Industrial OutlookHouston . Q1 2012Oil and gas sector willcontinue to drive leasing andsales activity into 2012and beyond....
Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 3Houston industrial overviewEconomyHouston’s industrial market...
Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 4Houston industrial overview, cont.OutlookBuilding sales and l...
Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 5Houston industrial overview, cont.Average rental rate        ...
Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 6Houston leased industrial market [excluding owner occupied fa...
Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 7Houston select salesSoutheast 4554 E Greenwood Rd.           ...
Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 8AppendixStatisticsLarge block availabilitiesConstruction mapC...
Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 9Houston industrial market statistics                         ...
Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 10Houston industrial market statistics, cont.                 ...
Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 11Houston industrial buildings with large block availabilities...
Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 12Houston industrial buildings with large block availabilities...
Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 13Houston construction map                                    ...
Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 14Houston contactsResearchLauren KelleyResearch Analyst+1 713 ...
About Jones Lang LaSalleJones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real e...
Houston Q1 2012  Industrial Outlook 06142012 For Naitonal Site
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Houston Q1 2012 Industrial Outlook 06142012 For Naitonal Site

  1. 1. Industrial OutlookHouston . Q1 2012Oil and gas sector willcontinue to drive leasing andsales activity into 2012and beyond.Vacancy rates remain low due to the rise in exploration, the recovery inmanufacturing, and steady traffic through our region’s ports.As demand continues to rise, construction elevates throughout Houston.
  2. 2. Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 3Houston industrial overviewEconomyHouston’s industrial market continues to be driven by its resilient economy and international energy emphasis. Trend spotlight…As a reference, Houston began the year with more than 2.6 million payroll jobs, the highest employment level inits history. Furthermore, Houston’s unemployment rate dropped significantly, decreasing from 7.8 percent in • There were a total of 1,980 oil and gas drilling rigs working in the UnitedApril 2011 to 6.5 percent in April 2012. The Eagle Ford Shale formation is also bolstering Houston’s economy. States at the beginning of June.As of March 2012, over 100 rigs have been added over the past 12 months with a total count of 271 rigs. To putthis into perspective, there are only 1,900-2,000 active rigs in the United States. • The Northwest submarket was the most active during the first quarter with almost one million square-feet absorbed.Market conditionsThe Houston Industrial Real Estate market has continued to outperform other markets of comparable size during • A total of 40 industrial buildings were under construction at the end of the firstfirst quarter of 2012 . Citywide vacancy rates declined 20 basis points to 4.4 percent as the market absorbed quarter, totaling 4,164,053 square feet. 1,585,848 square feet of themmore than 1.1 million square feet of space. Once again, the Northwest submarket contributed a significant were pre-leased.amount to overall citywide absorption, mainly a result of the high demand for crane-served freestandingbuildings. Oil Field Services groups, among other energy-related and manufacturing users, have increasingly • Houston should continue to see job growth throughout 2012 and is forecastedhad a need for 5-10 acre tracts of land with sufficient crane capacity, hook height, and wider bays to move their to add 84,600 jobs this year.equipment. As a result of the enhanced demand for such a unique product, vacancy rates for crane-servedfreestanding buildings are among the lowest in industrial product types. • Dow has announced it will invest more than $1.7 billion into its Freeport Plant.Citywide average asking rents, while growing in some of the stronger submarkets (North, Northwest, • Houston and Washington D.C are the only major metro areas that haveSouthwest), have decreased marginally to $4.92/NNN, down one cent from the previous quarter. Despite this recovered all jobs lost during the recession. Houston regained all of its jobsslight drop, rental rates are projected to remain stable or increase as the demand for quality space increases. three months before Washington D.C., an indicator of its economic fortitude.Furthermore, new developments in North and Northwest Houston can be expected into 2012 as developers lookto capitalize on improving market conditions. Total industrial market (owner occupied included) Supply Construction Vacancy Availability Demand Pricing Total stock (s.f.) Under construction (s.f.) Rate Trend Rate Trend Q1 2012 net absorption (s.f.) Average rental rate (nnn) Total industrial market 424,975,124 3,374,427 4.5% 8.4% 1,082,026 $4.92 Warehouse/distribution 312,126,213 3,232,445 5.3% 9.4% 1,138,020 $4.92 Manufacturing 58,253,345 141,982 2.9% 7.7% -333,676 $4.44 Total flex market 36,966,761 51,000 10.8% 14.8% 114,936 $8.51
  3. 3. Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 4Houston industrial overview, cont.OutlookBuilding sales and leasing activity are on the rise. As demand for quality space increases, new Oil and gas service companies will also experience increased activity, resulting in high demand fordevelopments in Southeast, North, Northwest, and Southwest Houston are probable as developers crane served and crane ready buildings as existing vacancies are scarce. The size of theselook to capitalize on improving market conditions. Absorption numbers should continue to improve buildings is also increasing from 25,000 - 50,000 square feet with 1.5 acres of land to 50,000 –throughout the year as company operations grow and speculative construction remains limited. The 100,000 square feet with 5 – 10 acres of land. The Eagle Ford Shale phenomenon teamed withSoutheast submarket has the highest total vacancy rate of 5.7 percent and continues to provide high oil prices will sustain the drilling rig boom throughout 2012. Chevron Phillips and Dow Chemical broke ground on plant expansions in Baytown and Freeport and analysts believe thereopportunities for tenants interested in consolidating operations near the two container terminals. A could be more built along the Gulf Coast. Increased exploration will continue to create a need forMcGraw Hill Construction forecast for 2012 predicts that commercial building will grow 8 percent more oil field equipment thus creating more jobs. Houston should continue to see job growth duringnationally. Warehouse and hotels will see the largest percentage increase. Manufacturing buildings 2012 and is forecasted to add 84,600 jobs this year. Concessions could decrease for tenants as awill increase 4 percent, as the low value of the dollar continues to fund export growth. Landlords are result of a high-demand marketplace. Furthermore, land activity in North and Northwest Houstonstill aggressive in pursuing tenants for their developments. Leasing activity should continue to pick has dramatically increased.up among energy companies and international corporations. Houston property clock Peaking Falling market market Landlord leverage Tenant leverage Rising Bottoming market market North, Northwest, Southwest Northeast, Southeast, CBD Southern
  4. 4. Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 5Houston industrial overview, cont.Average rental rate YTD net absorptionPricing trends Demand trends• The average asking rental rate for available industrial space was $0.41 per square foot NNN per • Demand is being fueled by numerous factors including 1) increasing population; 2) employment month at the end of the first quarter 2012 in the Houston market area. rate growth; 3) positive trade indicators; 4) increased activity in the oil and gas sector, and ; 5) a• Lease rates for first generation crane ready buildings are favorable to landlords as demand diversified economy. outweighs supply. • Net absorption for the Houston industrial market was positive 1,082,026 square feet in the first quarter of 2012.
  5. 5. Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 6Houston leased industrial market [excluding owner occupied facilities] Total leased industrial market (excluding owner occupied facilities) Methodology… Demand Pricing Supply Vacancy Availability Q1 2012 net Average rental total stock (s.f.) rate rate absorption (s.f.) rate (nnn) The leased industrial sector excludes owner Total leased industrial market 234,604,140 7.3% 11.7% 1,171,797 $4.90 occupied product from the market’s data set, and Warehouse/distribution 190,413,982 7.8% 12.1% 1,251,391 $4.94 provides a rental equivalent perspective for Manufacturing 25,397,617 6.1% 13.4% -288,676 $4.54 industrial buildings that are leased by tenants. Buildings can move into and out of this data Total leased flex market 29,812,407 12.4% 17.2% 104,301 $8.59 set based upon being purchased or sold by a Recent lease transactions particular user. Tenant Name Location Submarket Deal type Size (s.f.) Gulf Winds International, Port Crossing Commerce Center – Southeast New Lease 247,240 Inc. 1842 S 16th St. Hempstead Highway Distribution Center – Daltile Northwest New Lease 116,000 11850 Hempstead Highway West Little York Crossdock – Automatic Power Inc. Northwest New Lease 63,000 10810 W Little York Rd. OldCastle Building Greenspoint Business Center – North New Lease 61,194 Envelope Inc. 101 Esplanade Blvd. Equator Plaza – Transcore Northwest New Lease 55,431 2701 W Sam Houston Parkway Cornerstone Records Hardy Distribution Center I – North New Lease 52,000 Management 1521 Greens Rd.
  6. 6. Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 7Houston select salesSoutheast 4554 E Greenwood Rd. Northeast 8800 Citypark Loop RBA 4,000,000 s.f. RBA 564,248 s.f. Buyer Wal-Mart Stores, Inc. Buyer First Industrial Real Trust, Inc. Seller Texas General Land Office Seller Chatham Financial Corp. Price (p.s.f.) $26.13 Price (p.s.f.) $54.23 Date sold Q2 2011 Date sold Q2 2011Northeast 9705 Highway 225 Southwest 14623 Fairway Pines RBA 312,964 s.f. RBA 152,844 s.f. Buyer Meritex Enterprises Inc. Buyer The Allied Group Seller Cardinal Industrial Seller Crow Holdings Price (p.s.f.) $41.70 Price (p.s.f.) $50.00 Date sold Q2 2011 Date sold Q2 2011Northwest 8017 Pinemont Dr. North 14345 Northwest Freeway RBA 111,197 s.f. RBA 91,161 s.f. Buyer Cabot Investment Properties LLC Buyer Par-Pak, Inc. Seller Colglazier Properties Seller Cotton Price (p.s.f.) $43.17 Price (p.s.f.) $54.85 Date sold Q4 2011 Date sold Q3 2011
  7. 7. Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 8AppendixStatisticsLarge block availabilitiesConstruction mapContacts
  8. 8. Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 9Houston industrial market statistics YTD Direct net YTD direct net Total net YTD total net YTD total net Direct Direct Total Total Average Under InventorySubmarket completion absorption absorption absorption absorption absorption vacancy vacancy vacancy vacancy Asking rent construction / (s.f.) (s.f.) (s.f.) (s.f.) (s.f.) (s.f.) (% of stock) (s.f.) (%) (s.f.) (%) ($ p.s.f) NNN renovation (s.f.)CBDWarehouse & Distribution 0 40,380,215 172,069 172,069 172,069 172,069 0.4% 1,837,838 4.6% 1,837,838 4.6% $0.37 38,232Manufacturing 0 7,081,808 42,500 42,500 42,500 42,500 0.6% 225,221 3.2% 225,221 3.2% $0.34 0Totals 0 52,086,343 219,969 219,969 219,969 219,969 0.4% 2,093,059 4.0% 2,093,059 4.0% $0.36 38,232NorthWarehouse & Distribution 228,238 41,855,873 123,149 123,149 112,733 112,733 0.3% 2,182,128 5.2% 2,203,036 5.3% $0.53 984,973Manufacturing 0 8,149,038 13,500 13,500 -138,776 -138,776 -1.7% 125,727 1.5% 378,003 4.6% $0.47 0Totals 228,238 58,518,975 195,270 195,270 32,578 32,578 0.1% 2,700,333 4.6% 2,973,517 5.1% $0.52 984,973NortheastWarehouse & Distribution 0 23,375,793 -4,989 -4,989 12,819 12,819 0.1% 834,369 3.6% 834,369 3.6% $0.38 0Manufacturing 0 5,486,034 -14,500 -14,500 -14,500 -14,500 -0.3% 63,000 1.1% 192,000 3.5% $0.28 0Totals 0 28,625,958 -47,916 -47,916 -30,108 -30,108 -0.1% 879,471 3.1% 1,008,471 3.5% $0.33 0NorthwestWarehouse & Distribution 257,835 87,885,470 826,950 826,950 813,350 813,350 0.9% 3,808,067 4.3% 3,965,729 4.5% $0.39 960,297Manufacturing 0 13,358,894 -6,800 -6,800 -6,800 -6,800 -0.1% 351,968 2.6% 351,968 2.6% $0.44 0Totals 257,835 111,744,407 936,717 936,717 936,717 936,717 0.8% 4,265,259 3.8% 4,422,921 4.0% $0.40 960,297Vacancy: Physically vacant space. Total Vacancy includes both direct and sublease space.Availability: Space being marketed for lease by owner or sublessor, regardless of occupancy. Total Availability includes both direct and sublease space.Net Absorption: The net change in occupancy over a measured period of time.Average Asking Rent: Direct monthly values presented on a NNN basis, then weighted by the amount of direct available space in a building.Statistics reflect the total industrial market, including owner occupied facilities for buildings greater than 20,000 square feet.
  9. 9. Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 10Houston industrial market statistics, cont. YTD Direct net YTD direct net Total net YTD total net YTD total net Direct Direct Total Total Average UnderSubmarket Inventory completion absorption absorption absorption absorption absorption vacancy vacancy vacancy vacancy Asking rent construction / (s.f.) (s.f.) (s.f.) (s.f.) (s.f.) (s.f.) (% of stock) (s.f.) (%) (s.f.) (%) ($ p.s.f) NNN renovation (s.f.)SoutheastWarehouse & Distribution 0 54,764,215 -18,148 -18,148 -60,990 -60,990 -0.1% 4,217,105 7.7% 4,282,288 7.8% $0.37 1,109,800Manufacturing 0 11,753,663 0 0 0 0 0.0% 27,120 0.2% 27,120 0.2% $0.54 0Totals 0 78,666,657 -15,598 -15,598 -58,440 -58,440 -0.1% 4,451,175 5.7% 4,516,358 5.7% $0.38 1,109,800SouthernWarehouse & Distribution 0 27,774,060 -47,962 -47,962 -47,962 -47,962 -0.2% 944,631 3.4% 986,631 3.6% $0.40 128,000Manufacturing 0 6,836,189 -202,700 -202,700 -202,700 -202,700 -3.0% 349,912 5.1% 349,912 5.1% $0.32 0Totals 0 38,632,778 -206,743 -206,743 -206,743 -206,743 -0.5% 1,315,053 3.4% 1,357,053 3.5% $0.39 128,000SouthwestWarehouse & Distribution 192,431 36,090,587 218,151 218,151 136,001 136,001 0.4% 2,211,404 6.1% 2,302,062 6.4% $0.48 733,449Manufacturing 0 5,587,719 -13,400 -13,400 -13,400 -13,400 -0.2% 187,275 3.4% 187,275 3.4% $0.51 141,982Totals 192,431 53,988,210 248,476 248,476 166,326 166,326 0.3% 2,550,963 4.7% 2,641,621 4.9% $0.48 875,431Market TotalsWarehouse & Distribution 678,504 312,126,213 1,269,220 1,269,220 1,138,020 1,138,020 0.4% 16,035,542 5.1% 16,411,953 5.3% $0.41 3,954,751Manufacturing 0 58,253,345 -181,400 -181,400 -333,676 -333,676 -0.6% 1,330,223 2.3% 1,711,499 2.9% $0.37 141,982Totals 678,504 425,007,455 1,365,502 1,365,502 1,082,026 1,082,026 0.3% 18,312,211 4.3% 19,069,898 4.5% $0.41 4,096,733Vacancy: Physically vacant space. Total Vacancy includes both direct and sublease space.Availability: Space being marketed for lease by owner or sublessor, regardless of occupancy. Total Availability includes both direct and sublease space.Net Absorption: The net change in occupancy over a measured period of time.Average Asking Rent: Direct monthly values presented on a NNN basis, then weighted by the amount of direct available space in a building.Statistics reflect the total industrial market, including owner occupied facilities
  10. 10. Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 11Houston industrial buildings with large block availabilities Manufacturing Manufacturing Warehouse Warehouse Warehouse Warehouse Manufacturing Manufacturing DistributionCBD North Northeast Northwest3 Blocks 1 Block 1 Block 2 Blocks797,430 s.f. 286,000 s.f. 298,000 s.f. 675,273 s.f.6501 Navigation Blvd. – (M) - 286,000 s.f. Airtex Dr. – (M) – 267,150 s.f. 8501 E I-10 Fwy – (M) – 298,000 s.f. 8110 Kempwood Dr. – (W) – 408,000 s.f.555 Gellhorn Dr. – (M) – 259,540 s.f. 11711 Clay Rd. – (W) – 275,000 s.f.8833 Citypark Loop – (W) – 254,765 s.f. 10650 Okanella Ln. – (D) – 267,273 s.f.1200 Lathrop St. – (W) – 251,890 s.f.Contiguous blocks greater than 250,000 square feet; (M): Manufacturing; (D): Distribution; (F): Flex; (W): Warehouse
  11. 11. Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 12Houston industrial buildings with large block availabilities, cont. Distribution Distribution Warehouse Distribution Distribution Warehouse Distribution Distribution Warehouse Warehouse Warehouse DistributionSoutheast Southern Southwest10 Blocks 0 Blocks 1 Block4,029,692 s.f. 369,439 s.f.359 Pike Ct.– (D) – 710,200 s.f. 1601 Gillingham Ln. – (D) – 369,439 s.f.4906 Broadway St. – (D) – 605,879 s.f.9501 Bay Area Blvd. – (W) – 480,480 s.f.359 Old Underwood Rd. – (D) – 450,000 s.f.4330 Underwood Rd. – (D) – 353,500 s.f.8855 Citypark Loop – (W) – 346,515 s.f.5151 Rice Farm Rd. – (D) – 312,000 s.f.13031 Bay Area Blvd. – (D) – 296,400 s.f.9401 Bay Area Blvd. – (W) – 283,920 s.f.10000 Manchester St . – (W) – 270,000 s.f.4500 Gulf Freeway – (W) – 263,378 s.f.Contiguous blocks greater than 250,000 square feet; (M): Manufacturing; (D): Distribution; (F): Flex; (W): Warehouse
  12. 12. Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 13Houston construction map Construction in progress 1 CBD - 6503 Navigation, est. delivery Q4 2012 2 North – 3375 Pollock Dr., est. delivery Q4 2012 3 North – Airtex Dr., est. delivery Q3 2012 4 North – 14000 Vickery Dr., est. delivery Q3 2012 2 5 North – 16605 Central Green Blvd., est. delivery Q2 2012 6 North – 2442 Greens Rd., est. delivery Q2 2012 7 North – Kennedy Greens, est. delivery Q2 2012 10 11 14 15 8 North – 12309 Cutten Rd., est. delivery Q3 2012 16 17 18 19 5 6 9 North – 330 Northpark Dr., est. delivery Q2 2012 10 Northwest – 7603 Bluff Point Dr., est. delivery Q2 2012 9 11 Northwest – 7607 Bluff Point Dr., est. delivery Q2 2012 8 3 12 Northwest – 10650 Okanella, est. delivery Q2 2016 4 13 7 13 Northwest – 12223 FM 529, est. delivery Q3 2012 12 14 Northwest – 7645 Railhead, est. delivery Q3 2012 15 Northwest – 1355 Yorkfield Rd., est. delivery Q3 2012 1 28 16 Northwest – 6511 W Little York Rd., est. delivery Q3 2012 20 25 26 21 23 24 27 30 17 Northwest – Windfern and Genard St., est. delivery Q4 2012 22 29 18 Northwest – 12626 N Houston Rosslyn , est. delivery Q2 2012 19 Northwest – 12616 N Houston Rosslyn , est. delivery Q2 2012 20 Southwest – 1001 S Cravens Rd., est. delivery Q1 2013 21 Southwest – 13223 S Gessner Rd., est. delivery Q3 2012 22 Southwest – 13123 S Gessner Rd., est. delivery Q3 2012 23 South – 2725 Park South Vw, est. delivery Q3 2012 24 South – 9250 Park South Vw, est. delivery Q3 2012 25 Southeast – 5200 Gulf Freeway, est. delivery Q4 2012 26 Southeast – 310 W Deerwood Glen Dr., est. delivery Q3 2012 27 Southeast – 405 W Deerwood Glen Dr., est. delivery Q2 2012 28 Southeast – 300 Delta Parkway, est. delivery Q2 2012 29 Southeast – Fairlane St. And Highway 146., est. delivery Q2 2012 30 Southeast – 1445 Sens Rd., est. delivery Q2 2012
  13. 13. Jones Lang LaSalle • Industrial Outlook • Houston • Q1 2012 14Houston contactsResearchLauren KelleyResearch Analyst+1 713 888 4046lauren.kelley@am.jll.comBrokerageBob Berry, SIORExecutive Vice President+1 713 888 4028bob.berry@am.jll.comJohn Talhelm, SIORSenior Vice President+1 713 888 4058john.talhelm@am.jll.com
  14. 14. About Jones Lang LaSalleJones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increasedvalue by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management,the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47.2 billion of assets under management. For further information, please visitwww.joneslanglasalle.com.Jones Lang LaSalle ResearchJones Lang LaSalle’s research team delivers intelligence, analysis, and insight through market-leading reports and services that illuminate today’s commercial real estate dynamics and identify tomorrow’schallenges and opportunities. Our 300 professional researchers track and analyze economic and property trends and forecast future conditions in over 70 countries, producing unrivalled local and globalperspectives. Our research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives success.f.ul strategies andoptimal real estate decisions.Jones Lang LaSalle1400 Post Oak Blvd.Suite 1100Houston, TX 77056tel +1 713 888 4000fax +1 713 888 4040www.us.joneslanglasalle.com/industrial©2012 Jones Lang LaSalle IP, Inc. All rights reserved. No part of this publication may be reproduced by any means, whether graphically, electronically, mechanically or otherwise howsoever, including without limitation photocopying and recording on magnetic tape, or included in anyinformation store and/or retrieval system without prior written permission of Jones Lang LaSalle. The information contained in this document has been compiled from sources believed to be reliable. Jones Lang LaSalle or any of their affiliates accept no liability or responsibility for theaccuracy or completeness of the information contained herein and no reliance should be placed on the information contained in this document.

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