The document summarizes industrial real estate trends in Houston, Texas in Q2 2018. Vacancy rates increased slightly to 5.5% as some tenants relocated from older buildings to newer, higher-quality space. Absorption turned negative as tenants left older buildings, though the overall market remains healthy. Over 12 million square feet of new industrial space is under construction, with several large distribution centers planned or underway. Job and economic growth in Houston continues to outpace national averages.

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Houston industrial tenants move to new space, increasing
vacancy in older inventory
Research &
Forecast Report
HOUSTON | INDUSTRIAL
Q2 2018
Lisa Bridges Director of Market Research | Houston
E-commerce continues to expand, helping to grow Houston’s
industrial inventory. More than 12.3 million SF of industrial
space is currently under construction, much of that in the form
of distribution and logistics facilities. Liberty Property Trust
is developing a 727,600-SF distribution warehouse located at
14803 Woodham Drive in the North Hardy Toll Rd submarket
for Grocers Supply and a 550,000-SF distribution center is
under construction at 636 Highway 90 in the Hwy 59/Hwy 90
submarket for Best Buy, just to name a few.
In general, the negative absorption as a percentage of the 560
million SF of existing industrial inventory is a small number, but
we do keep an eye on vacancies as they arise. The vacancies
created during the quarter of 2018 resulted from tenants who
left older functionally obsolete buildings in a “flight to quality”
for newer, state of the art buildings in different submarkets, or
a couple of smaller 60,000 - 80,000 SF tenants that closed
operations due to corporate M&A activity, or due to other
restructuring. The strength of the market overall, including the
balance of new deliveries in submarkets around the city indicate
that the overall industrial market is healthy.
According to the U.S. Bureau of Labor Statistics, the Houston
MSA created 79,200 jobs (not seasonally adjusted) between
May 2017 and May 2018, an annual growth rate of 2.6%, which
is above the national average job growth rate of 1.6%. The
largest gains by sector include manufacturing, construction and
employment services.
Summary Statistics
Houston Industrial Market Q2 2017 Q1 2018 Q2 2018
Vacancy Rate 5.6% 5.3% 5.5%
Net Absorption (SF) (13,100) 2,812,181 (231,558)
New Construction (SF) 1,502,400 3,091,633 1,625,625
Under Construction (SF) 4,227,300 9,266,194 12,370,032
Asking Rents
Per Square Foot Per Year (NNN)
Average $6.89 $6.76 $7.03
Warehouse/Distribution $6.63 $6.53 $6.66
Flex/Service $10.52 $9.82 $9.98
Tech/R&D $11.49 $10.22 $10.82
Market Indicators
Relative to prior period
Annual
Change
Quarterly
Change
Quarterly
Forecast*
VACANCY
NET ABSORPTION
NEW CONSTRUCTION
UNDER CONSTRUCTION
*Projected

2. Change in Sales (Year over Year)
-100.0%
-50.0%
0.0%
50.0%
100.0%
150.0%
200.0%
250.0%
300.0%
Q2 '14 Q2 '15 Q2 '16 Q2 '17 Q2 '18
Average Price Per SF
40
45
50
55
60
65
70
75
80
85
90
Q2 '14 Q2 '15 Q2 '16 Q2 '17 Q2 '18
Houston U.S.
Average CAP Rate
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
Q2 '14 Q2 '15 Q2 '16 Q2 '17 Q2 '18
Houston U.S.
2 Houston Research & Forecast Report | Q2 2018 | Industrial | Colliers International
Sales Activity
Source: Real Capital Analytics
Q2 2018
NO. OF PROPERTIES: 38
TOTAL SF: 4.5M
AVERAGE $/SF: $81
AVERAGE CAP RATE: 6.0%
Job Growth & Unemployment
(not seasonally adjusted)
UNEMPLOYMENT 5/17 5/18
HOUSTON 4.8% 4.2%
TEXAS 4.1% 3.7%
U.S. 4.1% 3.6%
Vacancy & Availability
Houston’s average industrial vacancy rate increased 20 basis points from 5.3% to
5.5% over the quarter. At the end of theecond quarter, Houston had 28.8 million
SF of vacant industrial space for direct lease and an additional 1.9 million SF
of vacant sublease space. Among the major industrial corridors, the Northeast
Corridor had the lowest vacancy rate at 2.5%, followed by the South Corridor
at 3.9%. The submarket with the largest percentage of vacant space is the
Northwest Corridor which had a 6.0% vacancy rate.
Absorption & Demand
Houston’s industrial market posted 231,558 of negative net absorption in the
second quarter, a significant decrease from the 2.8 million SF or positive
absorption recorded in the previous quarter. The negative absorption as a
percentage of the total existing industrial inventory is a small number and
was mostly the effect of tenants relocating to newly delivered space, leaving
older space vacant. Some of the tenants that relocated or expanded into newly
constructed space during Q1 2018 include B&H Bag Company (186,306 SF) in the
Northwest Outliers submarket, Evoqua Water Technologies (107,000 SF) in the
North Hardy Toll Rd submarket and ThyssenKrupp (71,916 SF) in the North Fwy/
Tomball Pky submarket.
The Southeast and North Corridors posted the largest amount of positive net
absorption during the second quarter, posting 0.4 million SF and 0.3 million SF,
respectively. The submarket with the highest amount of negative absorption was
the Northwest Corridor, posting 962,116 SF of negative net absorption.
Rental Rates
According to CoStar, our data service provider, Houston’s citywide average
quoted industrial rental rate for all product types increased from $6.76 per
SF NNN to $7.03 per SF NNN over the quarter. According to Colliers’ internal
data, actual lease transactions are in the $4.56 – $5.04 per SF NNN range for
newer bulk industrial spaces, while flex rates range from $7.20 to $10.80 per
SF depending on the existing improvements or the allowance provided for tenant
improvements and the location of the property.
According to CoStar, the average quoted NNN rental rates by property type are
as follows: $6.66 per SF for Warehouse Distribution space; $9.98 per SF for Flex/
Service space; with Tech/R&D space averaging $10.82 per SF.
JOB GROWTH
Annual
Change
# of Jobs
Added
HOUSTON 2.6% 79.2K
TEXAS 2.8% 344.7K
U.S. 1.6% 2.4M

3. 3 Houston Research & Forecast Report | Q2 2018 | Industrial | Colliers International33
Q2 2018 Industrial Lease Transactions over 50,000 SF
BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE
14803 Woodham Dr North Hardy Toll Rd 727,600 Grocers Supply2
Jun-18
12101 McLain Rd Hwy 59/Hwy 90 143,986 Hose Master1
Apr-18
800 Koomey Rd Northwest Outliers 186,306 B&H Bag Company1
Apr-18
600 Fallbrook Dr North Fwy/Tomball Pky 107,790 Kitchen Cabinet Distributors1
Apr-18
15414 International Plaza Dr North Hardy Toll Rd 107,000 Evoqua Water Technologies1
May-18
8000 Market St Southeast Outer Loop 93,600 Metrix1
Jun-18
Leasing Activity
Houston’s industrial leasing activity decreased 9% over the quarter from 5.8M SF in Q1 2018 to 5.4M SF in Q2 2018. Most of the
transactions consisted of leases for 75,000 SF or less; however, there were several larger deals that occurred. The table below highlights
some of the larger transactions that closed in Q2 2018.
1
Direct/New
2
Pre-lease in BTS
Under Construction
Currently 12.4M SF of industrial space is under construction in Houston and 37.4% is pre-leased. The largest project under construction
is a 727,600-SF BTS distribution warehouse for Grocers Supply Company which is being developed by Liberty Property Trust. Below is a
partial list of buildings currently under construction.
Q2 2018 Industrial Under Construction - 300,000 SF or greater
BUSINESS PARK/ADDRESS SUBMARKET RBA % LEASED DEVELOPER/CONTRACTOR
DELIVERY
DATE
BUILDING DESCRIPTION
14803 Woodham Dr North Hardy Toll Rd 727,600 100% Liberty Property Trust Apr-19 BTS for Grocers Supply
Company
Parc Air 59 - 18250 Hwy 59 N Northeast Hwy 90 677,040 0% Archway Properties Dec-18 Spec Distribution
525 Cane Island Pky Northwest Outliers 673,785 0% Oakmont Industrial Group Jul-18 Spec Distribution
1302 Wharton Weems Blvd -
Bldg B2
East-Southeast Far 600,360 0% Liberty Property Trust Jul-18 Spec Distribution
636 Hwy 90 Hwy 59/Hwy90 550,000 100% Seefried Properties, Inc. Oct-18 BTS for Best Buy
Cedar Port Industrial Park East-Southeast Far 500,000 100% Avera Companies Sep-18 BTS Vinmar International
Bayport South Business Park III East-Southeast Far 500,000 0% Johnson Development Assoc. Mar-19 Spec Distribution
Northwest Logistics Center West Outer Loop 411,442 0% Stream Realty Partners, L.P. Jul-18 Spec Distribution
Bayport Logistics Park Bldg 2 East-Southeast Far 369,755 100% Avera Companies Oct-18 BTS for Kuraray
Fallbrook Pines Business Park Hwy 290/Tomball Pky 368,467 0% TrammellCrowCompany Aug-18 Spec Warehouse
Gateway Northwest Business
Park
Northwest Hwy 6 368,432 43.7% Duke Realty Corporation Jul-18 Spec Warehouse
Victory Commerce Center East-Southeast Far 349,050 0% Crow Holdings Industrial Mar-19 Spec Distribution
Point North Three North Hardy Toll Road 337,700 0% Duke Realty Corporation Aug-18 Spec Warehouse
22806 Northwest Lake Dr Northwest Outliers 320,000 100% Kingham Dalton Ltd. Dec-18 BTS for AIV Inc.

4. 4 Houston Research & Forecast Report | Q2 2018 | Industrial | Colliers International
Q2 2018 Houston Industrial Market Statistical Summary
MARKET
RENTABLE
AREA
DIRECT
VACANT SF
DIRECT
VACANCY
RATE
SUBLET
VACANT
SF
SUBLET
VACANCY
RATE
TOTAL
VACANT SF
TOTAL
VACANCY
RATE
2Q18 NET
ABSORP-
TION
1Q18 NET
ABSORP-
TION
2Q18
COMPLE-
TIONS
SF UNDER
CONSTRUC-
TION
HOUSTON TOTAL 562,070,336 28,795,315 5.1% 1,936,971 0.3% 30,732,286 5.5% (231,558) 2,812,181 1,625,625 12,370,032
CBD-NW Inner Loop 11,405,369 503,921 4.4% 25,755 0.2% 529,676 4.6% 99,834 (88,855) 0 14,250
Downtown 31,418,190 1,048,076 3.3% 26,437 0.1% 1,074,513 3.4% 237,057 16,776 0 0
North Inner Loop 4,858,519 296,272 6.1% 0 0.0% 296,272 6.1% 33,722 (72,779) 0 0
Southwest Inner Loop 7,007,302 267,259 3.8% 0 0.0% 267,259 3.8% (108,629) (26,513) 0 0
INNER LOOP
CORRIDOR TOTAL
54,689,380 2,115,528 3.9% 52,192 0.1% 2,167,720 4.0% 261,984 (171,371) 0 14,250
North Fwy/Tomball
Pky
25,324,246 2,633,030 10.4% 158,702 0.6% 2,791,732 11.0% 357,585 (33,994) 894,280 631,370
North Hardy Toll Rd 34,510,616 2,549,867 7.4% 203,465 0.6% 2,753,332 8.0% (145,055) 324,596 176,900 1,295,425
North Outer Loop 21,991,436 627,808 2.9% 76,910 0.3% 704,718 3.2% 235,242 195,550 0 0
The Woodlands/
Conroe
17,615,356 1,240,149 7.0% 103,949 0.6% 1,344,098 7.6% (122,601) 139,977 98,366 25,685
NORTH CORRIDOR
TOTAL
99,441,654 7,050,854 7.1% 543,026 0.5% 7,593,880 7.6% 325,171 626,129 1,169,546 1,952,480
Northeast Hwy 321 1,324,329 33,000 2.5% 0 0.0% 33,000 2.5% 12,000 7,340 0 0
Northeast Hwy 90 18,551,333 355,485 1.9% 0 0.0% 355,485 1.9% (89,282) 316,805 21,000 997,040
Northeast I-10 4,091,145 76,922 1.9% 6195 0.2% 83,117 2.0% 26,360 48,950 0 0
Northeast Inner Loop 11,681,548 394,988 3.4% 22,500 0.2% 417,488 3.6% (61,045) (109,402) 0 0
NORTHEAST
CORRIDOR TOTAL
35,648,355 860,395 2.4% 28,695 0.1% 889,090 2.5% (111,967) 263,693 21,000 997,040
Hwy 290/Tomball Pky 22,618,017 1,290,461 5.7% 154,123 0.7% 1,444,584 6.4% (276,865) 41,707 0 889,319
Northwest Hwy 6 10,350,641 424,125 4.1% 0 0.0% 424,125 4.1% 28,833 101,340 0 435,672
Northwest Inner Loop 60,353,714 3,642,194 6.0% 193,022 0.3% 3,835,216 6.4% (859,026) 110,031 0 42,166
Northwest Near 18,419,329 982,376 5.3% 78,943 0.4% 1,061,319 5.8% 62,858 (139,867) 0 0
Northwest Outlier 22,791,795 1,421,668 6.2% 37,216 0.2% 1,458,884 6.4% 84,429 1,178,956 231,839 2,422,655
West Outer Loop 25,582,078 1,354,781 5.3% 84,200 0.3% 1,438,981 5.6% (2,345) 67,734 0 433,042
NORTHWEST
CORRIDOR TOTAL
160,115,574 9,115,605 5.7% 547,504 0.3% 9,663,109 6.0% (962,116) 1,359,901 231,839 4,222,854
South Highway 35 35,113,991 1,228,297 3.5% 121,836 0.3% 1,350,133 3.8% (17,275) (257,196) 38,500 75,765
South Inner Loop 12,564,984 504,380 4.0% 20,295 0.2% 524,675 4.2% (111,506) 233,569 0 0
SOUTH CORRIDOR
TOTAL
47,678,975 1,732,677 3.6% 142,131 0.3% 1,874,808 3.9% (128,781) (23,627) 38,500 75,765
East I-10 Outer Loop 13,072,490 350,468 2.7% 0 0.0% 350,468 2.7% (77,381) (93,921) 0 10,000
East-Southeast Far 63,475,496 2,835,598 4.5% 443,000 0.7% 3,278,598 5.2% 638,821 859,768 89,440 4,496,805
Southeast Outer Loop 17,334,371 722,351 4.2% 15,000 0.1% 737,351 4.3% (149,782) (97,982) 0 0
SOUTHEAST
CORRIDOR TOTAL
93,882,357 3,908,417 4.2% 458,000 0.5% 4,366,417 4.7% 411,658 667,865 89,440 4,506,805
Highway 59/Highway
90
23,211,646 1,518,349 6.5% 81,411 0.4% 1,599,760 6.9% 58,668 (146,030) 0 550,000
Southwest Far 12,686,309 902,541 7.1% 9,117 0.1% 911,658 7.2% 39,045 231,559 75,300 10,000
Southwest Outer Loop 13,256,970 835,321 6.3% 8,691 0.1% 844,012 6.4% (46,617) 8,905 0 13,198
Sugar Land/Ft Bend
Co
21,459,116 755,628 3.5% 66,204 0.3% 821,832 3.8% (78,603) (4,843) 0 27,640
SOUTHWEST
CORRIDOR TOTAL
70,614,041 4,011,839 5.7% 165,423 0.2% 4,177,262 5.9% (27,507) 89,591 75,300 600,838
Market Summary

5. 5 North American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International
Copyright © 2015 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While
every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No
responsibility is assumed for any inaccuracies. Readers are encouraged to consult their
professional advisors prior to acting on any of the material contained in this report.
Colliers International | Market
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5 North American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International
Copyright © 2018 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While
every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No
responsibility is assumed for any inaccuracies. Readers are encouraged to consult their
professional advisors prior to acting on any of the material contained in this report.
Colliers International | Houston
1233 West Loop South, Suite 900
Houston, Texas 77027
+1 713 222 2111
colliers.com/houston
FOR MORE INFORMATION
Lisa Bridges
Director of Market Research | Houston
+1 713 830 2125
lisa.bridges@colliers.com
Q2 Houston Industrial 2018 Highlights

6. 6 Houston Research & Forecast Report | Q2 2018 | Industrial | Colliers International6
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