Resilience. Continued growth. These are the characteristics of the Houston industrial distribution market – REJournals

Resilience and sustained growth. That’s what Lee & Associates says the Houston industrial distribution market demonstrated during a challenging first quarter of 2024.

In fact, the Houston market bucked the national trend, seeing its industrial distribution vacancy rate decline during the first three months of 2024. That’s unusual today, when many markets across the country saw their industrial vacancy rates increase at the start of the year.

That’s the positive news from the first quarter report on the Houston industrial distribution market released earlier this month by Lee & Associates.

What explains the resilience of the Houston market, even during difficult times? Lee & Associates highlighted Houston’s strong transportation and distribution infrastructure as one reason for the industrial distribution market’s continued resilience.

The Houston market saw a slight decrease in new direct space leases for facilities larger than 350,000 square feet. But tenants needing more than 500,000 square feet have been active enough to make up for that.

Overall, the Houston industrial distribution market saw more than 5.8 million square feet of leasing activity.

Notable leases include Hinton Lumber renewing its 450,000 square feet at Independence Logistics.

Park and Essendant is renewing 240,000 square feet at 7677 Pinemont Drive.

The Northwest submarket outperformed all other submarkets with 2.3 million square feet of new leases during the first quarter of 2024, followed by the Northeast and North submarkets with 1, respectively. .1 million square feet and 939,690 square feet.

Large occupiers renting more than 500,000 square feet made up 42.7% of the market, while tenants renting between 250,000 and 499,999 square feet made up 12.3% of the market.

Graphic courtesy of Lee & Associates.

Tenants include Grainger for 1.2 million square feet at Roberts Ranch Business Park in the Northwest and United Airlines for 509,600 square feet at 59 Logistics Center in the Northeast submarkets.

There have been headwinds in this market, however. Lee & Associates reported that net absorption fell to just over 2.33 million square feet in the first quarter. This is down from more than 4.29 million square feet of net absorption in the Houston industrial distribution market in Q4 2023.

Most of the occupancy gains during the first quarter of 2024 occurred in the Northwest, Northeast, Southeast, and Far West submarkets, where more than 81.9% Houston’s collective net gains were recorded.

Almost all of the positive absorption recorded in the market was driven by newly delivered products, as well as pre-leasing activity.

The number of new deliveries has also decreased. Lee & Associates reported that the Houston market saw the delivery of more than 3.94 million square feet of new industrial distribution space in the fourth quarter. This is down from the much higher 9.26 million square feet of deliveries in the previous quarter.

The Southeast market has proven to be a significant contributor to projects under construction, particularly those over 350,000 square feet.

Although the delivery of new inventory saw a temporary slowdown earlier this year, Lee & Associates said it expects the industrial distribution market to rebound as ongoing construction projects near completion. completed by the end of 2024.

CE Erwin III, director of Lee & Associates Houston’s industrial division, said the Houston area continues to attract tenants looking for efficient distribution centers. He said this should help ensure the continued growth of the region’s industrial real estate sector.