Baytown-West Chambers County Economic Development Foundation | 1300 Rollingbrook Dr., Suite 610 | Baytown, TX 77521 | 281.420.2961 | baytownedf@baytownedf.org

Houston Leads The Nation In Big-Box Industrial Growth, Thanks To Booming E-Commerce

March 21, 2022

Houston is the nation's top growth market among big-box industrial facilities, with growth in e-commerce incentivizing companies to hungrily grab properties, especially around Port Houston.Industrial big-box facilities, or any warehouse or distribution center over 200K SF, are proving more popular than ever as companies increase stock to keep up with e-commerce demand and supply chain woes, according to March data from CBRE. With 11.1% growth in 2021, Houston leads the nation, ahead of Phoenix (10.5%) and Atlanta (7.5%). The Bayou City is also No. 9 in the country for existing inventory, with 194M SF.

"Houston's pro-business environment, favorable real estate conditions and population growth continue to drive its thriving big-box industrial market," CBRE Senior Managing Director Peter Mainguy said in the report.

CBRE pointed to Houston's 22M SF of positive net absorption in 2021, triple the pace of 2020. The city boasts a 6.6% vacancy rate and saw most of its 18M SF of new supply in 2021 absorbed.

"Houston is poised for perhaps the most cap rate compression of all the major Texas markets this year," CBRE Executive Vice President Jonathan Bryan said. "After the incredible rent growth of 2021, landlords have more opportunity to raise rents than any time in recent history. Cap rate compression should follow and should make property pricing more in line with markets like DFW."

Industrial asking rents in Houston were an average of 65 cents per SF, according to 2021 fourth-quarter data from CBRE.

Over a third (38.8%) of Houston's industrial space is slated for retail and wholesale tenants, with third-party logistics coming in second at 34.4%. No other industry took up more than 10% of the market. Most of Houston's industrial leasing was for spaces between 200K SF and 499K SF, with properties of that size seeing a big increase year-over-year in 2021, per CBRE.

Nationwide, CBRE expects a strong industrial market in 2022, with occupiers continuing their focus on online customers and new expansion on domestic manufacturing.

“Supply chain uncertainty and e-commerce demand are driving a shift from a just-in-time model to a just-in-case model for storing more inventory near population centers," Nathan Wynne, senior vice president with CBRE’s industrial services team in Houston, said in a release. "Because of the tightening market and low inventory of existing first-generation warehouse space, we are seeing companies rush to sign sizable leases in speculative developments. These recent transactions are some of the largest deals in the history of the Houston industrial market.”

By Lane Gillespie, Bisnow Houston
https://www.bisnow.com/houston/news/industrial/houston-leads-the-nation-in-big-box-industrial-growth-thanks-to-booming-e-commerce-112325