TEXAS SNAPSHOT, SEPTEMBER 2007

Houston Industrial Market

Ginder

The industrial market in Houston continues to be very, very strong due to the energy-based economy and the service industry it supports, according to Bill Ginder, vice president of commercial client services for Caldwell Companies in Houston. “Lease rates are going up and leasing concessions are going away, which lends itself to a landlord’s market,” Ginder says. “However, this will change if too much speculative product is built too quickly.”

There is a great deal of speculative product being developed in Houston, particularly in the North (Intercontinental Airport area) and East (Ship Channel/Bayport area) submarkets of Houston, “The majority of industrial developments are taking place in these areas because of the cost of land, lack of available product, low vacancy rates in existing product, and the development of port container yards on the east side,” Ginder says.

Various developers are building or have plans to build more than 4.5 million square feet of dock-high distribution space in the North submarket, which currently contains 7.5 million square feet of product. “I believe — while some of this product will be quickly absorbed — there is a danger that the area will be overbuilt, forcing landlords to be aggressive in their rates and give lease concessions,” Ginder says. “The same holds true for the East submarket where large big box, dock-high distribution buildings are being developed on a purely speculative basis.”

Verde Development, IDI Development and Mountain West Development are a few developers that are new to the Houston industrial market, which currently boasts a vacancy rate between 5 and 7 percent.

While no major tenant is absorbing a majority of industrial space in Houston, owners are trying to attract distributors, oil field service companies, and logistics companies to their buildings. “That is predominantly where the growth is,” Ginder says.

In the future, the ship channel and Intercontinental areas are the ones to watch, if in fact, the areas are being overdeveloped or if there is too much product, according to Ginder. “Another submarket to watch is the warehousing around the Grand Parkway,” he says.

— Bill Ginder is vice president of commercial client services for Caldwell Companies in Houston.


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