over the next 6 to 12 reached 2.5M SF in the fourth quarter,8607 Citypark Loop months. 2.0M SF less than the previous quarterMay-10 127,900 SF and 3.5M SF less than what was Rental RatesTransportation Consultants recorded in the same quarter last year.Bay Area Business Park Houston’s average quoted industrial rental For a select list of Houston’s topJuly-10 120,000 SF rates increased by 1.0% between quarters, industrial leases signed to date, please and fell by 6.0% on a year-over-year basis. see the column at left.CVS Pharmacy** The overall $5.33 NNN/SF in the fourth301 S. Trade Center ParkwayJun-10 113,175 SF quarter fell from $5.65 NNN/SF at this time last year. By property type on a year-over-Furniture Brands* year basis, warehouse distribution spaceAirtex Industrial CenterJuly-10 109,386 SF was $4.67 NNN/SF (up $0.40/SF) and flex space stood at $7.91 NNN/SF (up $0.34/SF).*Colliers International transaction** Renewal*** Sale-Leaseback COLLIERS INTERNATIONAL | P. 2
  3. 3. RESEARCH & FORECAST REPORT | Q4 2010 | HOUSTON INDUSTRIAL MARKETHOUSTON INDUSTRIAL INVESTMENT SALES Sales Activity Houston’s industrial investment Wilsonville Holiday Partners LLC Year-end 2010 activity remained sluggish during the acquired the 88,500-SF Westgreen fourth quarter adding only 22 sales Business Center located in Katy, Total Volume: $1.1B to the 87 sale year-end total which Texas from for $70/SF. # of Transactions: 87 totaled $1.1B in total volume. The Total SF: 15,155,000 combined total of 15.1 MSF had an DCT Industrial Trust purchased a Average Price/SF: $102 average sales price of $102/SF. 51,959-SF distribution warehouse Average Cap: 8.2% Although owner/user industrial located at 16303 Air Center Blvd. properties less than 35,000 SF from The National Realty Group for Source: Costar Comps continued to account for the majority $52/SF. of transactions to date, there were LT Foods USA purchased 39,000- some larger Q4 sales that included: SF distribution center located at 14511 Fairway Pines Dr. in the Duke Realty acquired the 356,000- Lakeview Business Park from Crow SF Barbours Cut Business Park and Holdings for $64/SF. the 226,000-SF Bayport Container Terminal located in La Porte and Seabrook, Texas, respectively, from 14511 Fairway Pines Dr. Granite Properties. The two-property Missouri City, Texas sale is rumored to have sold for an average of $82/SF. HOUSTON INDUSTRIAL MARKET SUMMARY Direct Sublet Total Direct Sublet Total 4th Qtr Net YTD Net 4th 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 474,722,080 28,902,560 6.1% 710,715 0.1% 29,613,275 6.2% 354,079 4,760,762 204,793 2,239,377 206,671 NW Inner Loop 12,321,397 651,998 5.3% 53,034 0.4% 705,032 5.7% (28,683) 81,772 - - - CBD 33,962,193 1,859,048 5.5% - 0.0% 1,859,048 5.5% 262,336 109,072 - - - North Inner Loop 5,655,358 525,139 9.3% - 0.0% 525,139 9.3% 13,299 (42,733) - - - SW Inner Loop 9,096,442 192,220 2.1% 13,164 0.1% 205,384 2.3% (4,382) 151,046 - - - Total Inner Loop 61,035,390 3,228,405 5.3% 66,198 0.1% 3,294,603 5.4% 242,570 299,157 - - - North Fwy/Tomball Pky 12,661,810 1,202,565 9.5% 9,975 0.1% 1,212,540 9.6% 32,936 134,742 10,000 10,000 - North Hardy Toll Rd 23,993,349 1,512,322 6.3% 98,068 0.4% 1,610,390 6.7% 238,213 1,119,562 - 195,100 120,546 North Outer Loop 17,447,882 878,686 5.0% - 0.0% 878,686 5.0% (16,597) (39,680) 67,250 - The Woodlands/Conroe 11,418,215 562,407 4.9% 21,197 0.2% 583,604 5.1% 78,008 (31,367) - - - Total North Corridor 65,521,256 4,155,980 6.3% 129,240 0.2% 4,285,220 6.5% 332,560 1,183,257 10,000 272,350 120,546 Northeast Hwy 321 1,068,683 - 0.0% - 0.0% - 0.0% 0 7,700 - - - Northeast Hwy 90 15,968,145 472,072 3.0% 68,680 0.4% 540,752 3.4% 31,000 (218,101) - - - Northeast I-10 3,767,427 55,695 1.5% - 0.0% 55,695 1.5% (30,154) (30,154) - - - Northeast Inner Loop 11,516,440 992,918 8.6% - 0.0% 992,918 8.6% (25,811) (246,509) 148,793 148,793 - Total Northeast Corridor 32,320,695 1,520,685 4.7% 68,680 0.2% 1,589,365 4.9% (24,965) (487,064) 148,793 148,793 - Hwy 290/Tomball Pky 16,185,589 881,835 5.4% 16,024 0.1% 897,859 5.5% 67,645 367,957 204,800 - Northwest Hwy 6 4,293,271 771,146 18.0% - 0.0% 771,146 18.0% 44,557 215,463 140,000 - Northwest Inner Loop 60,809,214 3,237,720 5.3% 194,745 0.3% 3,432,465 5.6% (115,712) 711,001 - 25,760 - Northwest Near 16,285,861 944,292 5.8% 13,550 0.1% 957,842 5.9% 58,300 172,289 - - - Northwest Outlier 11,221,921 441,155 3.9% - 0.0% 441,155 3.9% (40,768) 337,678 - 180,000 - West Outer Loop 21,220,208 1,447,018 6.8% 3,678 0.0% 1,450,696 6.8% 69,547 464,183 - 101,650 34,125 Total Northwest Corridor 130,016,064 7,723,166 5.9% 227,997 0.2% 7,951,163 6.1% 83,569 2,268,571 - 652,210 34,125 East I-10 Outer Loop 14,972,842 410,595 2.7% 70,000 0.5% 480,595 3.2% 2,750 (15,672) - - - East-SE Far 43,120,913 5,028,724 11.7% 37,341 0.1% 5,066,065 11.7% 152,282 294,760 - - - SE Outer Loop 21,947,934 563,624 2.6% - 0.0% 563,624 2.6% 6,715 (97,838) - - - Total Southeast Corridor 80,041,689 6,002,943 7.5% 107,341 0.1% 6,110,284 7.6% 161,747 181,250 - - - South Highway 35 29,447,290 1,492,351 5.1% 11,000 0.0% 1,503,351 5.1% (17,910) (343,059) 26,000 26,000 - South Inner Loop 13,480,541 359,192 2.7% - 0.0% 359,192 2.7% (10,554) 150,633 - - - Total South Corridor 42,927,831 1,851,543 4.3% 11,000 0.0% 1,862,543 4.3% (28,464) (192,426) 26,000 26,000 - Highway 59/Highway 90 22,624,680 1,271,448 5.6% 64,871 0.3% 1,336,319 5.9% (28,003) 571,256 - 62,898 - Southwest Far 9,701,229 558,780 5.8% 12,490 0.1% 571,270 5.9% 21,906 141,272 - - - Southwest Outer Loop 13,274,451 1,239,975 9.3% - 0.0% 1,239,975 9.3% (83,897) 24,783 - - - Fort Bend County/Sugar Lan 17,258,795 1,349,635 7.8% 22,898 0.1% 1,372,533 8.0% (322,944) 770,706 20,000 1,077,126 52,000 Total Southwest Corridor 62,859,155 4,419,838 7.0% 100,259 0.2% 4,520,097 7.2% (412,938) 1,508,017 20,000 1,140,024 52,000 COLLIERS INTERNATIONAL | P. 3
  4. 4. RESEARCH & FORECAST REPORT | Q4 2010 | HOUSTON INDUSTRIAL MARKET Select Industrial Projects Under Construction Estimated Submarket Building Name Building Address RBA % Leased Developer Delivery 1 North Hardy Toll Rd 7902 FM 1960 Building 7902 FM 1960 Building 52,400 0 CBRE Mar-11 2 Sugar Land 15445 Old Richmond Ave 15445 Old Richmond Ave 52,000 0 Richard Chen Mar-11 3 North Hardy Toll Rd World Houston Building 31 4540 Kendrick Plaza 43,536 27.8 East Properties Feb-11 4 West Outer Loop 11987 FM 529 Warehouse 11987 FM-529 34,125 0 Texas Development Company Mar-11 5 North Hardy Toll Rd Greens Rd Ind Park Bldg F 2437 Peyton Rd 24,610 0 Holt Lundsford Commercial Oct-10 Total u/c indus trial projects lis ted above 206,671 Houston Industrial Under Construction 1 5 3 4 2 Select 2010 Industrial Deliveries % Submarket Building Park Building Name Building Address RBA Leased Developer Name Delivered 1 Sugar Land Rooms To Go Distribution Center 31111 Miller Rd 1,057,126 100 Houston Associates LLC Mar-10 2 Hwy 290/Tomball Pky Jakes Finer Foods HQ 13400 Hollister Dr 180,000 100 n/a Feb-10 3 Northwest Outlier Primewest Business Park Pointsmith HQ 21202 Park Row 180,000 100 n/a Aug-10 4 West Outer Loop Warehouse II 15300 Hempstead Hwy 150,000 82.67 The National Realty Grou May-10 5 Northeast Inner Loop Portwall Distribution Center Portwall IV 531 Portwall 148,793 0 The Carson Companies Dec-10 6 North Hardy Toll Rd LKQ Corporation 19423 Aldine Westfield Rd 98,850 100 n/a Feb-10 7 North Hardy Toll Rd AMB IAH Logistics Center III Forward Air 19220 Kenswick Dr 96,250 100 AMB Property Corporatio Jan-10 8 North Outer Loop 13627 W Hardy Warehouse 13627 W Hardy Rd 67,250 0 The National Realty Grou Jun-10 9 Northwest Hwy 6 Hempstead 1960 Bus. Park 20220 Hempstead Warehouse 20220 Hempstead Rd 65,000 0 Capital RE Commercial Mar-10 Houston Industrial New Inventory 6 7 9 2 8 4 3 5 1 COLLIERS INTERNATIONAL | P. 4
  5. 5. RESEARCH & FORECAST REPORT | Q4 2010 | 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

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