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Despite e-commerce’s disruption, industrial activity still largely driven by Port

July 28, 2017

Several major trends, including the Port of Houston's appeal and the growing presence of e-commerce companies in Houston, contributed to the industrial market's strong absorption performance last quarter.

In the second quarter, Houston's industrial market saw 949,791 square feet of positive absorption, per a report from Toronto-based Avison Young's Houston office. To date in 2017, the industrial market has seen 2.7 million square feet of positive absorption. Most of that absorption, of course, was driven by Port-related demand.

"Even though the rise in consumer goods distribution has energized the market, industrial space continues to be largely driven by trade and petrochemical activity near the Port of Houston," the report states.

In fact, 80 percent of that absorption happened in the southeast submarket, which is anchored by the Port of Houston and surrounding logistics parks.

To those that have kept up with the industrial market's performance in 2016 and 2017, that shouldn't come as a surprise – whether it's the 1 million square feet in industrial facilities leased by The Netherlands-based Ikea last year or the 500,006-square-foot facility that Avera Cos. will develop for Vinmar International near the Port, Houston's Port-anchored industrial market has remained resilient amid the oil slump.

Combine an already strong industrial market with the city's growing population, and Houston emerges as a market that's most effectively served from within its own backyard.

"To better-serve customers, many distributors have begun to open large distribution sites in Houston when in the past they have operated out of Dallas," the report states.

But the impact of e-commerce on the city's industrial market is nothing to sniff at. When looking at the overall increase of build-to-suit activity in Houston, e-commerce companies such as Seattle-based Inc. (NYSE: AMZN) are driving the growth.

"Two factors have contributed most to this increase in activity (in build-to-suit projects) – strong population gains and the rise of e-commerce," the report states.

With the rise of delivery-focused retail, distribution companies are beginning to lease smaller warehouses near specific neighborhoods, too, the report states. This trend is creating a new market for smaller and older warehouses, too, that might otherwise might not be as sought after.

By: Cara Smith,