Share or view online at colliers.com/texas/houstonindustrial Houston’s industrial market slows in 2015, but ends the year on a positive note Research & Forecast Report HOUSTON | INDUSTRIAL Q4 2015 Lisa Bridges Director of Market Research | Houston During the fourth quarter, 0.7M SF of Houston’s industrial inventory was absorbed, substantially less than the 1.7M SF absorbed in the previous quarter. Although Houston’s industrial market showed signs of slowing due to the downturn in the local economy caused by falling oil prices, 2015 still ended on a positive note, with year-end net absorption totaling a positive 9.5M SF. Industrial leasing activity increased to 4.2M SF from 3.9M SF in the third quarter. The vacancy rate did, however, increase by 20 basis points over the quarter to 5.0% from 4.8% in Q3 2015. Only 15.0% of the 1.8M SF of new inventory delivered in the fourth quarter is leased, but fortunately the 8.8M SF under construction is 64.0% pre-leased. The average citywide quoted industrial rental rate increased 1.3% between quarters from $6.96 to $7.05 per SF NNN. The average rental rate has increased 10.2% on a year-over-year basis from $6.40 per SF NNN. Rental rates are not expected to change much, if any, in the near-term. According to the U.S Bureau of Labor Statistics, the Houston metropolitan area created only 23,700 jobs between November 2014 and November 2015. This is an annual increase of just 0.8%, well below the 2014 annual growth rate of 3.4% (97,500 jobs). Local economists have predicted 2015 annual job growth will be around 20,000 jobs, however, we believe that number will be lower. Summary Statistics Houston Industrial Market Q4 2014 Q3 2015 Q4 2015 Vacancy Rate 4.8% 4.8% 5.0% Net Absorption (SF) 1.4M 1.7M 0.7M New Construction (SF) 1.4M 3.2M 1.8M Under Construction (SF) 7.9M 9.6M 8.8M Asking Rents Per Square Foot Per Year Average $6.40 $6.96 $7.05 Warehouse/Distribution $6.00 $6.45 $6.34 Flex/Service $10.06 $11.56 $12.53 Tech/R&D $10.82 $12.57 $13.10 Market Indicators Relative to prior period Annual Change Quarterly Change Quarterly Forecast* VACANCY NET ABSORPTION NEW CONSTRUCTION UNDER CONSTRUCTION *Projected
5
Embed
Q4 2015 Houston Industrial Market Research & Forecast Report
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Share or view online at colliers.com/texas/houstonindustrial
Houston’s industrial market slows in 2015, but ends the year on a positive note
Research & Forecast Report
HOUSTON | INDUSTRIALQ4 2015
Lisa Bridges Director of Market Research | Houston
During the fourth quarter, 0.7M SF of Houston’s industrial inventory was absorbed, substantially less than the 1.7M SF absorbed in the previous quarter. Although Houston’s industrial market showed signs of slowing due to the downturn in the local economy caused by falling oil prices, 2015 still ended on a positive note, with year-end net absorption totaling a positive 9.5M SF. Industrial leasing activity increased to 4.2M SF from 3.9M SF in the third quarter. The vacancy rate did, however, increase by 20 basis points over the quarter to 5.0% from 4.8% in Q3 2015. Only 15.0% of the 1.8M SF of new inventory delivered in the fourth quarter is leased, but fortunately the 8.8M SF under construction is 64.0% pre-leased.
The average citywide quoted industrial rental rate increased 1.3% between quarters from $6.96 to $7.05 per SF NNN. The average rental rate has increased 10.2% on a year-over-year basis from $6.40 per SF NNN. Rental rates are not expected to change much, if any, in the near-term.
According to the U.S Bureau of Labor Statistics, the Houston metropolitan area created only 23,700 jobs between November 2014 and November 2015. This is an annual increase of just 0.8%, well below the 2014 annual growth rate of 3.4% (97,500 jobs). Local economists have predicted 2015 annual job growth will be around 20,000 jobs, however, we believe that number will be lower.
Global Logistic Properties purchased a 192-building portfolio from Industrial Income Trust in November 2015 for $4.55B. Many of the assets are located in Houston. A few of those assets are highlighted below:
1111 Gillingham Ln | 489,253 SF | $37.3M
19802 Imperial Valley | 328,020 SF | $25.1M
6323 Windfern | 374,160 SF | $28.7M
Sale Transaction
2 Houston Research & Forecast Report | Q4 2015 | Industrial | Colliers International
Houston’s average industrial vacancy rate increased 20 basis points year over year and in Q4 2015 from 4.8% to 5.0%. At the end of the fourth quarter, Houston had 25.7M SF of vacant industrial space. Among the major industrial corridors, the Northeast Corridor has the lowest vacancy rate at 1.2%, followed by the South at 3.1% and then the Southeast Corridor at 3.4%. The largest concentration of vacant space is located in the North Corridor which has a 7.8% vacancy rate.
Houston’s industrial construction pipeline had 8.8M SF of projects underway at the end of the fourth quarter, and about 4.0M SF is spec development. The largest project under construction is a 4,000,000-SF build-to-suit engineering, manufacturing and logistics campus for Daikin Industries, an HVAC equipment manufacturer consolidating its operations at a site located on Kermier Rd and Hwy 290 in Waller County. A list of buildings currently under construction can be found on Page 3 of this report.
Absorption & Demand
Houston’s industrial market posted 0.7M SF of positive net absorption in the fourth quarter, with the North Corridor submarket contributing the largest amount at 685,629 SF, followed by the Southeast Corridor which posted 442,393 SF of absorption. The Southwest Corridor posted 96,565 SF, and the South Corridor contributed 72,436 SF of net absorption. Three submarkets posted negative net absorption and include the Northwest Corridor with 381,301 SF, the Inner Loop Corridor with 118,017 SF, and the Northeast Corridor with 51,988 SF of negative net absorption.
There were several major tenant move-ins contributing to net absorption gains in the fourth quarter including Mariak (103,908 SF) and GLT Fabricators Inc. (100,000 SF) both in the East-Southeast Far submarket, Pathmark Transportation (76,234 SF), and Arc Designs Inc. (30,000 SF) in the Northwest Hwy 6 submarket.
Rental Rates
According to CoStar, our data service provider, Houston’s citywide average quoted industrial rental rate for all product types increased 1.3% from $6.96 per SF NNN in the third quarter, to $7.05 per SF NNN in the fourth quarter. According to Colliers’ internal data, actual lease transactions are in the $4.56 – $5.04 per SF NNN range for newer bulk industrial spaces, while flex rates range from $7.20 to $10.80 per SF depending on the allowance provided for tenant improvements and the location of the property.
By property type, the average quoted NNN rental rates are as follows: $6.34 per SF for Warehouse Distribution space; $4.56 per SF for Bulk Logistics space; $12.53 per SF for Flex/Service space; with Tech/R&D space averaging $13.10 per SF, according to CoStar.
16240 Port NW West Outer Loop 261,990 GE Oil and Gas1 Dec-15
11503 Highway 225 East-Southeast Far 210,000 Jacobson Warehouse Co1 Dec-15
801 Seaco Ct East-Southeast Far 135,231 Valassis Communications, Inc.1 Dec-15
14810 North Freeway North Hardy Toll Road 109,386 Forward Air2 Dec-15
16727 Park Row Northwest Outliers 65,000 FTD Oct-15
Leasing ActivityHouston’s industrial leasing activity, which includes renewals, increased by 8.8% on a quarterly basis, but decreased by 47.0% on an annual basis, recording 4.2M square feet in Q4 2015. The table below highlights some of the larger transactions that occurred in Q4 2015.
1 Renewal 2 Colliers International Transaction
Under Construction - 150,000 SF or greater
Q4 2015 Industrial Under Construction - 150,000 SF or greater
BUILDING ADDRESS SUBMARKET RBA % LEASED DEVELOPER DELIVERY DATE BUILDING DESCRIPTION
Bloomberg named Houston among the nation’s richest and most productive cities in America, sitting in the No. 9 spot. Only two Texas cities are on the list. Dallas came in at No. 11.
5 North American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International