Houston Industrial Market Report 1Q 2010

8/9/2019 Houston Industrial Market Report 1Q 2010

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COLLIERS INTERNATIONAL | HOUSTON INDUSTRIAL MARKET | 1ST QUARTER 2010

HOUSTON | 1ST QUARTER | 2010

Our Knowledgeis your Pro


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Houston Industrial Market Posts Strong Absorption Gains

Houstons industrial market began 2010 on a strong note with positive net absorption gains of 1.8M


MARKET INDICATORS

SF, the highest level recorded since the third quarter 2008. Citywide, 93.4% occupancy in the first

quarter marked a 20 basis points (bps) increase from the previous quarter. On the leasing front, six

tenants signed leases over 100,000 SF in the first quarter, with newer, state-of-the-art buildings

continuing to draw the most tenant activity. After only five months since opening, Panattonis

Airtex Industrial Center reached 90% occupancy, with the project receiving a strong boost from

Ashley Furnitures 303,000-SF lease, the largest year-to-date industrial lease citywide. By way of

incentivizing tenants to lease space in the coming year, landlords once again reduced quoted rental

1Q-09 1Q-10

QUARTERLY NET ABSORPTION

590,146 SF 1,843,261 SF

EAR-TO-DATE NET ABSORPTION

590,146 SF 1,843,261

rates, w i e a so increasing ease concession pac ages, or a pro uct types. T e overa in ustria

$4.88 NNN per SF rental rate decreased 11.3% from this time last year, but only 1.4% from the

previous quarter, suggesting rates will likely reach bottom this year.

Looking forward, new industrial deliveries are not expected to impact occupancy levels in 2010,

with only 202,000 SF under construction at the end of the first quarter, compared to 3.6M SF

underway at this time last year. The largest project under construction is Carson Companies

CITYWIDE AVERAGE

QUOTED RENTAL RATE NNN

$5.50/SF $4.88/SF

CITYWIDE AVERAGE

INDUSTRIAL VACANCY

6.8% 6.6%

ortwa istri ution enter ase ortwa treet , sc e u e to a just un er ,

SF to the Northeast Inner Loop by August 2010. Speculative industrial construction is not expected

to resume in Houston before 2012.

Overall, Houstons industrial market and economy remain among the strongest in the U.S. InMarch 2010, Forbes ranked Houston fourth among U.S. major metros where the recession is

easing, due primarily to a solid diversified base of growth industries. In April 2010, IHS Global

QUARTERLY DELIVERIES

3,458,444 SF 1,423,176 SF

YEAR-TO-DATE DELIVERIES

3,458,444 SF 1,423,176 SF

UNDER CONSTRUCTION

ns g s orecas an . ncrease n s pp ng vo ume, an a ncrease n ra e rom s a o

North America. Houston is well-positioned to benefit from increased trade and rising oil prices as

global economic markets continue strengthening through this year. With commercial real estate a

lagging indicator, however, the industrial markets sustained recovery is not expected before 2011.

3,643,186 SF 202,918 SF

OB GROWTH & UNEMPLOYMENT

8%5,000,000

ABSORPTION, NEW SUPPLY & VACANCY RATESFEB. 09 FEB. 10

USTON -3.1% job growth

4%

5%

6%

7%

1,000,000

2,000,000

3,000,000

4,000,000

,

EMPLOYMENT 6.7% 8.5%

XAS-2.3% job growth

241,300 jobs lost


2%

3%

-1,000,000

0

ABSORPTION NEW SUPPLY VACANCY

Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10

-2.5% job growth

3.2M jobs lost



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Occupancy & Availability

Houstons industrial market averaged 93.4%

Absorption & Demand

Houstons industrial market posted stron2010 INDUSTRIAL LEASES

,

points (bps) higher than the previous

quarter, and only 10 bps below the 93.5%

recorded at this time last year. Despite the

dampening effects of the economicslowdown that began in late 2008,

Houstons industrial market has sustained

the healthiest occu anc of all commercial

.

first quarter, the highest quarterly

absorption gains since the third quarter

2008, and more than double the 590,14

SF of gains recorded in the first quarter year. With the exception of the second

quarter last year, Houstons industrial

market has consistentl recorded ositiv

Ashley Furniture*

Airtex Industrial Center

Mar-10 303,000 SF

Frontier Logistics3005 State Highway 225

Feb-10 300,000 SF

property sectors, consistently remaining

above 90% for all major corridors.

At the end of the first quarter, Houston

posted 32.3 million SF of vacant industrial

space citywide. Among the major industrial

corridors, the Northwest held the largest

net absorption throughout the current

economic downturn that began in late

2008, a strong testament to the local

markets stability and resiliency.

Among Houstons major industrial

corridors, the Northwest and Southwest

n us r es

Lockwood Distribution Center

Jan-10 154,114 SF

Charming Charlie

Beltway Crossing Business Park

Jan-10 141,440 SF

Prefco Cor oration** amount o vacant space wit . mi ion

(6.4% vacancy), followed by the Southeast

with 7.3 million SF vacant (8.8% vacancy),

the North with 5.3 million SF vacant (7.8%

vacancy), and the Southwest with 4.8 million

SF vacant (7.2% vacancy).

Developers have responded to current

poste t e ig est positive net a sorptio

in the first quarter with 1.5 million SF a

1.4 million SF of positive gains,

respectively. In contrast, only two marke

areas recorded negative net absorption in

the first quarter, the Southeast (997,906

SF) and Inner Loop (157,658 SF).

West Loop Business ParkMar-10 104,975 SF

A-International Distribution

Bayport North Distribution Center

Jan-10 100,000 SF

GAC Marine and Energy

market conditions by halting all major

speculative industrial construction projects

in Houston, leaving only 202,918 SF in the

construction pipeline at the end of the first

quarter. More than half of this total isslated for delivery in the Northeast Inner

Loop adding 148,793 SF to the submarket

Major tenant move-ins contributing to n

absorption gains in the first quarter

included Jakes Finer Foods 180,000-SF

lease at 13400 Hollister (Northwest);

CADECO Industries 154,114-SF lease a1060 Lockwood (Inner Loop); and

Charming Charlies 141,440-SF lease at

Verde Central Green Corporate Center

Mar-10 64,462 SF

Professional Packaging Systems

Beltway Crossing Business Park

Feb-10 58,240 SF

Pipestream, Inc.

by the end of this year. With healthy job

growth not expected before 2011,

speculative construction is not likely to

resume in Houston before 2012.

Rental Rates

13323 S. Gessner Road (Southwest).

Leasing

Houstons industrial market recorded six

leases over 100,000 SF in the first quarte

2010 with newer state-of-the art facilitie

6955 High Life Drive

Feb-10 56,155 SF

Velocity Express*

Airtex Industrial Center

Feb-10 54,000 SF

*Colliers International transaction

Houstons average quoted industrial rental

rates stood at $4.88 NNN per SF in the first

quarter, down 1.4% from the previous

quarter. Although rental rates continued to

post double-digit deceases on an annual

basis, quarterly rental rate decreases slowed

with warehouse distribution space

attracting the most tenant activity. This

was even more significant considering

Houstons industrial leasing activity

reached 3.4 million SF in the first quarte

compared to 5.2 million SF recorded in

same quarter last year. Overall, stable,

credit-strong tenants seeking large blocks

enewa

decreasing 2.0% to $4.90 NNN per SF; bulk

space decreasing 7.2% to $3.98 NNN per

SF; and flex space decreasing 1.0% to $7.92

NNN per SF.

space will continue to benefit from curre

market conditions this year. For a select

list of Houstons top industrial leases to

date, please see the column at left.Airtex Industrial Center

North Corridor


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Sales Activity

Houston industrial investment activityUSTON INDUSTRIAL INVESTMENT SALES TA Associates Realty acquired Eastport

Industrial Park, a five- ro ert industria

first quarter 2010 sales volume reaching

$4.7M with a combined total of 2.8 MSF

and a $70 price per SF average. Although

industrial properties less than 50,000 SFcomprised the majority of year-to-date

transactions, more significant Q1 sales

included:

ear- o- a e

Total volume: $4.7M

of transactions: 46

Total SF: 2,915,005

Price/SF: $70

Average Cap: 10.0%

complex with a combined 642,718-SF f

an undisclosed amount from UBS Realt

Investors. Four of the properties were10

leased at time of sale.

The Carson Companies acquired the

96,250-SF industrial building located

Sysco Corporation acquired the 669,102-SF

24500 Northwest Freeway distribution

warehouse from Unilev Capital

Corporation for an undisclosed amount.

The former Hewlett-Packard facility will be

100% occupied by owner-user Sysco.

Source: Costar Comps 19220 Kenswick Drive for an undisclose

amount from AMB Property Corporatio

Completed in January 2010, the propert

100% leased to Forward Air.

Monmouth Real Estate Investment

Corporation acquired the 91,295-SF

The Houston Food Bank acquired the

442,000-SF 530 Portwall industrial building

from Sysco Corporation for approximately

$16.7M in an owner-user sale.

HOUSTON INDUSTRIAL MARKET SUMMARY

Sysco Corporation

24500 Northwest Freeway

Center Boulevard in Central Green

Business Park for $8.1M. Built in 2005

the property is leased to National Oilwe

DHT through 2022.

Direct Sublet Total

Market Rentable Area

Direct

Vacant SF

Vacancy

Rate

Sublet

Vacant SF

Vacancy

Rate

Total

Vacant SF

Vacancy

Rate

1st Qtr Net

Absorption

YTD Net

Absorption

1st Qtr

Completions YTD Completions

SF Under

Construction

Greater Houston Total 485,894,664 31,455,806 6.5% 826,760 0.2% 32,282,566 6.6% 1,843,261 1,843,261 1,423,176 1,423,176 202,91

NW Inner Loop 12,836,805 912,767 7.1% 14,400 0.1% 927,167 7.2% (107,608) (107,608) - -

CBD 34,917,196 2,005,495 5.7% - 0.0% 2,005,495 5.7% (9,410) (9,410) - -

North Inner Loop 5,874,402 498,984 8.5% - 0.0% 498,984 8.5% (42,778) (42,778) - -

SW Inner Loop 9,943,327 467,028 4.7% 13,164 0.1% 480,192 4.8% 2,138 2,138 - -

Total Inner Loop 63,571,730 3,884,274 6.1% 27,564 0.0% 3,911,838 6.2% (157,658) (157,658) - -

North Fwy/Tomball Pky 14,251,054 1,290,838 9.1% 9,975 0.1% 1,300,813 9.1% 66,527 66,527 - -

North Hardy Toll Rd 23,398,118 2,486,508 10.6% 226,645 1.0% 2,713,153 11.6% (127,052) (127,052) 96,250 96,250

North Outer Loo 17 087 034 739 896 4 3% - 0 0% 739 896 4 3% 38 020 38 020 - -, , , . . , . , ,

The Woodlands/Conroe 12,793,959 524,170 4.1% 21,197 0.2% 545,367 4.3% 61,057 61,057 - -

Total North Corridor 67,530,165 5,041,412 7.5% 257,817 0.4% 5,299,229 7.8% 38,552 38,552 96,250 96,250

Northeast Hwy 321 1,166,135 4,200 0.4% - 0.0% 4,200 0.4% 0 - - -

Northeast Hwy 90 16,236,873 268,375 1.7% - 0.0% 268,375 1.7% 44,186 44,186 - -

Northeast I-10 3,902,934 0 0.0% - 0.0% - 0.0% 0 - - -

Northeast Inner Loop 11,265,426 602,101 5.3% - 0.0% 602,101 5.3% (525) (525) - - 148,7

Total Northeast Corridor 32,571,368 874,676 2.7% - 0.0% 874,676 2.7% 43,661 43,661 - - 148,7

Hwy 290/Tomball Pky 16,282,011 1,094,279 6.7% 11,374 0.1% 1,105,653 6.8% 202,699 202,699 204,800 204,800

NW Hwy 6 5,157,065 304,640 5.9% - 0.0% 304,640 5.9% 688,197 688,197 65,000 65,000

NW Inner Loop 60,528,381 3,514,166 5.8% 236,341 0.4% 3,750,507 6.2% 402,664 402,664 - -

NW Near 16,681,461 1,016,883 6.1% 13,550 0.1% 1,030,433 6.2% 64,945 64,945 - -

NW Outlier 11,203,182 552,476 4.9% 14,863 0.1% 567,339 5.1% 64,394 64,394 - -

West Outer Loop 21,026,790 1,622,953 7.7% 42,409 0.2% 1,665,362 7.9% 60,033 60,033 - - 34,1

Total Northwest Corridor 130,878,890 8,105,397 6.2% 318,537 0.2% 8,423,934 6.4% 1,482,932 1,482,932 269,800 269,800 34,1

East I-10 Outer Loop 14,977,779 454,345 3.0% 70,000 0.5% 524,345 3.5% (59,422) (59,422) - -

East-SE Far 45,097,281 5,961,990 13.2% - 0.0% 5,961,990 13.2% (616,942) (616,942) - -

SE Outer Loop 22,080,286 781,328 3.5% - 0.0% 781,328 3.5% (321,542) (321,542) - -

Total Southeast Corridor 82,155,346 7,197,663 8.8% 70,000 0.1% 7,267,663 8.8% (997,906) (997,906) - -

South Hwy 35 29,633,594 1,284,734 4.3% - 0.0% 1,284,734 4.3% (67,442) (67,442) - -

South Inner Loop 13,590,377 439,903 3.2% - 0.0% 439,903 3.2% 122,362 122,362 - -

- - -, , , , . - . , , . , , - -

Hwy 59/Hwy 90 22,944,304 1,593,245 6.9% 124,359 0.5% 1,717,604 7.5% 246,539 246,539 - -

Southwest Far 10,176,609 656,603 6.5% - 0.0% 656,603 6.5% 51,291 51,291 - -

Southwest Outer Loop 14,446,256 1,315,954 9.1% - 0.0% 1,315,954 9.1% (43,090) (43,090) - -

Sugar Land 18,396,025 1,061,945 5.8% 28,483 0.2% 1,090,428 5.9% 1,124,020 1,124,020 1,057,126 1,057,126 20,0

Total Southwest Corridor 65,963,194 4,627,747 7.0% 152,842 0.2% 4,780,589 7.2% 1,378,760 1,378,760 1,057,126 1,057,126 20,0


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Select Industrial Projects Under Construction

Submarket Building Park Building Name Building Address RBA % Leased Developer

Estimated

Delivery

Northeast Inner Loop Ind Portwall Distribution Center IV 531 Portwall St 148,793 0 The Carson Companies Aug-10

West Outer Loop Ind 11987 FM 529 Warehouse 11987 FM 529 34,125 0 Texas Development Company Jul-10

Sugar Land Ind Stoney Creek Center Stoney Creek Center, 3 bldgs. 1420 Katy Flewellen Rd 29,600 0 Lionheart Commercial Development Jun-10

Total u/c industrial projects listed above 212,518

Grand total u/c industrial (including projects not listed above) 212,518

Select Q1 2010 Industrial Deliveries

Submarket Building Park Building Name Building Address RBA % Leased Developer Name Delivered

Sugar Land Rooms To Go Distribution Center 31111 Miller Rd 1,057,126 100 Houston Associates LLC Mar-10

Hwy 290/Tomball Pkwy Jake's Finer Foods HQ 13400 Hollister Dr 180,000 100 n/a Feb-10

North Hardy Toll Road AMB IAH Logistics Center III Forward Air 19220 Kenswick Dr 96,250 100 AMB Property Corporation Jan-10

Northwest Hwy 6 Hempstead 1960 Business Park 20220 Hempstead Warehouse 20220 Hempstead Rd 65,000 0 Capital RE Commercial Mar-10

Hwy 290/Tomball Pkwy Beltway 249 Business Park Beltway 249 BP, bldg. A 15825 State Highway 249 24,800 0 Capital RE Commercial Mar-10

Total year-to-date industrial deliveries listed above 1,423,176

Grand total year-to-date industrial deliveries 1,423,176


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294 Offices Worldwide

133 Americas

94 USA

22 Canada17 Latin America

64 Asia/Pacific

97 Europe/Middle East/Afri

NORTH AMERICA

EUROPE AND

MIDDLE EAST

$1.6 Billion in Global Revenu

1.1 Billion Square Feet under

Management

12,700 Professionals

HAWAII

SOUTH

AMERICA

AFRICA

ASIA PACIFIC

AUSTRALIA

61 Countries on 6 Continents

133 AMERICAS

94 USA

22 CANADA

17 LATIN AMERICA

COLLIERS INTERNATIONA

1300 Post Oak Blvd, 2nd Floo

Houston, Texas 7705

Main: 713.222.21

Fax: 713.830.21

www.collierstexas.co

64 ASIA/PACIFIC

97 EUROPE/MIDDLE

EAST/AFRICA

$1.6 BILLION IN GLOBAL

REVENUE

1.1 BILLION S UARE FEET

UNDER MANAGEMENT

12,700 PROFESSIONALS

Houston Industrial Market Report 1Q 2010

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