JLL Q4 Houston Industrial Insight

1. © 2019 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Q4 2018
Houston
Industrial Insight
Strong demand for industrial space continued, and activity in the final quarter
of the year originated from consumer-driven users taking down significant
ownership positions across the metro. Costco purchased a 150-acre land site
for a likely 750,000 to 1.0 million-square-foot project at I-10 and Igloo Rd, and
a national beverage distributor purchased and occupied the 673,785-square-
foot recent delivery at 525 Cane Island Pkwy, both in the Northwest
submarket. Additionally, Ikea closed on 164 acres in Generation Park in the
Northeast submarket with a sizable footprint planned for the site. This is
emblematic of 2018, with occupiers executing significant and long-term
positions in the Houston market.
While the North and Northwest submarkets dominated leasing activity in the
first three quarters, the Southeast closed out the year strong, capturing over
50% of deal volume in the fourth quarter. The largest transactions included
expansions inked by UNIS for 248,240 square feet, NT Logistics for 225,500
square feet, and Delta Petroleum for 204,118 square feet. Each of these leases
occurred in new construction projects.
Though demand did outpace supply in the fourth quarter, new deliveries
finished ahead of net absorption on the year by 1.4 million square feet of
space. This resulted in a 20 basis-point rise in vacancy from 4.9 percent to 5.1
percent, which presents no threat to Houston’s landlord-favorable conditions.
Outlook
Construction activity ramped back up in the fourth quarter as developers
work to get new product out of the ground and capitalize on Houston’s
growing pipeline of occupiers in the market. Amid the tight vacancy, many
tenants will look to execute early renewals and expansions in the market to
take advantage of the new supply.
Fundamentals Forecast
Q4 net absorption 2,225,119 s.f. ▶
2018 total net absorption 8,550,598 s.f. ▶
Under construction 11,292,329 s.f. ▼
Total vacancy 5.1% ▶
Average asking rent (NNN) $0.51 p.s.f. ▲
Tenant improvements Stable ▶
0
5,000,000
10,000,000
15,000,000
2014 2015 2016 2017 2018
Supply and demand (s.f.) Net absorption
Deliveries
Owners and occupiers hone their focus on Houston,
setting the table for 2019
4.5%
4.8%
5.0%
4.6%
5.1%
2014 2015 2016 2017 2018
Total vacancy
For more information, contact: Rachel Alexander | rachel.alexander@am.jll.com
• Big-box demand continued with population-driven users making long-
term commitments to Houston
• The Southeast submarket made a strong push at year-end, capturing
51.6% of total leasing activity
• New industrial supply slightly outpaced demand in 2018; total vacancy
rose from 4.9% to 5.1%
$0.40
$0.45
$0.50
$0.55
2014 2015 2016 2017 2018
Average asking rents ($/s.f.)
W&D Manufacturing

2. Houston
Q4 2018
Industrial Statistics
Inventory
(s.f.)
Quarterly
total net
absorption
(s.f.)
YTD
total net
absorption
(s.f.)
YTD
total net
absorption
(% of stock)
Total
vacancy
(%)
Total
availability
(%)
Average
direct asking
rent
($ p.s.f.)
Quarterly
completions
(s.f.)
YTD
completions
(s.f.)
Under
construction
(s.f.)
Houston Totals
Warehouse & Distribution 335,361,374 1,684,256 7,788,367 2.3% 5.7% 9.6% $0.51 2,005,984 9,044,244 10,971,714
Manufacturing 86,102,237 212,704 434,072 0.5% 3.1% 5.0% $0.56 0 863,160 320,000
Totals 421,963,617 2,225,119 8,550,598 2.0% 5.1% 8.7% $0.51 2,005,984 9,907,404 11,291,714
Submarkets
CBD
Warehouse & Distribution 29,909,599 -271,617 -518,577 -1.7% 7.3% 9.8% $0.46 0 0 0
Manufacturing 8,669,501 22,615 56,908 0.7% 1.9% 8.4% $0.55 0 0 0
Totals 38,579,100 -249,002 -461,669 -1.2% 6.1% 9.5% $0.46 0 0 0
Northwest
Warehouse & Distribution 98,813,223 1,860,324 3,474,264 3.5% 6.1% 10.0% $0.55 629,325 3,658,699 2,446,065
Manufacturing 22,923,897 -134,422 -315,795 -1.4% 3.4% 4.6% $0.56 0 63,420 320,000
Totals 121,737,120 1,554,055 2,986,622 2.5% 5.6% 9.0% $0.55 629,325 3,722,119 2,766,065
North
Warehouse & Distribution 55,584,827 -647,034 1,193,741 2.1% 7.2% 11.6% $0.51 106,000 1,060,706 2,833,442
Manufacturing 13,748,751 53,267 -122,370 -0.9% 7.1% 9.2% $0.61 0 87,000 0
Totals 69,333,578 -593,767 1,071,371 1.5% 7.2% 11.1% $0.53 106,000 1,147,706 2,833,442
Northeast
Warehouse & Distribution 23,133,795 -182,686 -123,547 -0.5% 4.2% 9.7% $0.44 0 164,500 1,005,400
Manufacturing 6,944,575 -25,000 -64,930 -0.9% 2.8% 4.0% $0.51 0 0 0
Totals 30,078,370 -207,686 -188,477 -0.6% 3.9% 8.4% $0.45 0 164,500 1,005,400
Southeast
Warehouse & Distribution 63,177,554 198,211 2,886,009 4.6% 5.1% 8.3% $0.51 694,909 3,495,339 3,744,062
Manufacturing 18,181,278 209,744 949,484 5.2% 0.5% 2.0% $0.60 0 712,740 0
Totals 81,858,838 907,961 4,335,499 5.3% 4.1% 6.9% $0.52 694,909 4,208,079 3,744,062
South
Warehouse & Distribution 26,860,250 26,224 -229,069 -0.9% 4.3% 9.0% $0.42 0 64,500 35,765
Manufacturing 8,413,524 0 -27,925 -0.3% 0.9% 2.5% $0.48 0 0 0
Totals 35,273,774 26,224 -256,994 -0.7% 3.5% 7.5% $0.45 0 64,500 35,765
Southwest
Warehouse & Distribution 37,882,126 700,834 1,105,546 2.9% 3.7% 8.0% $0.56 575,750 600,500 906,980
Manufacturing 7,220,711 86,500 -41,300 -0.6% 6.0% 5.7% $0.62 0 0 0
Totals 45,102,837 787,334 1,064,246 2.4% 4.1% 7.6% $0.57 575,750 600,500 906,980
Rachel Alexander | Research Manager
1400 Post Oak Blvd., Suite 1100, Houston, TX 77056 | tel +1 713 888 4044 | rachel.alexander@am.jll.com
2019 Jones Lang LaSalle IP, Inc. All rights reserved.

3. Houston
Q4 2018
Industrial leasing activity
This report analyzes all closed industrial leases > 20,000 s.f.
46
2,744,780
2,533,926
210,854
-
212
19,123,403
Avg. building
construction date
44%
13%
15%
7%
19%
1%
Top 10 lease transactions during the quarter
Size Building status Year built
248,240 Planned 2019
225,500
Under
Construction
2019
204,118
Under
Construction
2019
194,293 Existing 1999
129,807 Existing 2000
127,526
Under
Construction
2019
104,975 Existing 1965
104,000 Existing 2013
103,466 Existing 2009
102,122
Under
Construction
2019
NT Logistics
900 Georgia Ave Southeast
Delta Petroleum Company
DirectSoutheastUndisclosed 1100 Pasadena Fwy
Access World 5515 Ameriport Pkwy Southeast Direct
Bermingham Controls 6535 Guhn Rd Northwest Sublease
Franklin Valve 500 Northpark Central Dr North Direct
MRC Global 1302 Wharton Weems Blvd Southeast
HydroChem
Direct
Colorado Boxed Beef Co 1190 West Loop N CBD Direct
Direct
Lease type
10565 Red Bluff Rd Southeast Direct
5515 Ameriport Pkwy Southeast
Southeast5411 Ameriport Pkwy Direct
Direct
UNIS Company
Tenant Address Submarket
Avg. lease size (in s.f.)
Relocation within market
Extension (< 36-month term)
Expansion in market
New to market
Renewal
Renewal and expansion
Leasing activity by submarket QTD
At a glance
Total leases QTD
Total s.f. leased QTD
Leasing activity by size QTD
Total s.f. leased QTD:
Warehouse/Distribution
Leasing activity QTD
2000
Total s.f. leased QTD:
Manufacturing
Leasing activity (s.f.) by transaction type QTD
Total s.f. leased QTD:
Special Purpose
Total leases YTD
59,669
Total s.f. leased YTD
9 13 28
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
100,000-249,999 50,000-99,999 20,000-49,999
Total leased Number of leases
52%
14%
14%
9%
8%
Southeast
North
Northwest
CBD
Southwest
Northeast
South
2,000,000
4,000,000
6,000,000
8,000,000
Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Historical leasing activity
Source: JLL Research 2019 Jones Lang LaSalle IP, Inc. All rights reserved.

4. Q4 2018
Industrial development
This report analyzes all industrial developments under construction & new deliveries > 30,000 s.f.
Total leased at delivery (%) 68.1%
Total speculative at delivery (s.f.) 5,302,479
Total BTS at delivery (s.f.) 3,587,776
Total Owner-User at delivery (s.f.) 1,017,149
Total # of properties delivered 62
Asking rental rate (low - high) Withheld
Top 5 projects delivered to date
Building RBA (s.f.) Delivery date
Leased at
delivery (%)
Amazon Distribution Center 1,016,000 Q1 2018 100%
Ravago Americas 712,740 Q1 2018 100%
525 Cane Island Pkwy 673,785 Q3 2018 0%
Emser Tile 601,426 Q2 2018 100%
Best Buy Distribution Center 554,000 Q4 2018 100%
Total pre-leased (%) 40.1%
Total speculative under construction (s.f.) 8,700,544
Total BTS under construction (s.f.) 2,051,170
Total Owner-user under construction (s.f.) 540,000
Total # of properties UC 52
Asking rental rate (low - high) Withheld
Top 5 projects currently under construction
Building RBA (s.f.) Delivery date Pre-leased (%)
Grocers Supply 727,600 Q2 2019 100%
Air 59 Logistics Center 685,400 Q4 2019 0%
Conn's Distribution Center 656,658 Q2 2019 100%
Port Crossing Commerce Center Bldg 2 600,360 Q1 2019 100%
PBP Building 519,224 Q2 2019 100%
BTS
Speculative
BTS
Submarket
Under construction
11,291,714
Under construction (s.f.)
Under construction in-depth
Upcoming deliveries by year (s.f., excludes YTD completions)
New deliveries
Completions in-depth
9,907,404
Total delivered YTD (s.f.)
Historical deliveries (s.f.)
Construction typeOwnerSubmarket
Southwest
North
Northwest
Southeast
Northwest
Seefried Properties
Hines
Oakmont Industrial
Ravago Americas
Duke Realty
BTS
Owner-user
Southeast
Southeast
North
North
North
BTS
Speculative
Owner Construction type
BTS
Artis REIT
Liberty Property Trust
Liberty Property Trust
Archway Properties
Liberty Property Trust
Speculative
BTS
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
2014 2015 2016 2017 2018
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
2019
BTS
Owner-user
Speculative
Source: JLL Research 2019 Jones Lang LaSalle IP, Inc. All rights reserved.

5. Houston
Q4 2018
Industrial sales activity
This report analyzes all industrial sales > 30,000 s.f.
$821,818,357
42
$87.69
5.15%
92.7%
7.3%
4.50-5.25% 0 0 $0
6.50-7.25% 0 42 $821,818,357
Top 10 sales transactions this year
Size (s.f.) $ p.s.f. Sale date
1,275,645 $116 Aug-18
1,047,797 $102 Sep-18
951,651 $85 Dec-18
700,644 Undisclosed Feb-18
674,418 $117 Aug-18
601,426 $82 Nov-18
554,000 $87 Nov-18
419,850 $61 Jul-18
351,960 $98 Apr-18
293,280 $70 Sep-18
10633, 10643 & 10653 W Airport
Blvd
Black Creek Group Crow Holdings $34,492,080
11833 Cutten Rd Black Creek Group Clay Development & Construction $20,529,600
636 Highway 90 Zurich Seefried Properties $47,967,364
Multiple Wilson Investment Properties Jaymar Investments $25,650,000
Multiple Cabot Properties Hines $79,200,000
10433 Ella Blvd Clarion Capital Hines $49,500,000
1190 West Loop N New Mountain Capital Cbbc Real Estate Holdings Inc $81,287,081
10700 Telge Rd Crow Holdings Albertsons Companies Undisclosed
10910 & 10920 W Sam Houston
Pkwy N
Exeter Property Group Adler Kawa Real Estate Advisors $148,000,000
7865-7909 Northcourt Rd ASB Capital Mgmt Barings $106,875,294
Building address Buyer company Seller company Sales price $
Core Class A Flex
Average partial interest
acquired
Number of domestic
buyers
Domestic capital $
Sales volume $ by submarket Top buyers (s.f.) Top sellers (s.f.)
Cap rate range Transactions details
Core Class A Ind.
Number of partial interest
transactions
Number of foreign
buyers
Foreign capital $
At a glance Sales activity by building type
Total volume YTD
Number of transactions YTD
Average Class A price p.s.f. YTD
Average Class A cap rate YTD
Warehouse/Dist. sales volume
as % of total YTD
Manufacturing sales volume as
% of total YTD
18%
15%
14%
10%
10%
9%
9%
8%
7%
Exeter Property Group
ASB Capital Mgmt
New Mountain Capital
Crow Holdings
Cabot Properties
Black Creek Group
Clarion Capital
Zurich
STAG Industrial
18%
18%
15%
14%
10%
8%
6%
6%
5%
Hines
Adler Kawa Real Estate Advisors
Barings
Cbbc Real Estate Holdings Inc
Albertsons Companies
Seefried Properties
Jaymar Investments
Clay Development & Construction
Crow Holdings
$761,558,447
$60,259,910
9,998,675
1,146,960
0 s.f.
2,000,000 s.f.
4,000,000 s.f.
6,000,000 s.f.
8,000,000 s.f.
10,000,000 s.f.
12,000,000 s.f.
$0
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
$700,000,000
$800,000,000
$900,000,000
Warehouse / Distribution Manufacturing
$7,100,000
$71,295,404
$94,342,985
$106,799,600
$173,219,444
$369,060,924
South
Southeast
CBD
North
Southwest
Northwest
Source: JLL Research 2019 Jones Lang LaSalle IP, Inc. All rights reserved.

6. Q4 2018
Warehouse/Distribution large blocks
This report analyzes existing and under construction contiguous warehouse/distribution blocks > 100,000 s.f.
Address Submarket Block size Year built
Hwy 59 & Will Clayton Pkwy Northeast 685,400 2019
611 S Cravens Rd Southwest 477,355 2019
4600 Underwood Rd Southeast 404,160 2019
10700 Telge Rd Northwest 401,753 1983
9800 Derrington Rd Northwest 368,467 2019
30 Esplanade Blvd North 351,400 2019
2851 E Pasadena Blvd Southeast 349,050 2019
411 Brisbane St South 345,100 1973
8221 Volta Dr North 337,700 2019
5623 AmeriPort Pkwy Southeast 337,040 2019
Submarket concentrations
Total number of blocks
Total s.f. of blocks
Largest block
79
15,588,109
685,400
Northeast
Southwest
Southeast
Northwest
North
South
Top 10 largest contiguous blocks
CBD
Quick stats
685,400
477,355
404,160
401,753
351,400
345,100
238,011
Submarket
Houston
Largest block by submarket
Blocks by size
s.f.
Total market availability
197,318Average block
12
16
19
32
0
5
10
15
20
25
30
35
300,000 + 200,000 - 299,999 150,000 - 199,999 100,000 - 149,999
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18
Northwest,
4,969,498
North,
2,890,787 Northeast,
1,672,060
Southeast,
3,493,006
South,
578,100
Southwest,
1,274,681
CBD,
709,977
Source: JLL Research 2019 Jones Lang LaSalle IP, Inc. All rights reserved.