Across the nation, demand for consumer goods is strong. E-commerce is the driving force behind this trend. Consequently, many retailers now favor online retail over storefronts. This has produced a greater demand for industrial and warehouse space. As a result, Houston’s warehouse market has experienced many consecutive years of growth. This includes both traditional industrial and office-flex space.
This shift towards e-commerce has increased retailers’ need for warehouse and industrial space. As a result, several major retailers have shopped for a warehouse for rent Houston.
But why Houston? Finding a warehouse for rent Houston has numerous benefits:
- Houston is a transportation hub and the intersection of several major interstates and highways.
- The Port of Houston is one of the world’s biggest and busiest shipping ports.
- The metro area is a major shipping hub for UPS and FedEx.
- Houston’s cost-of-living is lower. Because a dollar goes further, the cost of doing business is also lower.
Houston Warehouses & Industrial Space for Rent
As stated above, Houston is a transportation and shipping hub. Houston warehouses for rent let companies utilize these existing logistical networks. Therefore, demand in Houston’s industrial and warehouse market remains steady.
Throughout Houston, the average industrial vacancy rate hovers around 5.5%.
Houston’s top industrial markets are the Northwest, Southeast, and North. These markets make up the bulk of leasing activity and construction.
Houston Warehouse Development
In contrast to Houston’s other commercial real estate sectors, industrial development has stayed strong. Not only that, but the sector continues to grow. During Q1 2018, 3.1 million SF of new industrial space was completed. In Q2 2018, another 1.6 million SF of new industrial space was completed.
In Q3 2019, there was about 15.2 SF of industrial buildings under construction. Most of these new industrial properties are situated in the Southeast and Northwest areas. This was nearly a record for the Houston metro area and ranked the metro fifth in the nation. On top of that, deliveries are currently greater than the demand. Due to this, there could be an increase in vacancy rates.
Those new additions increased Houston’s industrial square footage to 562 million SF. 61% of that square footage is warehouse space. Additionally, as of Q3 2018, over 12.3 million SF of industrial space was under construction. The majority of that space is intended for distribution and logistics.
If you are in the market for a warehouse for rent Houston, let CXRE help.
Investing in Houston Warehouses & Industrial Buildings
There are several benefits to renting Houston warehouses. Firstly, Houston is major a transportation hub. Also, Houston has one of the world’s largest and busiest shipping ports. In addition, Houston is a major shipping hub for UPS and FedEx. Lastly, doing business is cheaper in Houston.
Also, unlike some large metro areas, Houston can grow in almost any direction. Because of this, the metro area’s warehouse base is expandable. National retailer Best Buy has chosen to build a 550,000 SF distribution in southwest Houston. And Houston-based Conn’s HomePlus will build a 656,658 SF warehouse and distribution center in north Houston.
Houston has already expanded west. New highway construction on the Grand Parkway could bring another major expansion to the east and northeast. For clients who need commercial land to build new warehouses in these areas, CXRE’s land brokers can help.
2019 Current Industrial/Warehouse Market
Currently, Houston has a structurally low vacancy rate (6.3%) which is below the 20-year historical average. This vacancy rate is also in line with its peer set. At the same time, Houston is underperforming the national average. What’s more, the vacancy rate is also up more than 150 basis points since a cyclical low of 4.7% in Q2 2015. Meanwhile, strong trailing 12-month net absorption of about 8M SF places Houston in the top 10 U.S. industrial markets Q3 2109.
Strong demand from port-related trade and exports (particularly petrochemicals and plastics) continues to drive the Houston industrial real estate market.
One of the main reasons for such a strong showing in industrial real estate is e-commerce. Growth in this sector has led to significant demand for Houston industrial space this cycle.
Yet the vacancy rate inched up in Q3 2019 as new supply outpaced demand. Furthermore, CoStar forecasts that Houston’s industrial vacancy rate could top 7% by mid-2023. This would then be the result of a significant supply wave coupled with slowing economic growth across the nation. However, in late 2023 and beyond, Houston’s industrial vacancy rate could begin to compress again as the supply wave is absorbed and the national economy recovers.
The great Houston metro area is built for business. Literally. With extensive infrastructure, industries and businesses throughout Houston have the capacity to deliver and receive goods and products from all over the world.
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Port of Houston
This 25-mile-long complex of almost 200 industrial terminals makes Port Houston Texas’ largest port. Not only that, but it is also the largest port of the Gulf Coast. Along the 52-mile-long Houston Ship Channel there are eight Port of Houston Authority public terminals. These include Care, Jacintoport, the Turning Basin, Woodhouse, and the Barbours Cut and Bayport container terminals.
This thriving shipping port has made the greater Houston area the nation’s top region for exports. In 2018, Port Houston handled over 200 million short tons of international cargo. That translates into $801.9 billion in economic value, 3.2 million jobs, and over $38B in tax dollars.
Cargo Rail System
The Lone Star State is one of the country’s main freight hubs. In the state, there are 10,000 track miles, more miles of rail than any other state. Texas also has more railroad employees than any other state. At Port Houston alone, the Port Terminal Railroad Association has over 150 miles of railway lines for transporting cargo.
Houston is served by BNSF Railway Company, Kansas City Southern Railway Company, and Union Pacific Railroad Company. What’s more, the Houston metro area has 42M SF of industrial space in over 300 industrial rail-served properties. The Southeast, Northwest, and Northeast submarkets have the largest concentrations of these properties. All total, these three areas have over 70% of Houston’s rail-served properties.
Proximity to San Antonio, Dallas-Ft. Worth, and Mexico
In addition to its extensive infrastructure, Houston is also not far from Texas’ other large metros.
Downtown Houston is about 190 miles east of San Antonio. Also, Houston is only about 225 miles south of Dallas-Ft. Worth. And Houston is only about 300 miles from the border between Laredo, TX and Neuvo Laredo, Mexico.
CXRE: Warehouse and Industrial Specialists
CXRE agents know Houston’s submarkets. Also, we’re familiar with the metro area’s warehouses and industrial properties. And our team can assist you in renting Houston warehouses. Contact us today so we can help find the ideal Houston warehouses for rent to suit your needs.