Share or view online at colliers.com/houston Houston’s industrial market continues to expand adding 3.4M SF of new inventory in Q1 2019 with an additional 16.2M SF under construction

1. Share or view online at colliers.com/houston
Houston’s industrial market continues to expand adding 3.4M SF of new
inventory in Q1 2019 with an additional 16.2M SF under construction
Research &
Forecast Report
HOUSTON | INDUSTRIAL
Q1 2019
Lisa Bridges Director of Market Research | Houston
Houston’s industrial market continues to expand, adding 3.4M SF
in new inventory in the first quarter. There are 110 buildings with
16.2M SF of space under construction and scheduled to deliver
in 2019 and early 2020. Some of the tenants that have or will
be occupying the new inventory include Grocers Supply, Coca-
Cola, Conn’s HomePlus, PBP | Plastic Bagging & Packaging and
American Furniture Warehouse. Not all of the new construction is
pre-leased which will increase the vacancy rate if not committed
before delivery. The first quarter of 2019 saw an increase in
vacancy, but Houston’s industrial market is healthy and the average
vacancy rate only increased 30 basis points over the quarter from
5.6% to 5.9%.
Houston’s net absorption decreased by almost 1M SF over the
quarter from 2.3M SF to 1.4M SF of positive net absorption. A vast
majority of the leasing activity can be attributed to an expanding
need for manufactured and consumer goods distribution in the
growing Houston metro area.
Houston’s job growth increased by 2.4% over the year, according
to recent data released by the U.S. Bureau of Labor Statistics.
The Houston MSA created 72,600 jobs (not seasonally adjusted)
between February 2018 and February 2019, growing faster than
the U.S. during the same time period. Employment sectors with the
most growth include support activities for mining which grew by
9.0% over the year, durable goods manufacturing which was up by
7.6% and construction which increased by 7.1% over the year.
Summary Statistics
Houston Industrial Market Q1 2018 Q4 2018 Q1 2019
Vacancy Rate 5.1% 5.6% 5.9%
Net Absorption (SF) 3.1M 2.3M 1.4M
New Construction (SF) 2.8M 2.8M 3.4M
Under Construction (SF) 11.4M 14.5M 16.2M
Asking Rents
Per Square Foot Per Year (NNN)
Average $6.86 $7.39 $7.41
Warehouse/Distribution $6.50 $7.09 $7.04
Flex/Service $9.80 $9.21 $9.22
Tech/R&D $9.85 $10.23 $10.47
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%
Houston U.S.
Average Price Per SF
$40
$50
$60
$70
$80
$90
$100
Houston U.S.
Average CAP Rate
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
Houston U.S.
2 Houston Research & Forecast Report | Q1 2019 | Industrial | Colliers International
Sales Activity
Source: Real Capital Analytics Q1 2019
NO. OF PROPERTIES: 42
SALES VOLUME: 322.6M
AVERAGE $/SF: $89
AVERAGE CAP RATE: 6.4%
Job Growth & Unemployment
(not seasonally adjusted)
UNEMPLOYMENT 2/18 2/19
HOUSTON 4.7% 4.2%
TEXAS 4.1% 3.9%
U.S. 4.4% 4.1%
Vacancy & Availability
On an annual basis, Houston’s average industrial vacancy increased 80 basis
points from 5.1% in Q1 2018 to 5.9% in Q1 2019. It rose 30 basis points on a
quarterly basis from 5.6% in Q4 2018. At the end of the first quarter, Houston
had 32.4 million SF of vacant industrial space for direct lease and an additional
1.6 million SF of vacant space for sublease. Among the major industrial corridors,
the South Corridor had the lowest vacancy rate at 3.5%, followed by the Inner
Loop Corridor at 4.7%. The submarket with the largest percentage of vacant
space is the Northwest Corridor which had a 7.2% vacancy rate and the largest
amount of new inventory, 1.7M SF, delivered during the first quarter.
Absorption & Demand
Houston’s industrial market posted 1.4M SF of positive net absorption in the first
quarter, a 59% decrease from the 2.3M SF posted in the previous quarter. Some
of the tenants that relocated or expanded include Plantgistix, AIV Inc, Hailiang
Group (USA, Inc), Houston Fruitland, Inc, Smart Warehousing LLC and Box Gang
Manufacturing.
The majority of first quarter positive net absorption occurred in the Southeast
Corridor which recorded 724,000 SF of space absorbed. The North, Inner Loop,
South and Southwest Corridors also recorded positive net absorption in the first
quarter of 2019. The submarket with the highest amount of negative absorption
was the Northwest Corridor, which posted 504,000 SF of negative net absorption
due to new inventory delivering with vacancies.
Rental Rates
According to CoStar, our data service provider, Houston’s citywide average
quoted industrial rental rate for all product types increased from $7.39 per SF
NNN to $7.41 per SF NNN over the quarter. According to Colliers’ internal data,
actual lease transactions are in the $4.68 – $5.16 per SF NNN range for newer
bulk industrial spaces, while flex rates range from $7.20 to $10.80 per SF NNN
depending on the existing improvements or the allowance provided for tenant
improvements, and the age and location of the property.
According to CoStar, the average quoted NNN rental rates by property type are as
follows: $7.04 per SF for Warehouse Distribution space; $9.22 per SF for Flex/
Service space; with Tech/R&D space averaging $10.47 per SF.
JOB GROWTH
Annual
Change
# of Jobs
Added
HOUSTON 2.4% 72.6K
TEXAS 2.2% 273.2K
U.S. 1.7% 2.5M

3. 3 Houston Research & Forecast Report | Q1 2019 | Industrial | Colliers International33
Q1 2019 Industrial Lease Transactions over 50,000 SF
BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE
Grand National Business Park Hwy 290/Tomball Pky 770,640 Home Depot1,3
Jan-19
AmeriPort Building 9 East-Southeast Far 337,040 Plantgistix1
Jan-19
Fallbrook Pines Business Park Building 5 Hwy 290/Tomball Pky 134,900 Norlyn Enterprises1
Mar-19
Port Crossing Commerce Center Bldg B-2 East-Southeast Far 127,526 MCR Global (US) Inc3
Jan-19
4732 Darien St Northeast Inner Loop 118,578 Galberath1
Feb-19
22008 N Berwick Dr Northwest Outliers 110,000 Inhance Technologies1
Feb-19
Freeport SW Business Park Hwy 59/Hwy 90 78,465 International Standard Valve Inc1
Jan-19
12900 W Airport Blvd Sugar Land 70,170 Scope Imports2
Mar-19
Leasing Activity
According to CoStar Property, our data source, Houston’s industrial leasing activity decreased over the quarter from 7.5M SF in Q4 2018
to 4.6M SF in Q1 2019. The actual Q1 2019 leasing activity is likely higher due to leases that occurred, but haven’t been made public at the
time this report was published. Most of the Q1 2019 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 Q1 2019.
1
Direct/New
2
Sublease
Under Construction
Currently, 16.2M SF of industrial space is under construction in Houston and 30% of this space is pre-leased. The largest project under
construction is a 1,000,000-SF BTS distribution warehouse for The Coca-Cola Company which is being developed by Hines. The majority
of projects under construction are located in the Southeast and North Corridor submarkets. Below is a partial list of buildings currently
under construction.
Q1 2019 Industrial Under Construction - 250,000 SF or greater
BUSINESS PARK/ADDRESS SUBMARKET RBA % LEASED DEVELOPER/CONTRACTOR
DELIVERY
DATE
BUILDING DESCRIPTION
Fallbrook Dr North Fwy/Tomball Pky 1,000,000 100.0% Hines Feb-19 Coca-Cola Bottling/Distribution
10629 Red Bluff Rd East-Southeast Far 784,000 0.0% Stream Realty Partners, LP Jan-20 Spec Distribution Warehouse
14803 Woodham Dr North Hardy Toll Road 727,600 100.0% Liberty Property Trust Apr-19 Grocers Supply Distribution
Hwy 59 & Will Clayton Pky Northeast Hwy 90 685,400 0.0% USAA Real Estate Company Jul-19 Spec Distribution Warehouse
1401 N Rankin Rd North Hardy Toll Road 656,658 100.0% Liberty Property Trust Jun-19 Conn’s, Inc. Distribution
Cypress Slough Dr North Hardy Toll Road 557,280 0%.0 Davis Commercial Development Nov-19 4 Spec Distribution Warehouses
McCarty St & Plummer St Southeast Outer Loop 526,094 0.0% NorthPoint Development Aug-19 Spec Warehouse
5055 E Grand Parkway S East-Southeast Far 519,224 100.0% TrammellCrowCompany Jun-19 Plastic Bagging & Packaging
611 S Cravens Rd Southwest Far 477,355 0.0% Ridge Development May-19 Spec Distribution Warehouse
4600 Underwood Rd East-Southeast Far 404,160 0.0% Triten Real Estate Partners Apr-19 Spec Distribution Warehouse
21000 block of Gulf Fwy East-Southeast Far 355,000 100.0% American Furniture Warehouse Sep-19 American Furniture Warehouse
631 Buffalo Lakes Dr Southwest Far 352,769 44.3% TrammellCrowCompany Jun-19 Spec Warehouse
30 Esplanade Blvd North Outer Loop 351,400 0.0% IDI Logistics Oct-19 Spec Distribution Warehouse
Hwy 99 & Fisher Rd East-Southeast Far 349,440 0.0% Clay Development & Construction Jan-20 Spec Distribution Warehouse
Hwy 99 & Fisher Rd East-Southeast Far 341,120 0.0% Clay Development & Construction Aug-19 Spec Distribution Warehouse
8221 Volta Dr North Hardy Toll Road 337,700 0.0% Duke Realty Corporation May-19 Spec Distribution Warehouse
I-10 & Thompson Rd East-Southeast Far 260,148 0.0% Investment & Development
Ventures, LLC
Apr-19 Spec Distribution Warehouse
1901 Wharton Weems Blvd East-Southeast Far 252,924 0.2% Liberty Property Trust Jun-19 Spec Distribution Warehouse
10619 Red Bluff Rd East-Southeast Far 251,680 0.0% Stream Realty Partners, LP Jan-20 Spec Distribution Warehouse
3
Pre-lease in BTS or building under construction
4
Colliers International Transaction

4. 4 Houston Research & Forecast Report | Q1 2019 | Industrial | Colliers International
Q1 2019 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
1Q19 NET
ABSORP-
TION
4Q18 NET
ABSORP-
TION
1Q19
COMPLE-
TIONS
SF UNDER
CONSTRUC-
TION
Houston Total 578,799,386 32,428,358 5.6% 1,605,994 0.3% 34,034,352 5.9% 1,447,295 2,315,803 3,402,139 16,252,556
CBD-NW Inner Loop 11,158,595 574,204 5.1% 4,904 0.0% 579,108 5.2% (9,747) 53,837 - -
Downtown 30,922,898 1,220,839 3.9% 124,961 0.4% 1,345,800 4.4% 241,219 (288,169) - -
North Inner Loop 4,881,392 387,915 7.9% 0 0.0% 387,915 7.9% 33,081 (45,744) - -
Southwest Inner Loop 6,935,961 246,963 3.6% 0 0.0% 246,963 3.6% (18,719) 87,197 - -
INNER LOOP
CORRIDOR TOTAL
53,898,846 2,429,921 4.5% 129,865 0.2% 2,559,786 4.7% 245,834 (192,879) - -
North Fwy/Tomball
Pky
25,875,308 2,004,314 7.7% 186,765 0.7% 2,191,079 8.5% 393,391 (27,180) 173,270 2,607,907
North Hardy Toll Rd 35,436,753 1,945,768 5.5% 91,830 0.3% 2,037,598 5.7% (42,011) 276,697 159,000 2,333,015
North Outer Loop 22,229,912 723,029 3.3% 32,235 0.1% 755,264 3.4% 181,197 (100,740) - 351,400
The Woodlands/
Conroe
17,985,035 1,459,720 8.1% 88,249 0.5% 1,547,969 8.6% 102,425 (184,683) 18,500 149,245
NORTH CORRIDOR
TOTAL
101,527,008 6,132,831 6.0% 399,079 0.4% 6,531,910 6.4% 635,002 (35,906) 350,770 5,441,567
Northeast Hwy 321 1,502,426 4,950 0.3% 0 0.0% 4,950 0.3% (3,750) 5,050 - -
Northeast Hwy 90 19,076,672 971,516 5.1% 0 0.0% 971,516 5.1% 49,652 9,867 438,000 835,200
Northeast I-10 4,091,145 264,314 6.5% - 0.0% 264,314 6.5% 481 (188,628) - -
Northeast Inner Loop 11,995,625 665,312 5.5% 49,500 0.4% 714,812 6.0% (77,676) (16,020) - -
NORTHEAST
CORRIDOR TOTAL
36,665,868 1,906,092 5.2% 49,500 0.1% 1,955,592 5.3% (31,293) (189,731) 438,000 835,200
Hwy 290/Tomball Pky 23,822,596 2,294,316 9.6% 149,795 0.6% 2,444,111 10.3% (203,537) 354,660 680,073 369,438
Northwest Hwy 6 11,713,649 1,022,069 8.7% 0 0.0% 1,022,069 8.7% 36,417 (167,082) 24,500 160,951
Northwest Inner Loop 61,222,270 3,984,471 6.5% 214,818 0.4% 4,199,289 6.9% (271,149) (64,370) 84,000 22,166
Northwest Near 18,407,060 980,191 5.3% 68,348 0.4% 1,048,539 5.7% (237,566) 155,595 - -
Northwest Outliers 25,533,249 1,867,566 7.3% 36,348 0.1% 1,903,914 7.5% 333,052 884,340 499,754 1,502,320
West Outer Loop 26,144,703 1,369,256 5.2% 14,000 0.1% 1,383,256 5.3% (161,275) 538,281 25,172 -
NORTHWEST
CORRIDOR TOTAL
166,843,527 11,517,869 6.9% 483,309 0.3% 12,001,178 7.2% (504,058) 1,701,424 1,313,499 2,054,875
South Highway 35 35,588,205 1,076,479 3.0% 69,200 0.2% 1,145,679 3.2% 171,309 3,537 17,000 30,000
South Inner Loop 12,516,555 533,899 4.3% 4,000 0.0% 537,899 4.3% 16,127 (25,738) - -
SOUTH CORRIDOR
TOTAL
48,104,760 1,610,378 3.3% 73,200 0.2% 1,683,578 3.5% 187,436 (22,201) 17,000 30,000
East I-10 Outer Loop 13,693,689 457,787 3.3% 0 0.0% 457,787 3.3% (125,787) (6,832) - -
East-Southeast Far 69,006,285 4,412,161 6.4% 385,025 0.6% 4,797,186 7.0% 998,945 796,620 1,252,830 5,403,495
Southeast Outer Loop 17,367,261 577,940 3.3% 17,750 0.1% 595,690 3.4% (148,974) (33,512) - 526,094
SOUTHEAST
CORRIDOR TOTAL
100,067,235 5,447,888 5.4% 402,775 0.4% 5,850,663 5.8% 724,184 756,276 1,252,830 5,929,589
Highway 59/Highway
90
23,590,820 918,384 3.9% 12,746 0.1% 931,130 3.9% 245,098 131,500 - 203,268
Southwest Far 12,997,722 763,780 5.9% 7,803 0.1% 771,583 5.9% 128,174 92,726 - 1,558,057
Southwest Outer Loop 13,190,661 837,064 6.3% 22,843 0.2% 859,907 6.5% (51,926) 31,460 - -
Sugar Land/Ft Bend
Co
21,912,939 864,151 3.9% 24,874 0.1% 889,025 4.1% (131,156) 43,134 30,040 200,000
SOUTHWEST
CORRIDOR TOTAL
71,692,142 3,383,379 4.7% 68,266 0.1% 3,451,645 4.8% 190,190 298,820 30,040 1,961,325
Market Summary

5. TOTAL INDUSTRIAL
INVENTORY 578.8M SF
OTHER: 6%
SERVICE/FLEX 2%
R&D: 1%
DISTRIBUTION: 14%
WAREHOUSE: 61%
MANUFACTURING: 16%
8.1M SF
9.4M SF
7.5M SF
4.6M SF
5.9% 3.4M SF $7.41/SF
VACANCY UNDER CONSTRUCTION AVG. RENTAL RATE
Q12019
9.3M SFQ1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
50.5%
ANNUAL
DECREASE
LEASING
ACTIVITY
21.4%
ANNUAL
INCREASE
NEW CONSTRUCTION
(DELIVERIES)
Q1 2018
Q2 2018 2.2M SF
Q3 2018 4.5M SF
Q4 2018 2.8M SF
Q1 2019 3.4 SF
2.8M SF
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 © 2019 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
Q1 Houston Industrial 2019 Highlights

6. 6 Houston Research & Forecast Report | Q1 2019 | Industrial | Colliers International6
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