Quarterly Market Report

Transcription

1 HOUSTON INDUSTRIAL APRIL EXECUTIVE SUMMARY Industrial Market Continued low oil prices have had a marginal impact on Houston s industrial market. With a reduced pipeline of new projects and strong demand from e-commerce tenants such as Amazon and FedEx, the Houston industrial real estate market is reasonably healthy. The vacancy rate for the metro area rose to 5.7% in, an increase of 40 basis points quarter-over-quarter and 50 basis points year-over-year. In line with broker sentiment, available sublease space for all industrial property types is down 15.8% since Q In addition, net absorption stood at positive 1,233,828 sq. ft. as of the quarter s end this on the heels of the more than.3 million sq. ft. of positive absorption recorded in 201 (4 million sq. ft. of which Daikin was responsible for). Following a year rife with speculation around the energy market s recovery and uncertainty over the new presidential administration, Houston s industrial market is primed for a reprieve in. Houston Economy Per the U.S. Census Bureau, the Houston metro area reported 125,005 new residents from July 1,, to July 1, 201, and Houston ranks fifth in the most populous metro areas in the country as of July 1, 201. As for the Houston job market, the unemployment rate (not seasonally adjusted) ticked up to 5.9% in February, up from 5.7% in January and above 4.8% a year ago. Houston remains above the Texas rate of 5.1% and the U.S. rate of 4.9%. Job growth in Houston increased by,200 jobs during the month in February. Government, mainly led by colleges and school districts, had the largest monthly gain of 8,400 jobs. Trade, Transportation, and Utilities had the largest drop, losing 7,800 jobs. The Greater Houston Partnership is forecasting one more soft year in (albeit with an encouraging job forecast of adding as many as 30,000 new jobs this year), and expects that by 2018 the market should be trending upward. Supply & Demand Millions Total Net Absorption Total Vacant (%) Market Indicators Current Prior Quarter Q Net Absorption (sq. ft.) 1,233,828 1,833,112 21,24 Vacancy (%) Availabiity (%) Avg Asking Gross Rent ($) Construction (sq. ft.) 4,495,393 7,157,892 14,381,751 Deliveries (sq. ft.) 2,20,883 3,342,514 2,, Year Ago 201 Inventory (sq. ft.) 538,283,1 534,847, ,72,13 HOUSTON AUSTIN SAN ANTONIO

2 HOUSTON INDUSTRIAL Net Absorption Houston ended the first quarter of with positive 1,233,828 sq. ft. of net absorption. Flex space represented negative 39,3 sq. ft. of that total, manufacturing space was responsible for negative 391,838 sq. ft., and warehouse/distribution space closed the quarter with positive 2,25,2 sq. ft. The Southeast Warehouse/Distribution submarket was almost single-handedly responsible for the overall positive absorption in the Houston industrial market, and remains center stage in the region due to petrochemicals and trade activity. Demand is especially high for properties that have rail-served distribution space near the Port of Houston. In the first quarter of, the Southeast submarket was responsible for 34% of absorption gains and 23% of total leasing activity in Houston. The major move-ins contributing to the quarterly gains include 495,42 sq. ft of space taken by IKEA in Cedar Port Distribution Park; more than 0,000 sq. ft. of space occupied at Ameriport Industrial Park; and 145,37 sq. ft. of space absorbed at Eastport 8 on E. Interstate. Availability and Vacancy Houston s industrial availability rate, which measures the total amount of space being marketed for lease, increased by 20 basis points quarter-over-quarter, from 9.3% to 9.5%. By the end of the first quarter, Houston had 51. million sq. ft. of available industrial space. Among the major property types, Warehouse/ Distribution ended at 9.5% availability, Manufacturing closed at 8.1% availability, and Flex space finished at 12.% availability. Available sublease space dipped from a peak of almost 5.4 million sq. ft. as of fourth quarter 201, down to 4.5 million sq. ft. by the close of first quarter. Across all industrial property types, available sublease space was down 15.8% quarterover-quarter. The North submarket continued to have both the highest overall vacancy and availability rates, at 9.1% and 13.1%, respectively. The higher availability is due in part to an ongoing large supply of institutional warehouse and distribution space at 13.3%. Move-outs affecting net absorption in the North submarket included Ozburn-Hessey Logistics vacating 300,000 sq. ft. at Bayport North Distribution Center in Pasadena and Largo moving out of 200,220 sq. ft. at Clay-Campbell Business Park, in the Northwest submarket. Net Absorption by Industrial Property Type Historical Vacancy & Availability Flex Manufacturing Warehouse/Distribution Select Sale & Lease Transactions Sale/Buyer Building/Address SF Submarket HRUS Underwood, LLC Prologis-Exchange W by NW LLC Underwood Distribution Center Portfolio 2,15,200 Southeast West by Northwest Industrial Portfolio 809,19 Northwest TIAA-CREF Investment Management Fallbrook 1 & 2 Portfolio 93,400 Northwest CalPERS Beltway Crossing Northwest Portfolio 3,882 Northwest Lease/Tenant Building/Address Type/Deal SF Submarket Gulf Winds Ford Motor Company Exel Total Vacant (%) Total Available (%) Greens Port Industrial Warehouse Alamo Crossing Center Citypark East Industrial Renewal 303,281 Northeast Renewal 250,000 Northwest Renewal 17, Energy Corridor McLane Group Interstate Commerce Center New 1,785 North 2

3 HOUSTON INDUSTRIAL Asking Rent The industrial market saw overall average asking rates rise $0.11 per sq. ft. quarter-over-quarter to finish at $7.02 per sq. ft. at the end of. Rates for industrial real estate throughout Houston show that the Southwest submarket has the highest prices for industrial space at $8.02. The average rate for Flex space is highest in the Southwest submarket, at $14.33 per sq. ft.; Manufacturing rates peak in the southwest at $.89; and Warehouse/ Distribution space is at its pinnacle in the Northwest at $7.71. The Northwest s top-tier rental rates are no surprise the submarket is the traditional core of industrial development, with more than 152 million sq. ft. of the metro s 538 million sq. ft. of industrial space. Southwest Houston s vicinity to downtown and the Medical Center is said to be driving demand, as escalated prices may be pushing industrial development to the North and Northwest. Construction & Deliveries There is currently about 4.5 million sq. ft. under construction in the Houston industrial market, with about 3% of that space available for lease. The Southeast submarket has the most space in the pipeline at close to 1.5 million sq. ft., including Bayport North Industrial Park Buildings I-1, I-2 and I-3 underway with more than 13,000 sq. ft. and no pre-leased space. The Northwest submarket comes in second with about 1.3 million sq. ft. as Pepperl + Fuchs 1,000-sq.-ft. distribution building nears completion at 500 Cane Island Parkway in Katy; and FedEx works towards a completion date of August for its 800,000-sq.-ft. warehouse at 8787 Grand Parkway in Cypress. During the first quarter of there were 2 buildings delivered to the Houston industrial market totaling 2.2 million sq. ft., all of which was Warehouse/Distribution except for 0,000 sq. ft. of flex R&D space at Dow Chemical in Lake Jackson. Leasing Activity Overall leasing activity was down quarter-overquarter at almost 3.5 million sq. ft. during from 5.0 million sq. ft., and year-over-year from.7 million sq. ft. The average sq. ft. leased per quarter during the last ten years is approximately.1 million sq. ft. Notable tenants that signed lease agreements this year include Gulf Winds, with a 303,281-sq.-ft. renewal at Greens Port Industrial in the Northeast submarket; Ford Motor Company, taking 250,000 sq. ft. at Alamo Crossing Center in the Northwest; and Exel renewing 17,753 sq. ft. of space at Citypark East Industrial in the Energy Corridor. Historical Gross Average Asking Rent $15 $13 $ $8 $5 Overall Flex Manufacturing Warehouse/Distribution $3 Under Construction Over 0,000 SF Total Pre-Leased Space Pinto Bus. Park-Amazon Fulfillment Center FedEx Cedar Port Dist.-Building II Bayport North Industrial Park Bldg I-2 Bayport North Industrial Park Bldg I-3 FloWorks International 170 S 1th St 22 Spring Cypress Rd Beltway SW Business Park Cane Island Pky-Pepperl + Fuchs Bayport North Industrial Park Bldg I-1 The Dow Chemical - Central Plant & Top Submarkets by Leasing Activity CBD North Northeast Northwest Southeast South Southwest Total Available Space Flex Manufacturing Warehouse/Distribution ,000 1,200 3

4 HOUSTON INDUSTRIAL Submarket Stats Submarket Inventory Net Absorption YTD Net Absorpiton Total Vacancy (%) Total Availability (%) Deliveries YTD Deliveries Under Construction Overall Avg Asking Rent ($/PSF) CBD Total 54,81,230-94,381-94, Flex 3,253,284-34,043-34, Manufacturing,04,9-537, , Warehouse/Distribution 41,380, ,3-122, North Total 92,194, , , ,415 84,415 1,184, Flex 9,8,580-9,7-9, , Manufacturing 12,0,04-1,12-1, Warehouse/Distribution 9,727,8 8,84 8, ,415 84,415 1,04, Northeast Total 34,5,24 193, , ,088 20, Flex 44,715-11,79-11, Manufacturing,28,17 145,94 145, Warehouse/Distribution 27,435,733,21, ,088 20, Northwest Total 152,342,024-32,050-32, , ,522 1,271, 7.24 Flex 1,4,95-13,421-13, , Manufacturing 23,00,309 3,384 3, , Warehouse/Distribution 112,821,750-22,013-22, , ,522 1,225, Southeast Total 89,572,275 1,743,957 1,743, ,557,58 1,557,58 1,477, Flex 2,385,09-48,280-48, , Manufacturing 1,243,378-3,020-3, Warehouse/Distribution 70,943,288 1,795,257 1,795, ,557,58 1,557,58 1,434,341.5 South Total 4,12,001,724, ,800 4, , Flex 2,0, ,2-182, Manufacturing 8,988,73 74,4 74, Warehouse/Distribution 35,072,7 17,524 17, ,800 4, ,2 5.4 Southwest Total 8,820,80 5,24 5, , , , Flex 12,315, ,7-239, ,000 0, Manufacturing,980,24 2,208 2, Warehouse/Distribution 49,524, , , , , , Houston Market Total 538,283,142 1,233,828 1,233, ,20,883 2,20,883 4,495, Flex 4,821,48-39,3-39, ,000 0, , Manufacturing 84,554, , , , Warehouse/Distribution 40,,843 2,25,2 2,25, ,,883 2,,883 4,28,

5 HOUSTON INDUSTRIAL Houston Industrial Submarkets 1. CBD 2. North 3. Northeast 4. Northwest 5. Southeast. South 7. Southwest 2 2 West Park Houston Tollway Sam Houston Tollway Westheimer Fo rt Bend Tollway Information and data within this report were obtained from sources deemed to be reliable. No warranty or representation is made to guarantee its accuracy. HOUSTON INDUSTRIAL APRIL NAI Partners Houston Office West Loop South, Suite 500 Houston, TX tel Leta Wauson Director of Research leta.wauson@naipartners.com tel