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Exclusive: Walmart planning huge new distribution center in Houston as e-commerce competition intens

January 28, 2022

Walmart is investing in a new distribution center in the southeast Houston area as e-commerce continues to light up the city’s industrial real estate market.

Walmart is developing 1 million square feet of warehouse space in Baytown at 4633 Borusan Road at Cedar Port Trade Center, a distribution facility developed by Dallas-based Hunt Southwest, according to data from the commercial real estate information firm CoStar and three commercial real estate professionals familiar with the transaction.Contractors in February are expected to start building out the interior of the existing warehouse space, with construction expected to wrap up in early 2023, according state permitting documents. The build-out is estimated to cost $22 million, according to initial estimates in the permitting documents; however, Chambers County economic development officials have said they expect tenant improvements to tally about $50 million.

Walmart and the building’s developer, Hunt Southwest, declined to comment.

The retailer has rapidly expanded its warehousing nationally as it vies with e-commerce rival Amazon to gain market share in growing population centers. Surging e-commerce demand during the pandemic has fueled a boom in industrial real estate as companies invest millions of dollars into warehouses to fulfill online orders in the age of same-day and next-day shipping.

In December, Walmart announced plans for a fulfillment center with more than 1 million square feet in Salt Lake City and a 925,000-square-foot high-tech facility in Lebanon, Tenn. The Salt Lake City warehouse — similar in size to the planned Houston warehouse — is expected to support 450 jobs, while the Tennessee warehouse is expected to create 300 jobs.In Houston, the retailer is planning the 1 million-square-foot warehouse in a business park where it already has a 4.2 million-square-foot distribution hub in buildings that it owns.

The distribution centers are in Cedar Port Industrial Park, a sprawling complex described as the world’s fifth-biggest industrial park. Home Depot and Ikea also have a major presence in the 15,000-acre industrial park located about 33 miles east of downtown. Retailer Floor & Décor moved into a 1.5 million-square-foot regional distribution center in the park, according to research by the international commercial real estate firm CBRE.

The park gives tenants access to the Port of Houston’s Bayport and Barbour’s Cut container terminals as well as Texas 99 (also known as the Grand Parkway), Interstate 10, Texas 225 and 146, and FM 1045.

Hunt Southwest made a bet on the park when it built the 1.02 million-square-foot building on a speculative basis, meaning it started construction without a tenant. Construction on the building, designed by Powers Brown Architecture, was completed last year.

Chamber County commissioners have approved a Chapter 312 agreement with Hunt Southwest for the project that would abate a portion of property taxes on the site for the next several years, offering tax savings over time. The dollar value of those incentives was not immediately clear, and county economic development officials were not available to comment Friday.

In exchange for tax incentives, the project would support at least 150 permanent jobs and the tenant would maintain about $50 million in inventory on the property, B.J. Simon, CEO of the Baytown West Chambers County Economic Development Foundation, said in a Dec. 14 Commissioner’s Court meeting.

By Marissa Luck, Houston Chronicle